##### Table of Contents

---

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



---

FORM 10-KSB



---



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

For the fiscal year ended March 31, 2007



| ̈ | 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



---

DYNAMIC HEALTH PRODUCTS, INC.

(Name of small business issuer in its charter)



---



|                                                                  |  |                                     
|----------------------------------------------------------------- |  | ------------------------------------
|Florida                                                           |  | 34-1711778                          
|(State of 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

Securities registered under Section 12(b) of the Exchange Act: None

Securities registered pursuant to Section 12(g) of the Exchange Act: Common Capital Stock



---

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.    Yes  x    No ̈

Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will
be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. ̈

Issuers revenues for its most recent fiscal year were
$56,810,439.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act)    Yes ̈No  x

The aggregate market value of the voting common stock held by non-affiliates of the Registrant was $4,444,404, based upon the last reported trade of the
stock on June 20, 2007, which was 37,150 shares at $0.60 per share.

The number of shares outstanding of the Issuers common
stock at $.01 par value as of June 25, 2007 was 16,691,860.



---



---

##### Table of Contents

PART I



|Item 1. | DESCRIPTION OF BUSINESS.
|------- | ------------------------

The Companys
executive offices are located at 12399 Belcher Road South, Suite 140, Largo, Florida 33773 and its telephone number is (727) 683-0670. References in this Annual Report on Form 10-KSB refer to Dynamic Health Products, Inc. and, as applicable,
its subsidiaries as the Company or Dynamic, unless the context otherwise requires.

General

Dynamic Health Products, Inc., was incorporated on January 27, 1998, as a Florida corporation under the name Direct Rx Healthcare, Inc. In April
1998, its name was changed to Nu-Wave Health Products, Inc. and in August 1998, its name was changed to Dynamic Health Products, Inc.

The Companys predecessor, Direct Rx, Inc., an Ohio corporation (Direct Rx), was formed in 1992. In September 1995, Direct Rx acquired an 80% interest in Nu-Wave Health Products, Inc., a Florida
corporation (Nu-Wave), which manufactured non-prescription medications, nutritional supplements, and health and beauty care products. On July 1, 1997, Direct Rx acquired the remaining shares of Nu-Wave. In January 1998, Direct Rx
changed its domicile from Ohio to Florida. After the domicile change, the Company changed its name to Direct Rx Healthcare, Inc., and later to Dynamic Health Products, Inc., its current name. After the domicile change, Nu-Wave was merged into the
Company.

The Company, through its wholly-owned subsidiaries, develops, markets and distributes 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. The Company distributes approximately 2,500
individual inventory items, which are designated as individual stock keeping units (SKU) purchased from manufacturers. Additionally, the Company carries its own lines of branded products. These are comprised of approximately 40 products
packaged into approximately 75 SKUs.

The Company has grown primarily through acquisitions. In June 1998, the Company acquired, through a
merger with a wholly-owned subsidiary of the Company, Energy Factors, Inc. (Energy Factors), a Florida corporation, which had a 33,222 square foot office, laboratory, manufacturing and warehouse facility located in Largo, Florida. After
the acquisition, the Company changed the name of Energy Factors to Innovative Health Products, Inc. In February 2000, its name was changed to Go2Pharmacy.com, Inc., in September 2000, its name was changed to Go2Pharmacy, Inc., in September 2002, its
name was changed to Innovative Companies, Inc., and in June 2004, its name was changed to GeoPharma, Inc. (GeoPharma). GeoPharma creates, manufacturers, and packages a wide variety of proprietary and non-proprietary dietary supplements,
and health and beauty care products, and manufactures generic and over-the-counter drugs. On November 7, 2000, the United States Securities and Exchange Commission (SEC) declared GeoPharmas registration of 1,000,000 shares of
its common stock to be effective. Prior to the offering, the Company owned all of the issued and outstanding common stock of GeoPharma. In March 2001, the Company distributed 2,324,984 shares of GeoPharma common stock to its shareholders. As of
March 31, 2007 and 2006, the Company held 204,914 and 347,938 shares of common stock of GeoPharma, respectively.



2



---

##### Table of Contents

In June 1998, the Company acquired Becan Distributors, Inc. (Becan), incorporated in November
1996, in Ohio. Becan is a wholesale distributor of pharmaceuticals, over-the-counter drugs, and health and beauty care products. In August 1998, the Company, through Becan, formed Discount Rx, Inc. (Discount), a Louisiana corporation.
Discount is a wholesale distributor of pharmaceuticals, over-the-counter drugs, and health and beauty care products. Becan and Discount also provided distribution channels for the Companys branded products. The Company subsequently sold Becan
and its subsidiary, Discount, to DrugMax, Inc. (DrugMax), formerly DrugMax.com, Inc. and formerly Nutriceuticals.com, Inc., on November 26, 1999. As of March 31, 2002, the Company held 1,933,000 shares of common stock of
DrugMax. In November 2002, the Company distributed all of its shares of DrugMax common stock to its shareholders.

In September 1998, the
Company acquired Pharma Labs Rx, Inc. (PFL), formerly J.Labs, Inc., incorporated in April 1997, as a Florida corporation. The operations of PFL consisted of the procurement of trademarks and product rights for the Companys branded
products. At this time, PFL is not actively conducting operations.

In September 1998, the Company formed Incredible Products of Florida,
Inc., a Florida corporation, to market dietary supplements through distributors and radio infomercials. In May 1999, the Company formed Online Meds Rx, Inc. (OMR), formerly Dynamic Life, Inc., as a Florida corporation. In March 2000,
Incredible was merged into OMR. OMR marketed dietary supplements, over-the-counter drugs, and health and beauty care products primarily through distributors and through direct marketing to consumers. The operations of OMR, as previously conducted,
are now carried out through the Herbal Health Products, Inc. In March 2003, OMR began providing prescription services through direct mail and through its web sites. In September 2004, OMR discontinued its prescription services operations. At this
time, OMR is not actively conducting operations.

In December 1998, the Company formed Herbal Health Products, Inc. (Herbal),
as a Florida corporation. Herbal acquired the Florida operations of a Colorado company which marketed dietary pet supplements primarily to Veterinarians. In July 2000, Herbal sold substantially all of its assets relating to the distribution of
veterinary products, which primarily consisted of its inventory and its customer base to Vertical Health Solutions, Inc., formerly Labelclick.com, Inc., an affiliate of the Company. Herbal continues to market dietary supplements and over-the-counter
drugs for human consumption, and health and beauty care products, primarily to mass retail outlets by its in-house sales force and through distributors.

In February 2000, through OMR, the Company formed Dynamic Financial Consultants, LLC (DFC), formerly Dynamic Life Asia, LLC, a Florida limited liability company. Also in February 2000, through DFC, the
Company formed Dynamic Life Korea Ltd. (Dynamic Korea), a Korean corporation, to market dietary supplements primarily through distributors and through direct marketing to consumers. The Company subsequently sold Dynamic Korea in November
2001. At this time, DFC is not actively conducting operations.

In December 2003, the Company formed Pharma Labs Rx, Inc.
(PNV), as a Nevada corporation, to provide prescription services and to market prescription drugs through direct mail and through use of the internet. In April 2004, PNV discontinued its prescription services operations. At this time,
PNV is not actively conducting operations.

In October 2004, the Company acquired Bob OLeary Health Food Distributor Co., Inc.
(BOSS), incorporated in July 1984, in Pennsylvania. BOSS is engaged in developing, wholesaling and distributing a wide variety of sports nutrition products, non-prescription dietary supplements, vitamins, health food and nutritional
products, soft goods and other related products.



3



---

##### Table of Contents

In March 2005, the Company formed Dynamic Marketing I, Inc. (DMI), as a Florida corporation.
In March 2005, DMI acquired Dynamic Marketing, Inc. (DM), a Rhode Island corporation. On March 30, 2005, through the filing by DMI of Articles of Merger, effective March 31, 2005, DM merged into DMI, with DMI being the
surviving entity. DMI is engaged in wholesaling and distributing a wide variety of sports nutrition products, non-prescription dietary supplements, health food and nutritional products, performance drinks and other related products.

In March 2005, the Company formed DYHP Acquisitions, Inc. (DAI), as a Florida corporation. At this time, DAI is not actively conducting
operations.

Recent Development  Proposed Merger with GeoPharma, Inc.

On May 14, 2007, the Company and GeoPharma, Inc. entered into a definitive agreement (the Merger Agreement) under which the Company will
merge with and into a wholly-owned subsidiary of GeoPharma in a stock transaction (the Merger). The Board of Directors of the Company determined that the Merger would further the Companys long-term business objectives, including
without limitation, providing additional capital to support continued growth.

Under the terms of the Merger Agreement, GeoPharma will
exchange approximately 0.1429 shares of its common stock for each share of Company common stock and fractional shares will be rounded up to the nearest whole share. Based on an average 10-day market closing price of GeoPharmas common stock
from May 1-14, 2007 of $4.24 per share, the transaction would be valued at $14 million, based on an estimated 3.3 million shares of GeoPharma common stock to be issued to the shareholders of the Company in the Merger. The actual value at
consummation of the Merger will be based on GeoPharmas share price at that time.

Completion of the Merger of the Company into a
wholly-owned subsidiary of GeoPharma and the issuance of the GeoPharma common shares to the shareholders of the Company is subject to the approval of the transaction by the shareholders of both companies, the conversion of the Companys
convertible notes prior to the closing of the Merger, the receipt of required regulatory approvals, and the satisfaction of usual and customary closing conditions. The Merger Agreement contains certain termination rights for both the Company and
GeoPharma.

Directors and executive officers of GeoPharma beneficially own and are entitled to vote approximately 43% of the shares of
GeoPharma common stock outstanding. Directors and executive officers of the Company beneficially own and are entitled to vote approximately 47% of the shares of Company common stock outstanding.

On May 15, 2007, the Company and GeoPharma filed with the Securities and Exchange Commission (the SEC) a joint proxy
statement/prospectus on Form S-4, in connection with the proposed acquisition of the Company by GeoPharma, pursuant to the terms of the definitive Merger Agreement.



4



---

##### Table of Contents

Products

The Company markets and distributes 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. The Company distributes approximately 2,500 individual inventory items purchased from over 100 manufacturers. Additionally, the Company carries its own lines of branded products. These are comprised of approximately
40 products packaged into approximately 75 SKUs.

Product Development

Generally, the more novel and unique the Companys products are, the greater the profit margins. The Company, along with product development teams, works closely with its customers to understand their needs,
their strengths and their objectives to be met, thus involving the team to create products with more unique sales points. The Companys response time in developing its own proprietary products is critical and enables the Company to take
advantage of consumer trends and preferences.

Marketing and Sales

The Companys products are marketed directly to its wholesale and retail customers through the Companys in-house salespeople. The Company markets and distributes 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 to gyms, health food stores, regional and national chain
drugstore, internet companies, mail order facilities, mass merchandisers, discounters, distributors and brokers. The Companys products are also marketed through catalog sales and through the Companys web sites.

Competition

The wholesale product distribution
industry in which the Company operates is highly competitive. Numerous companies, many of which have greater size and greater financial, personnel, distribution and other resources than the Company, compete with the Company.

The Company faces substantial competition from other regional and national distributors in the 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 industries, both domestic and abroad. The Companys branded products face
substantial competition from broad line manufacturers, major private label manufacturers and, more recently, large pharmaceutical companies and pharmacies, both domestic and abroad. Increased competition from such companies could have a material
adverse affect on the Company because such companies have greater financial and other resources available to them and possess marketing and distribution capabilities far greater than those of the Company.

The Company competes on the basis of competitive pricing, its ability to develop new product lines and customer service. Due to the Companys larger
purchasing power, the Company is able to offer its products at what we believe are more attractive prices to our customers. The Company works closely with contract manufacturers to continue to develop future products and to expand our product line
to satisfy the continuing changing needs of customers. The Company has trained in-house customer service personnel available to address all of our customers needs. The Companys ability to compete favorably with its competitors



5



---

##### Table of Contents

with respect to its branded products will depend primarily upon its development of brand recognition across multiple distribution channels, its ability to
quickly develop new products with market potential, to successfully advertise, market and promote its products, as well as its product quality and the development of a strong and effective distribution network.

Backlog

The Companys revenues are processed
through its system from sales orders generated and issued by the Companys customers. The Company primarily fulfills the sales orders on a turn-around time of between one to three days. As such, at any given point in time, the Company does not
experience a backlog of unfilled sales orders. At March 31, 2007, the Company had no backlog sales orders.

Research and Development

The Company contracts research and development primarily through its affiliate, GeoPharma, where Dr. Kotha S. Sekharam, the
President of GeoPharma and a director of the Company, provides guidance and direction for GeoPharmas research and development team. Nutritional information, as well as label requirements, are prepared by GeoPharmas regulatory staff
personnel. Research and development costs have been immaterial to the operations of the Company, and are charged directly to expense as incurred.

Trademarks

The Company has applied for various federally registered
trademarks and utilizes the following federally registered trademarks: Vibrafem®, ECLIPSE
Sports Supplements®, Eclipse 2000®and Muscle Sandwich®. Vibrafem®is a topical gel designed to
enhance sexual arousal. ECLIPSE Sports Supplements®and Eclipse 2000®are lines of dietary supplements, namely vitamins, minerals, herbs, amino acids, protein powders,
protein bars, protein shakes, protein drinks, nutraceuticals and essential fatty acids. Muscle Sandwich®is a line of peanut butter based protein bars. Since approximately 3% of our consolidated revenues result from the sales of these products, the Company believes that protecting some of its trademarks is crucial to its business
strategy of building strong brand name recognition and that such trademarks will have significant value.

The Companys policy is to
pursue registrations of all the trademarks associated with its key products. The Company relies on common law trademark rights to protect its unregistered trademarks. Common law trademark rights generally are limited to the geographic area in which
the trademark is actually used, while a United States federal registration of a trademark enables the registrant to stop the unauthorized use of the trademark by any third party anywhere in the United States. Furthermore, the protection available,
if any, in foreign jurisdictions may not be as extensive as the protection available to the Company in the United States.

Although the
Company seeks to ensure that it does not infringe on the intellectual property rights of others, there can be no assurance that third parties will not assert intellectual property infringement claims against the Company. Any infringement claims by
third parties against the Company may have a material adverse effect on the Companys business, financial condition, results of operations and cash flows.



6



---

##### Table of Contents

Principal Suppliers and Sources of Supply

The Company obtains all of its products from third party suppliers. Many of the raw materials used in the Companys products are harvested
internationally. The Company does not have contracts with any suppliers committing such suppliers to provide materials required for the production of its products. There can be no assurance that suppliers will provide products needed by the Company
in the quantities requested or at a price the Company is willing to pay. Because the Company does not control the actual production of these products, it is also subject to delays caused by interruption in production of materials based on conditions
not within its control. Such conditions include job actions or strikes by employees of suppliers, weather, crop conditions, transportation interruptions and natural disasters or other catastrophic events. The inability of the Company to obtain
adequate supplies of its products at favorable prices, or at all, could have a material adverse effect on the Companys business, financial condition, results of operations and cash flows.

Quality Control

Although the Company does not
directly manufacture its products, we endeavor to purchase products manufactured in accordance with the Good Manufacturing Practices (GMPs) prescribed by the United States Food and Drug Administration, all other applicable
regulatory standards, and rigorous quality control procedures used by the manufacturers of the products which the Company purchases.

Government
Regulation

Although the manufacture, packaging, labeling, advertising, promotion, distribution and sale of the Companys products
are subject to regulation by numerous government agencies, such regulations apply to the manufacturers of the products, but the Company is not directly regulated.

The Company cannot predict the nature of any future laws, regulations, interpretations or applications, nor can it determine what effect additional governmental regulations or administrative orders, when and if
promulgated, would have on its business in the future. They could, however, require the reformulation of certain products to meet new standards, the recall or discontinuance of certain products not capable of reformulation, additional record
keeping, expanded documentation of the properties of certain products, expanded or different labeling, and/or scientific substantiation. Any or all of such requirements could have a material adverse effect on the Companys business, financial
condition, results of operations and cash flows. If the Company were to experience product recalls or discontinuances, the Company could incur substantial expenses and wastage of time, as well as damage to the Companys reputation.

The Companys advertising of its products is subject to regulation by the U.S. Federal Trade Commission (FTC) under the Federal Trade
Commission Act (FTCA). The FTCA prohibits unfair methods of competition and unfair or deceptive acts or practices in or affecting commerce. The FTCA provides that the dissemination or the causing to be disseminated of any false
advertisement pertaining to drugs or foods, which would include dietary supplements, is an unfair or deceptive act or practice. Under the FTCs Substantiation Doctrine, an advertiser is required to have a reasonable basis for all
objective product claims before the claims are made. Failure to adequately substantiate claims may be considered either deceptive or unfair practices. Pursuant to this FTC requirement the Company is required to have adequate substantiation for all
material advertising claims made for its products. If the FTC were to impose limitations on the Companys advertising of its products, any such limitations could materially adversely affect the Companys ability to successfully market its
products.



7



---

##### Table of Contents

The FTC has a variety of processes and remedies available to it for enforcement, both administratively
and judicially, including compulsory processes, cease and desist orders, and injunctions. FTC enforcement can result in orders requiring, among other things, limits on advertising, corrective advertising, consumer redress, divestiture of assets,
rescission of contracts and such other relief as may be deemed necessary. A violation of such orders could have a material adverse effect on the Companys business, financial condition, results of operations and cash flows.

Advertising, labeling, sales and manufacturing of dietary supplements and conventional foods are also regulated by state and local authorities. There can
be no assurance that state and local authorities will not commence regulatory action, which could restrict the permissible scope of the Companys product claims or its ability to sell in that state.

Governmental regulations in foreign countries where the Company may commence or expand sales may prevent or delay entry into the market or prevent or
delay the introduction, or require the reformulation, of certain of the Companys products. Compliance with such foreign governmental regulations is generally the responsibility of the Companys distributors for those countries. These
distributors are independent contractors over whom the Company has limited control.

Employees

As of March 31, 2007 the Company had 96 employees, of which 93 were full-time employees and three were part-time employees, as compared to 92
employees, of which 89 were full-time employees and three part-time employees as of March 31, 2006. Of such full-time employees, 19 were engaged in marketing and sales, 12 were devoted to customer service, 45 were devoted to warehousing and
distribution, one was devoted to web site development and database administration, and 16 were responsible for management and administration. Of such part-time employees, one was devoted to customer service and two were devoted to warehousing and
distribution. None of the Companys employees are covered by a collective bargaining agreement. The Company considers its relations with its employees to be good.

In each case, the employees are permitted to participate in employee benefit plans of the Company that may be in effect from time to time, to the extent eligible, and each employee may be entitled to receive an annual
bonus as determined at the sole discretion of the Companys Board of Directors based on the Boards evaluation of the employees performance and the financial performance of the Company. Each employee is eligible for grant of stock
options in accordance with the provisions of the Companys 1999 Stock Option Plan (the Plan), as determined by the Administrator of the Plan.

In March 1999, the Companys Board of Directors adopted the Companys 1999 Stock Option Plan, which has been approved by the Companys shareholders. The purpose of the 1999 Plan is to enable the Company
to attract and retain top-quality executive employees, officers, directors and consultants and to provide such executive employees, officers, directors and consultants with an incentive to enhance stockholder return. The 1999 Plan provides for the
grant to officers, directors, or other key employees and consultants of the Company, of options to purchase up to an aggregate of 6,000,000 shares of common stock.



8



---

##### Table of Contents

Cautionary Statements for Purposes of The Safe Harbor Provisions of The Private Securities Litigation
Reform Act of 1995

The Private Securities Litigation Reform Act of 1995 (the Act) provides a safe harbor for
forward-looking statements to encourage companies to provide prospective information, so long as such information is identified as forward-looking and is accompanied by meaningful cautionary statements identifying important factors that
could cause actual results to differ materially from those discussed in the forward-looking statement(s). The Company desires to take advantage of the safe harbor provisions of the Act.

Except for historical information, the Companys Annual Report on Form 10-KSB for the year ended March 31, 2007, the Companys quarterly
reports on Form 10-QSB, the Companys current reports on Form 8-K, periodic press releases, as well as other public documents and statements, may contain forward-looking statements within the meaning of the Act.

In addition, representatives of the Company may, from time to time, participate in speeches and calls with market analysts, conferences with investors
and potential investors in the Companys securities, and other meetings and conferences. Some of the information presented in such speeches, calls, meetings and conferences may be forward-looking within the meaning of the Act.

It is not reasonably possible to itemize all of the many factors and specific events that could affect the Company and/or the Companys industry as
a whole. In some cases, information regarding certain important factors that could cause actual results to differ materially from those projected, forecasted, estimated, budgeted or otherwise expressed in forward-looking statements made by or on
behalf of the Company may appear or be otherwise conveyed together with such statements. The following additional factors (in addition to other possible factors not listed) could affect the Companys actual results and cause such results to
differ materially from those projected, forecasted, estimated, budgeted or otherwise expressed in forward-looking statements made by or on behalf of the Company.

Consolidation in the Health and Nutritional Product Distribution Industry May Make It More Difficult for Us to Compete with Larger Companies, We May be Required to Sell Products At Prices Below Our Profit Margin.The health and nutritional product distribution industry is subject to significant economic factors, including consolidation of our competitors. Some of our competitors are consolidating to create integrated delivery systems with greater market
presence and negotiation power with manufacturers. As the health and nutritional product distribution industry consolidates, competition for customers will become more intense and the importance of acquiring each customer will become greater. A
forced reduction in our prices to meet these challenges may reduce our operating margins and increase our losses.

We Rely on Strategic
Relationships to Generate Revenue, the Loss of Which Would Cause Our Revenues to Decrease.Our success relies on establishing and maintaining strategic relationships with leaders in the health and nutritional product distribution industry. We
believe that these relationships will enable us to extend our distribution, obtain specialized industry expertise, and increase overall revenue. We may be unable or unwilling to establish such relationships due to preexisting relationships that
these market leaders or we have with other competitors. Furthermore, our strategic relationships may change rapidly in the event that current or future partners decide to compete with us. Consequently, we intend to maintain independence from any
particular customer or partner through the use of oral agreements rather than written contracts. Consequently, these agreements may be terminated by the customers at any time. If we lose the right to distribute products under such agreements, we may
lose the ability to market certain of our products. Our inability to establish or maintain our strategic relationships may reduce our revenues and increase our losses from operations.



9



---

##### Table of Contents

Our Business is Subject to Government Regulation, the Failure to Comply with Which Could Result in
Significant Penalties.The packaging, labeling, advertising, promotion, distribution and sale of the Companys products are all subject to extensive regulation by numerous federal, state and other government agencies. Because of the broad
language of the laws applicable to the Companys business, it is difficult for the Company to remain in strict compliance. If the Company fails to or is unable to comply with applicable laws and governmental regulations, the Companys
business could be adversely affected. See Business  Government Regulation.

Our Business Depends Upon Third Party
Manufacturers, the Loss or Unavailability of Which Would Require Us to Find Substitute Manufacturers, Resulting in Delays in Production and Additional Expenses.Many of our products are produced for us by third party manufacturers. We cannot
assure that these manufacturers will provide the products we need, in the quantities we request, or at a price we are willing to pay. In general, we do not maintain written agreements with these manufacturers. Because of the lack of such agreements,
there can be no assurance that products we need will be available. Our inability to obtain adequate supplies of product from third party manufacturers at favorable prices, or at all, may increase our expenses and reduce our operating margins,
resulting in increased losses.

Our Products Have Limited Trademark Protection, Which Could Permit Others to Market Similar Products,
Resulting in Decreased Sales by Dynamic Health.Our policy is to pursue registration of all of the trademarks associated with our key proprietary products. We rely on common law trademark rights to protect our unregistered trademarks as well as
our trade dress rights. Generally, common law trademark rights are limited to the geographic area in which the trademark is actually used, while a United States federal trademark registration enables the registrant to stop the unauthorized use of
the trademark by any third party anywhere in the United States. Although sales outside the United States currently constitute less than 1% of our revenues, we intend to register our trademarks in certain foreign jurisdictions where our products are
sold. We cannot assure that the protection available in such jurisdictions, if any, will be as extensive as the protection available to us in the United States. In addition, because we have no patents on our proprietary products, another company may
replicate them. Inadequate trademark and patent protection of our proprietary products may reduce sales of our products.

Our Articles
of Incorporation and Bylaws Contain Provisions that May Discourage Takeovers or Make Them More Difficult, Regardless of Whether or Not such a Takeover Would Be Advantageous for Our Stockholders.Certain provisions of our articles of
incorporation and bylaws, as well as certain sections of the Florida Business Corporation Act, and our board of directors ability to issue shares of preferred stock and to establish voting rights, preferences and other terms of our stock, may
be deemed to have an anti-takeover effect and may discourage takeover attempts that are not first approved by our board of directors. This anti-takeover effect may discourage takeovers which stockholders may deem to be in their best interests.

Possible Adverse Publicity About Our Products Could Adversely Affect Sales of These Products. We are dependent on consumers
perceptions and may be adversely affected by publicity associated with illness or other adverse effects from the consumption of our products (or similar products distributed by other companies) and future reports of research that are perceived as
less favorable or that question earlier research. Future scientific research or publicity may not be favorable to the dietary supplement industry or to any particular product, and may not be consistent with earlier favorable research or publicity.
We are highly dependent upon consumers perceptions of the safety and quality of our products as well as dietary supplements distributed by other companies. Thus, the mere publication of reports asserting that those products may be



10



---

##### Table of Contents

harmful or questioning their efficacy could adversely affect us regardless of whether such reports are scientifically supported or whether the claimed
harmful effects would be present at the dosages recommended for such products.

We Are Exposed to Product Liability Claims, Which Could
Create a Substantial Liability. We face an inherent risk of exposure to product liability claims in the event that the use of our products results in injury. Management believes that the Company has adequate insurance, but if it does not,
product liabilities relating to its products could adversely affect the Company. Although many of the ingredients in the Companys products are vitamins, minerals, herbs and other substances for which there is a long history of human
consumption, some of its products contain ingredients for which no such history exists. In addition, although management believes all of the Companys products are safe when taken as directed, there is little long-term experience with human
consumption of certain of these product ingredients in concentrated form. Accordingly, the Company cannot assure that its products, even when used as directed, will have the effects intended or will not have harmful side effects. Any such unintended
effects may result in adverse publicity or product liability claims that could adversely affect the Company.

Importance of Development
of New Products. Products currently experiencing strong popularity and rapid growth may not maintain their sales over time. As a result, it will be important for the Company to be able to develop or acquire new products. The Company cannot
assure that its efforts to develop or acquire new products will be successful.

Competition.The wholesale and retail product
distribution industries are highly competitive. Numerous companies, many of which have greater size and greater financial, personnel, distribution, marketing and other resources than the Company, compete with us in the development, marketing and
distribution of our products. Competition from such companies could have a material adverse effect on the Company. The Company also faces competition in both the health food store and mass market distribution channels from private label products
offered by sports nutrition product and performance drink manufacturers and distributors, health and natural food store chains, drugstore chains, mass merchandisers and supermarket chains. See Business  Competition.

Our Products Could Infringe on Intellectual Property Rights of Others.Although the Company seeks to ensure that it does not infringe on the
intellectual property rights of others, the Company cannot assure that third parties will not assert intellectual property claims against the Company. Infringement claims by third parties against the Company may have a material adverse affect on the
Company.

The Loss of a Significant Customer Could Result in a Substantial Decrease in Revenues. For the year ended March 31,
2007, 11% of consolidated revenues were received from one customer, DPS Nutrition Inc., representing a concentration of credit risk. If the Companys major customers substantially reduced their volume of purchases from the Company, the
Companys business, financial condition, results of operations and cash flows could be materially adversely affected.

General Risks

We May Grow In Excess of our Ability to Manage Such Growth, Which Could Result in Inefficiencies.The Company believes that
continued growth may strain its management, operations, sales and administrative personnel and other resources. In order to serve the needs of its existing and future customers the Company intends to increase its workforce.The
Companys ability to manage further growth depends in part upon its ability to expand its operating,



11



---

##### Table of Contents

management, information and financial systems, which may significantly increase its future operating expenses. The Company cannot assure that its business
will grow in the future or that it will be able to effectively manage its growth.

Possible Future Acquisitions May be Difficult to
Assimilate and Adequate Funding May not be Available. The Company expects to pursue additional acquisitions in the future as a part of its business strategy. The Company cannot assure that attractive acquisition opportunities will be available
to it or that it will be able to obtain financing for future acquisitions. If the Company is unable to consummate future acquisitions, its business, financial condition and operating results could be adversely affected.

Acquisitions involve numerous risks, including the risk that the acquired business will not perform in accordance with expectations, difficulties in the
integration of the operations and products of the acquired businesses with the Companys business, the diversion of managements attention from other aspects of the Companys business, the risks associated with entering geographic and
product markets in which the Company has limited or no direct prior experience, and the potential loss of key employees of the acquired business arising out of such acquired business. Future acquisitions would likely require additional financing,
which would likely result in an increase in the Companys indebtedness or the issuance of additional capital stock, which may be dilutive to the Companys shareholders.

Control by Certain Stockholders Could Make it Difficult for Others to Control Election of our Directors or other Corporate Actions. Directors,
executive officers and related family members beneficially own approximately 57.2% of the outstanding shares of the Companys common stock. Therefore, these stockholders will have significant control over the election of the Companys
directors and most of the Companys corporate actions.

Exposure to Natural Disaster Could Result in Unforseen Expenses or
Disruptions to Our Business. One of the Companys facilities is located in the greater Tampa Bay, Florida area, which is prone to hurricanes. The Companys business could be adversely affected should its ability to distribute products
be impacted by such event.

Our Common Stock is Subject to the Penny Stock Rules of the SEC and the Trading Market in Our
Securities is Limited, Which Makes Transactions in Our Stock Cumbersome and May Reduce the Value of an Investment in Our Stock.

The
Securities and Exchange Commission has adopted Rule 15g-9 which establishes the definition of a penny stock, for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise
price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require:



| |  |  | that a broker or dealer approve a persons account for transactions in penny stocks; and
| | - |  | ----------------------------------------------------------------------------------------



| |  |  | the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Securities and Exchange Commission has adopted Rule 15g-9 which establishes the definition of a penny
stock, for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny
stock, unless exempt, the rules require:



| |  |  | that a broker or dealer approve a persons account for transactions in penny stocks; and
| | - |  | ----------------------------------------------------------------------------------------



12



---

##### Table of Contents

| |  |  | the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

In order to approve a persons account for transactions in penny stocks, the broker or dealer must:



| |  |  | Obtain financial information and investment experience objectives of the person; and
| | - |  | ------------------------------------------------------------------------------------



| |  |  | make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in
financial matters to be capable of evaluating the risks of transactions in penny stocks.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The broker or dealer must also
deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the Commission relating to the penny stock market, which, in highlight form:



| |  |  | sets forth the basis on which the broker or dealer made the suitability determination; and
| | - |  | ------------------------------------------------------------------------------------------



| |  |  | that the broker or dealer received a signed, written agreement from the investor prior to the transaction.
| | - |  | ----------------------------------------------------------------------------------------------------------

Generally, brokers may be less willing to execute transactions in securities subject to the penny stock rules. This may make it more
difficult for investors to dispose of our common stock and cause a decline in the market value of our stock.

Disclosure also has to be
made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights
and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in
penny stocks.



|Item 2. | DESCRIPTION OF PROPERTY.
|------- | ------------------------

On October 1, 2004,
the Company entered into a lease agreement with Robert OLeary and Linda OLeary, whereby the Company agreed to lease approximately 26,200 square feet of office and warehouse space for its operations in Scranton, Pennsylvania. This
facility is used for a portion of the Companys office, warehousing and shipping operations. The lease is for a term of 10 years ending on September 30, 2014. The initial rental under the lease was $90,000 annually.

On February 8, 2005, the Company entered into a lease agreement with Yale Mosk & Co., whereby the Company agreed to lease approximately
10,000 square feet of office and warehouse space for its executive offices and its operations in Largo, Florida. This facility serves as the Companys corporate headquarters and is also used for a portion of the Companys office,
warehousing and shipping operations. The lease is for a term of 62 months commencing on May 1, 2005 and ending on June 30, 2010. The initial rental under the lease was $85,000 annually.



13



---

##### Table of Contents

On March 29, 2005, the Company entered into a lease with GAM Realty, LLC, 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 Companys office, warehousing and
shipping operations. The lease is for a term of five years ending on March 31, 2010. The initial rental under the lease was $120,000 annually.

On March 29, 2005, the Company entered into an assignment and assumption of lease agreement with Dynamic Marketing, Inc., effective March 31, 2005, whereby the Company agreed to assume the lease for approximately 14,725 square
feet of warehouse space for its warehousing and shipping operations in Henderson, Nevada, for the balance of the lease term. This facility is used for a portion of the Companys warehousing and shipping operations. The lease was for a term of
62 months commencing on December 8, 2000 and ending on April 30, 2006. The initial rental under the lease is $76,568 annually. On June 1, 2006, the Company entered into a lease with The Northwestern Mutual Life Insurance Company,
whereby the Company agreed to lease the property for a term of five years commencing on June 1, 2006 and ending on May 31, 2011. The initial rental under the lease was $76,865 annually.

On November 7, 2006, the Company entered into a lease agreement with Becknell Wholesale I, LP, effective January 1, 2007, whereby the Company
agreed to lease approximately 9,000 square feet of office and warehouse space for its warehousing and shipping operations in Dallas, Texas. This facility is used for a portion of the Companys warehousing and shipping operations. The lease is
for a term of 64 months commencing on January 1, 2007 and ending on April 30, 2012. The initial rental under the lease is $42,750 annually.

In the judgment of management, the leases described above reflect rent at current fair market value.

The
Company believes that its facilities and equipment are generally well maintained and in good operating condition. In the opinion of management of the Company, the properties are adequately covered by insurance.

As of March 31, 2007, the Company had equipment, furniture, vehicles and leasehold improvements, net of accumulated depreciation, in the amount of
$714,043.



|Item 3. | LEGAL PROCEEDINGS.
|------- | ------------------

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 that it believes
will have a material adverse affect on its results of operations.



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

None.



14



---

##### Table of Contents

PART II



|Item 5. | MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES.
|------- | ---------------------------------------------------------------------------------------------------------------

Market for Securities

In July 2002, the
Companys common stock began trading on the OTC Bulletin Board under the symbol DYHP. There is a limited trading market for the Companys common stock, therefore historical price information is limited. The quotations below
reflect inter-dealer prices, without retail mark-up, mark-down or commissions, and may not represent actual transactions. High and low sales prices since that time, by quarter-ended date, are as follows:



|                   |  |      |      |     |   |     
|------------------ |  | ---- | ---- | --- | - | ----
|                   |  | High |      | Low
|June 30, 2004      |  | $    | 1.15 |     | $ | 0.51
|September 30, 2004 |  | $    | 1.25 |     | $ | 0.51
|December 31, 2004  |  | $    | 1.85 |     | $ | 0.75
|March 31, 2005     |  | $    | 1.58 |     | $ | 0.98
|June 30, 2005      |  | $    | 1.60 |     | $ | 0.57
|September 30, 2005 |  | $    | 0.97 |     | $ | 0.45
|December 31, 2005  |  | $    | 0.95 |     | $ | 0.35
|March 31, 2006     |  | $    | 0.48 |     | $ | 0.36
|June 30, 2006      |  | $    | 0.41 |     | $ | 0.22
|September 30, 2006 |  | $    | 0.47 |     | $ | 0.25
|December 31, 2006  |  | $    | 0.40 |     | $ | 0.25
|March 31, 2007     |  | $    | 0.50 |     | $ | 0.24

As of June 25, 2007, there were approximately 550 stockholders of record of the
Companys common stock, according to ADP and the Companys stock transfer agent, Registrar and Transfer Company, located in Cranford, New Jersey.

Dividend Policy

Historically, the Company has not declared or paid any cash dividends on its common stock. Any future
determination to pay dividends on its common stock will depend upon the Companys results of operations, financial condition and capital requirements, applicable restrictions under any contractual arrangements and such other factors deemed
relevant by the Companys Board of Directors.

Recent Sales of Unregistered Securities

On March 28, 2007, we issued an aggregate of 1,186,825 restricted shares of our common stock in exchange for the cancellation of outstanding common
stock options. Such shares were issued based upon the exemption provided by Section 4(2) under the Securities Act of 1933.

The
following table shows information with respect to each equity compensation plan under which our common stock is authorized for issuance, as of the fiscal year ended March 31, 2007.



15



---

##### Table of Contents

EQUITY COMPENSATION PLAN INFORMATION



|                                                           |  |                                                                                        |  |                                                                          |      |                                                                                                                                        |          
|---------------------------------------------------------- |  | -------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------ | ---- | -------------------------------------------------------------------------------------------------------------------------------------- | ---------
|Plan category                                              |  | Number ofsecurities to be issued uponexercise ofoutstandingoptions,warrants and rights |  | Weightedaverage exercise price of outstandingoptions, warrants andrights |      | Number of securitiesremaining available for future issuance underequity compensationplans
(excludingsecurities reflected incolumn (a))
|                                                           |  | (a)                                                                                    |  | (b)                                                                      |      | (c)                                                                                                                                   
|Equity compensation plans approved by security holders     |  |                                                                                       |  | $                                                                        | 0.00 |                                                                                                                                        | 6,000,000
|Equity compensation plans not approved by security holders |  |                                                                                       |  | $                                                                        | 0.00 |                                                                                                                                        |         



|Item 6. | 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 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.

Revenues 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.

Cost of goods sold is comprised of direct product
costs, plus the cost of transportation necessary to bring the products to our distribution facilities, net of consideration received from suppliers in connection with the purchase or promotion of the suppliers products. Research and
development expenses are charged against cost of goods sold as incurred and are not material to the Companys operations.



16



---

##### Table of Contents

Operating expenses include salaries and wages, employee benefits, warehousing and delivery, selling,
occupancy, insurance, administrative, depreciation and amortization expense. We include outbound transportation expenses within our operating expenses rather than in our cost of goods sold.

Other expenses (income) includes interest earned on notes receivable and on cash balances maintained in interest bearing accounts with banks, interest on
our outstanding indebtedness, the change in fair value of derivative financial instruments and miscellaneous income and expenses.

Results of Operations

Fiscal Year Ended March 31, 2007 Compared To Fiscal Year Ended March 31, 2006

Revenues

We generated revenues of
$56,810,439 for the year ended March 31, 2007, an increase of $6,668,233 or 13.3%, compared to $50,142,206 for the year ended March 31, 2006. The increase was primarily attributable to organic growth resulting from expansion of our
distribution channels with the opening of distribution centers in Henderson Nevada and Largo, Florida in May 2005, and in Dallas, Texas in January 2007 and the expansion of our in-house sales force. We expect organic growth of up to 15% in the
future, based on expansion of marketing efforts through our in-house sales force.

Gross Profit

We achieved a gross profit of $10,455,933 for the year ended March 31, 2007, an increase of $1,298,926 or 14.2%, compared to $9,157,007 for the year
ended March 31, 2006. Gross margin, as a percentage of revenues, was 18.4% and 18.3%, respectively, for the years ended March 31, 2007 and 2006. We expect gross margins of 18% to 20% in the future.

Operating Expenses

We incurred
operating expenses of $11,533,493 for the year ended March 31, 2007, compared to $9,681,745 for the year ended March 31, 2006. For the year ended March 31, 2007, these expenses include various selling, general and administrative
expenses of $11,031,264, and amortization and depreciation expenses of $502,229, compared to $9,226,697 in various selling, general and administrative expenses, and amortization and depreciation expenses of $455,048 for the year ended March 31,
2006.

For the years ended March 31, 2007 and 2006, selling, general and administrative expenses included non-cash amortization of
deferred consulting fees of $215,004 and $308,755, respectively.

Outbound transportation expenses, which are included in selling, general
and administrative expenses, were $2,119,397 and $1,933,674, respectively, for the years ended March 31, 2007 and 2006.

Operating
expenses, excluding amortization and depreciation expenses increased to 19.4% of revenues for the year ended March 31, 2007, from 18.4% of revenues for the year



17



---

##### Table of Contents

ended March 31, 2006. The increase in operating expenses as a percentage of revenues was attributable to an increase in our allowance for bad debts
related to accounts and notes receivable, an increase in commissions paid to brokers and outside sales representatives, the amortization of stock-based compensation costs, an increase in compensation related expenses, an increase in credit card
fees, an increase in outbound transportation costs, an increase in insurance expenses, an increase in legal fees, an increase in profit sharing plan expenses and an increase in tradeshow expenses, and was partially offset by a decrease in
advertising expenses, a decrease in audit related accounting fees, a decrease in amortization of deferred consulting fees, a decrease in rent expense, a decrease in telephone expense and a decrease in travel expenses.

The Company now recognizes stock-based compensation costs in operating expenses, due to the adoption of FAS 123(R), on April 1, 2006. Share-based
compensation expense was $910,258 for the year ended March 31, 2007.

Operating Income (Loss)

Operating loss increased by 105.4% or $552,822, to $1,077,560 for the year ended March 31, 2007 from $524,738 for the year ended March 31, 2006.
As a percentage of revenues, operating loss was 1.9% and 1.0%, respectively, for the years ended March 31, 2007 and 2006.

Other
Income (Expense)

Other income (expense) was $(2,696,599) for the year ended March 31, 2007, compared to $6,110,906 for the year
ended March 31, 2006. Below is a discussion of each of the various line items of other income (expense).

Derivative instrument income
(expense), net, was $674,097 for the year ended March 31, 2007, compared to $10,314,794 for the year ended March 31, 2006. Derivative instrument interest expense was $3,311,752 for the years ended March 31, 2007 and 2006. The
accounting for derivative financial instruments is very complex and has had a material non-cash effect on our net income (loss) for the years ended March 31, 2006 and 2005. We expect the accounting for these derivative financial instruments to
have a material non-cash effect on our net income (loss) in any given reporting period during the life of the derivative financial instruments. The effect on our future earnings (losses) cannot be predicted since various factors effect both the
valuation and corresponding charges or credits to income at each reporting period, as further discussed below under Derivative Instruments.

Interest income was $23,528 for the year ended March 31, 2007, compared to $23,912 for the year ended March 31, 2006. The decrease in interest income was a result of the reduction in interest received on
notes receivable due to smaller principal balances and was partially offset by higher cash amounts held in interest bearing accounts in banks.

For the year ended March 31, 2007, other income and expenses, net, of $53,752 consisted primarily of proceeds from an insurance claim, proceeds from a disputed escrow balance, and income from negotiated allowances on prior years, and
was partially offset by expenses incurred in connection with potential financing not consummated and settlement of an employment agreement. For the year ended March 31, 2006, other income and expenses, net, of $(161,347) consisted primarily of
legal and consulting fees incurred in connection with a potential acquisition that was not consummated.



18



---

##### Table of Contents

For the year ended March 31, 2007, we realized a gain from the sale of marketable equity securities
of $572,096. Proceeds were used for payment of a portion of the principal balance on our revolving note payable.

For the year ended
March 31, 2007, we realized a gain from debt extinguishment of $153,750, resulting from the cancellation of all common stock warrants issued to Laurus Master Fund, Ltd., associated with our September 2004 and March 2005 financings, in exchange
for 150,000 shares of our common stock.

Interest expense was $827,294 for the year ended March 31, 2007, compared to $749,873 for the
year ended March 31, 2006. Interest expense increased for the year ended March 31, 2007, primarily as a result of interest rate increases and an increase in short-term obligations issued for insurance policy premiums. In addition, $139,873
and $60,493, respectively, of the interest expense for the years ended March 31, 2007 and 2006 relates to the non-cash amortization of the debt discounts based on the Black-Scholes option pricing model, applied to the postponement agreements
entered into in July 2005 and April 2006, in connection with the September 30, 2004 convertible term note.

Income Taxes

As of March 31, 2007 and 2006, we had a current income tax liability of $115 and zero, respectively, and an accrued income tax
liability of $925 and $5,819, respectively. We had an estimated deferred income tax asset of $49,400 as of March 31, 2007 and an estimated deferred income tax liability of $186,300 as of March 31, 2006, which primarily represent the
potential future tax expense associated with unrealized gains on marketable equity securities, and are partially offset due to potential utilization of net operating losses not previously recognized. The net operating losses may be carried forward
for up to up to 20 years.

Net Income (Loss) Per Share

We had a net loss of $3,814,764 or $0.25 per basic and diluted share for the year ended March 31, 2007, compared to net income of $5,903,910 or $0.41 per basic share and $0.08 per diluted share for the year ended
March 31, 2006.

Derivative Instruments

Derivative instrument income (expense), net, represents the net unrealized (non-cash) change, during the years ended March 31, 2007 and 2006, in the fair value of our derivative financial instrument assets or
liabilities related to certain warrants and embedded derivatives in our debt instruments that have been bifurcated and accounted for separately.

Derivative instrument interest expense, with a corresponding increase in the face amount of the debts, for the years ended March 31, 2007 and 2006, represents the (non-cash) accretion of debt discount as a result of the bifurcation of
the embedded conversion features and related warrants. We calculated the accretion using the effective interest rate method over the term of the debts. Due to the effect of the payment streams associated with the debts, the straight-line amount of
the accretion is substantially equivalent to the effective interest rate method and therefore is the resulting method we used for our calculations.

We sold debt convertible into shares of our common stock. The debt had detachable warrants to purchase shares of our common stock. These warrants have been classified as derivative liabilities, rather than as equity. Additionally, the debt
instruments contain embedded derivative features, such as conversion rights, which are required to be bifurcated from the associated host instrument and are accounted for separately as derivative instrument liabilities.



19



---

##### Table of Contents

The identification of, and accounting for, derivative instruments is complex. Our derivative instrument
liabilities are re-valued at the end of each reporting period, with changes in the fair value of the derivative liabilities recorded as charges or credits to income, in the period in which the changes occur. For warrants and bifurcated conversion
features that are accounted for as derivative instrument liabilities, we determine the fair value of these instruments using the Black-Scholes option pricing model. That model requires us to make assumptions related to the remaining term of the
instruments and risk-free rates of return, our current common stock price, expected dividend yield, and the expected volatility of our common stock price over the life of the instruments. Because of the limited trading history of our common stock
prior to the acquisition of BOSS on October 1, 2004, we have estimated the future volatility of our common stock price based on not only the history of our stock price but also the experience of other entities considered comparable to us.

The accounting for derivative instruments and the assumptions used to value them have materially affected our financial statements and are
expected to do so in the future. Factors that would have an affect on the fair value of derivative instruments and related derivative expense or income include, but are not limited to, the price of our common stock and risk free interest rates. For
example, if the price of our common stock increases, generally the fair value of the derivative instrument liabilities will increase and this will result in a corresponding increase in the derivative instrument expense recorded in our statement of
operations. Alternatively, if the price of our common stock decreases, it generally will cause the fair value of the derivative instrument liabilities to decrease and this will result in a corresponding increase in derivative instrument income to be
recorded in our statement of operations. The above changes could be mitigated by the change in the remaining term of the instruments over time and possible principal payments made during the life of the instruments. We currently do not pay dividends
and as such, the payment of dividends would not have an impact on the fair value of the derivative instrument liabilities.

In connection
with the September 30, 2004 convertible debt, we executed an interest rate index (IRI) whereby if the price of our common stock had increased by a specified amount, there would have been a reduction in the stated interest rate
payable on that instrument. This initially created a derivative instrument asset. The IRI agreement provided for a potential reduction but not an increase in the stated interest rate. The fair value of the derivative instrument asset so created
would increase if we projected a potential increase in the price of our common stock. This resulted in derivative instrument income for the year ended March 31, 2005. Since the price of our common stock decreased during the years ended
March 31, 2007 and 2006, the resulting fair value of the IRI was zero at March 31, 2007 and 2006, and this resulted in derivative instrument expense of $245,584 being recorded during the year ended March 31, 2006. For a full
discussion on Derivative Instruments, see Note 15 to our consolidated financial statements for the years ended March 31, 2007 and 2006.

Inflation And Seasonality

We believe that there was no material effect on our operations or our financial condition as a
result of inflation for the years ended March 31, 2007 and 2006. We also believe that our business is not seasonal; however, significant promotional activities can have a direct impact on our sales volume in any given quarter.



20



---

##### Table of Contents

Economic And Industry Conditions

We believe that there was no material effect on our operations or our financial condition a result of general economic and industry conditions for the
years ended March 31, 2007 and 2006. However, should there be a material deterioration of general economic or industry conditions, our results of operations could be impacted in any given quarter.

Financial Condition, Liquidity and Capital Resources

We finance our operations and growth primarily through cash flows from operations, borrowing under our revolving credit facility, operating leases, trade payables, and the sale of equity and debt securities. We had a working capital deficit
of $3,688,369 at March 31, 2007, compared to a working capital deficit of $688,507 at March 31, 2006.

Net cash provided by
operating activities was $1,424,922 for the year ended March 31, 2007, as compared to net cash used in operating activities of $35,319 for the year ended March 31, 2006. The cash provided was primarily attributable to a decrease in amounts
due to/from affiliates, net, of $16,857 based on net payments received, a decrease in prepaid expenses of $160,816 primarily due to the timing of insurance policy renewals, a decrease in other current assets of $65,958 primarily based on a decrease
in refunds due from vendors, a decrease in other assets of $55,686, an increase in accounts payable of $2,821,233 based on increased purchases made on accounts, an increase in other payables of $264,504 primarily based on an increase in prepayments
received from customers, an increase in income tax payable of $115, an increase in accrued expenses of $53,282, a decrease in net deferred income taxes of $12,894 as a result of the sales of marketable equity securities and an increase in available
net operating loss carry forwards, partially offset by an increase in accounts receivable of $378,637 based on increases in credit sales, an increase in inventories of $1,542,077 due to increased restocking levels and to the increase in our product
sales, and a decrease in accrued income taxes of $4,894 based on payments made.

Net cash provided by investing activities was $235,318,
representing proceeds from the sale of property of $49,900, proceeds from the sale of marketable equity securities of $572,096, proceeds from repayments on notes receivable of $63,806 and notes receivable from an affiliate of $25,577, partially
offset by purchases of property and equipment of $247,153, the purchase of a distributor agreement of $25,000 and the purchase of certificates of deposit of $203,908.

Net cash used in financing activities was $1,564,407, representing payments of long-term obligations of $899,875, the excess of payments versus advances received of $477,152 on our short-term revolving note, payment
of short-term obligations of $163,799 and payments of fractional shares on common stock exchanged of $1.

At March 31, 2007, we had
$1,104,845 in cash and cash equivalents, as compared to $1,009,012 at March 31, 2006.

We believe that cash expected to be generated
from operations and current cash reserves will be sufficient for us to meet our capital expenditures and working capital needs, for our operations as presently conducted, together with funds we received in April 2007, as a result of an agreement we
entered into on April 26, 2007, for an additional revolving credit facility in the amount of $1 million. Our 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 us to seek additional financing. While there can be no assurance that such financing would be available in
amounts and on terms acceptable to us, we believe that such financing would



21



---

##### Table of Contents

likely be available on acceptable terms. With respect to Laurus Master Fund, Ltd. (Laurus), although we do not have a definitive agreement, it is
anticipated that all obligations due to Laurus will be converted into shares of GeoPharma, Inc. common stock at the time of the merger.

On
September 30, 2004, we entered into a Securities Purchase Agreement with Laurus, whereby we 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 our 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 has a three year term and 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 is subject to possible downward adjustments. 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).

Upon an issuance of shares of common stock below the fixed conversion price, the fixed conversion price of the note will be
reduced accordingly. In connection with the September 12, 2005 stock issuance, the lender waived this provision. The conversion price of the note may be adjusted proportionately 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.

In accordance with the convertible note, commencing December 1, 2004, and each month thereafter, we were to pay $187,500 of the outstanding
principal, together with accrued interest on the convertible note, in cash or registered stock. In July 2005, we entered into a Postponement Agreement with Laurus, whereby the required principal payments under the convertible note were modified. In
April 2006, we entered into a Postponement and Amendment Agreement with Laurus, whereby the required principal payments under the convertible note were again modified and the note was amended and restated.

The monthly payments shall be payable in registered stock if: (i) we have an effective registration statement under which the stock can be sold;
(ii) the average closing price of our common stock as reported by Bloomberg, L.P. on our 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 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 us in cash at the rate of 102% of the principal portion of the monthly payment otherwise due on such repayment date.

The convertible note may be prepaid by us 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 the convertible note. In addition, we have granted the investor a security interest in substantially all of our assets and intellectual
property, as well as registration rights.



22



---

##### Table of Contents

As of March 31, 2007 and 2006, the outstanding principal balance on the convertible note was
$3,687,500 and $4,500,000, respectively. As of March 31, 2007 and 2006, 989,758 shares of our common stock have been issued to Laurus in payment of $750,000 of principal and $140,782 of interest on the note.

Initially, Laurus was not entitled to be issued shares of common stock in repayment of any portion of the convertible note if and to the extent such
issuance would result in Laurus and its affiliates beneficially owning more than 4.99% of our issued and outstanding common stock upon such issuance, unless Laurus shall have provided at least 75 days prior written notice to us of its revocation of
such restriction. In connection with the April 2006 Postponement and Amendment Agreement with Laurus, this provision was modified from 4.99% to 9.99%. In addition, this restriction would not apply in the event of default or if we sought to redeem
the outstanding balance of the convertible debentures.

The warrants were 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 our common stock for the 10 trading days immediately prior to the execution date). The warrants were exercisable on a cashless basis. In the event
that the warrants were exercised on a cashless basis, then we would not receive any proceeds. In addition, the exercise price of the warrants would have been adjusted in the event we issued 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. In September 2005, we sold 150,000 restricted shares of our common stock at a price below
market. In connection therewith, Laurus waived their anti-dilution provisions related to all convertible notes and warrants issued to Laurus. In connection with the April 2006 Postponement and Amendment Agreement with Laurus, we issued 97,059
restricted shares of our common stock to Laurus, in exchange for cancellation of the 1,375,000 warrants.

Our obligations under the
Security Agreement, Securities Purchase Agreement and the Note are secured by a first priority lien on all of our assets and all future assets acquired, including a pledge by us of shares representing 100% of our 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
March 29, 2005, we entered into agreements with Laurus, whereby we completed the sale to Laurus of convertible debt and a warrant to purchase our common stock in a private offering pursuant to exemption from registration under Section 4(2)
of the Securities Act of 1933. The $3,000,000 proceeds of the funding were used for the acquisition of Dynamic Marketing, Inc. on March 31, 2005, costs associated with the acquisition and for working capital.



23



---

##### Table of Contents

The securities sold to Laurus included a secured convertible minimum borrowing note with a principal
amount of $2,000,000, a secured revolving note with a principal amount note to exceed $4,000,000, and a common stock purchase warrant to purchase 750,000 shares of our common stock, at a purchase price of $1.37 per shares, exercisable for a period
of seven years. In connection with the April 2006 Postponement and Amendment Agreement with Laurus, we issued 52,941 restricted shares of our common stock to Laurus, in exchange for cancellation of the 750,000 warrants.

The combined principal amount that may be outstanding under the $2,000,000 minimum borrowing note and the $4,000,000 revolving note at any point in time
cannot exceed $4,000,000.

We are permitted to borrow an amount based upon its eligible accounts receivable and inventory, as defined in
the agreements with Laurus. We must pay certain fees for any unused portion of the credit facility or in the event the facility is terminated prior to expiration. Our obligations under the notes are secured by all of our assets, 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 our 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 us in cash by paying the holder 115% of the principal amount, plus accrued interest. The holder of the term note may require us 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 proportionately in certain circumstances such as if we pay a stock dividend, subdivide or combine outstanding shares of our common stock into a greater or lesser number of shares, or
if we take such other actions as would otherwise result in dilution. In September 2005, we sold 150,000 restricted shares of our common stock at a price below market. In connection therewith, Laurus waived their anti-dilution provisions related to
all convertible notes and warrants issued to Laurus.



24



---

##### Table of Contents

115% of the full principal amount of the convertible notes is due upon default under the terms of
convertible notes. Laurus had 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 our common stock. In connection with the April 2006 Postponement and Amendment Agreement with Laurus, this provision was modified from 4.99% to 9.99%. In addition,
this restriction would not apply in the event there was an event of default or if we sought to redeem the outstanding balance of the convertible deventures.

On April 22, 2005, we filed such Registration Statement on Form S-2 for the registration of up to 2,944,690 shares of our common stock, including up to 2,194,690 shares of common stock underlying the
March 29, 2005 Secured Convertible Notes issued to Laurus, 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 was subsequently withdrawn by us
on August 19, 2005.

On July 19, 2005, we entered into a Postponement Agreement with Laurus, whereby Laurus agreed to postpone
our obligation to make certain amortization payments on its secured convertible note and, in consideration therefore, we issued to Laurus 275,000 shares of our restricted common stock. Pursuant to the agreement, the principal portion of the monthly
amount that is due in connection with the September 30, 2004 note, 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 us, to extend the dates for the filing requirements of our Registration Statement.

On August 19,
2005, we filed a Registration Statement on Form S-2 for the registration of up to 3,219,690 shares of our common stock, including up to 2,194,690 shares of common stock underlying the March 29, 2005 Secured Convertible Notes issued to Laurus,
in the principal amount of $4,000,000, up to 750,000 shares issuable upon the exercise of common stock purchase warrants, and up to 275,000 shares issued in connection with the July 19, 2005 Postponement Agreement. Such Registration Statement
was subsequently withdrawn by us on May 11, 2006.

In November 2005, we reached an agreement with Laurus in principle pursuant to
which we will be obligated to pay Laurus $48,000 as payment in full for all late effectiveness fees. The agreement was subject to negotiation and execution of a definitive agreement.

On April 28, 2006, we entered into a Postponement and Amendment Agreement with Laurus, pursuant to which we modified the September 30, 2004 and
the March 29, 2005 earlier agreements among the parties. The Postponement and Amendment Agreement provides for the following:



| |  |  | Principal payments under the September 30, 2004 note are reduced by $137,500 per month for the eight months commencing May 2006, all of which shall be paid on
the maturity date of the convertible note;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



25



---

##### Table of Contents

| |  |  | The Companys obligation to repay overadvances of up to $1,721,000 under the March 29, 2005 notes shall be suspended for a period of eight months;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | All of the common stock purchase warrants issued to Laurus in connection with the September 30, 2004 and March 29, 2005 agreements are cancelled in their
entirety;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In connection with the foregoing, the Company issued 150,000 restricted shares of our common stock to Laurus, for cancellation of the warrants issued to Laurus;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In connection with the foregoing, the Company issued 275,000 restricted share of our common stock to Laurus, for postponement of the portion of principal payments
in connection with the September 30, 2004 note.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The fair value of the 275,000 shares issued in connection with the
April 28, 2006 Postponement and Amendment Agreement was $45,000, based upon the closing price of our common stock on that date. This financing cost was recorded as a discount on the September 2004 note and the discount is being amortized to
interest expense over the life of the note, in accordance with EITF 96-19 Debtors Accounting for a Modification or Exchange of Debt Instruments.

In connection with the Postponement and Amendment Agreement, we also executed restated promissory notes in favor of Laurus and an amended and restated registration rights agreement (the Restated Registration
Rights Agreement). Pursuant to the Restated Registration Rights Agreement, we agreed to file a registration statement by June 30, 2006, covering the resale of the securities issued or issuable to Laurus. We were obligated to have such
registration statement declared effective by September 30, 2006, but there were no stated penalties for failure to meet such deadline.

On July 3, 2006, the Company filed a Registration Statement on Form SB-2 for the registration of up to 10,221,275 shares of the Companys common stock, including up to 2,194,690 shares of common stock underlying the March 2005
secured convertible notes, up to 7,326,585 shares of common stock underlying the September 2004 secured convertible notes, 275,000 shares of common stock underlying the July 2005 postponement agreement, and 425,000 shares of common stock underlying
the April 2006 amendment and postponement agreement. Such Registration Statement was subsequently withdrawn by the Company on October 4, 2006.

On October 4, 2006, the Company entered into an agreement with Laurus pursuant to which the Company modified the earlier agreements among the parties (the Amendment Agreement). The Amendment Agreement (i) eliminated
the obligation of the Company to register for resale the shares of common stock underlying the securities sold in September 2004, and (ii) removed Laurus right to waive 9.99% ownership limitations contained in their convertible
debentures.



26



---

##### Table of Contents

In connection with the Amendment Agreement, the Company also executed second amended and restated
promissory notes in favor of Laurus. Pursuant to the Amendment Agreement, the Company agreed to file a registration statement by October 20, 2006, covering the resale of certain securities issued or issuable to Laurus. The Company was obligated
to have such registration statement declared effective by November 30, 2006, but there were no stated penalties for failure to meet such deadline. Laurus could have declared the obligations in default and sought immediate repayment, but it gave
no indication of doing so. If immediate repayment had been required, we would not have had sufficient funds and Laurus could have taken legal action to recover amounts due from our assets.

On October 20, 2006, the Company filed a Registration Statement on Form SB-2 for the registration of up to 2,761,335 shares of the Companys
common stock, including up to 2,061,335 shares of common stock underlying the March 2005 secured convertible notes, 275,000 shares of common stock underlying the July 2005 postponement agreement, and 425,000 shares of common stock underlying the
April 2006 amendment and postponement agreement. On December 14, 2006, March 8, 2007 and March 27, 2007, the Company filed amendments to this Registration Statement on Form SB-2. On April 9, 2007, the Securities and Exchange
Commission declared the Registration Statement to be effective.

On May 24, 2006, we entered into an Amendment Agreement with Laurus,
pursuant to which we modified earlier agreements among the parties. In connection with the March 29, 2005 financing, we received certain overadvances of funds in the aggregate amount of $572,094, as of May 24, 2006. In accordance with the
Amendment Agreement, Laurus permitted us to sell a sufficient number of shares of GeoPharma, pledged by us to Laurus, in connection with the September 30, 2004 financing, by June 5, 2006 in satisfaction of the overadvances, with the
proceeds being paid to Laurus. Any remaining unsold shares of GeoPharma were delivered to Laurus to be held pursuant to the original pledge agreement. In June 2006, we sold 143,024 shares of GeoPharma at $4.00 per share. Proceeds from the sale were
paid to Laurus in satisfaction of the overadvances. This resulted in our recognizing a gain on the sale of marketable equity securities of zero and $572,096, respectively, for the year ended March 31, 2007.

On April 11, 2007, the Company entered into a Postponement and Amendment Agreement with Laurus pursuant to which the Company modified the earlier
agreements among the parties. The agreement provides for the following:



| |  |  | Principal payments under the September 2004 note are reduced to $75,000 per month for each of the months commencing January 2007 through the maturity date of the
note, at which time all deferred payments become due and owing;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Companys obligation to repay overadvances of up to $1,721,000 under the March 2005 revolving note shall be due and payable on December 31, 2007;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In consideration for the foregoing, the Company issued an aggregate of 350,000 restricted shares of its common stock to Laurus.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------

On April 12, 2005, we 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.



27



---

##### Table of Contents

On May 3, 2005, we 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 us in twenty-three (23) monthly installments of $15,000, including principal and interest at 8% per annum, commencing June 15, 2005. As of
March 31, 2007, the remaining principal balance on the note was $152,935 and the note is in default.

On July 21, 2005, we
entered into a capital lease with NEC Financial Services, Inc. for the purchase of equipment, in the principal amount of $22,979. The principal together with interest at the rate of 11.326% per annum is payable in 60 monthly installments
commencing July 21, 2005 in the amount of $499. As of March 31, 2007, the principal balance on the lease was $16,207.

On
August 31, 2005, we issued 14,038 restricted shares of our common stock to Dynamic Health Products, Inc. 401(k) Plan for our contribution to the employees 401(k) benefit plan.

On September 12, 2005, 150,000 restricted shares of our common stock were sold to a non-affiliated third party investor at $.50 per new share, for
gross proceeds of $75,000. Proceeds were used to provide additional for working capital for us.

On September 21, 2005, we issued a
note payable to AFCO Credit Corporation, for insurance expenses associated with a new policy, in the principal amount of $30,296. The principal together with interest at the rate of 8.25% per annum is payable in one monthly installment
commencing October 21, 2005 in the amount of $3,483 and eight remaining monthly installments commencing November 21, 2005 in the amount of $3,478. In June 2006, the note was subsequently paid in full.

On May 15, 2006, we received a promissory note in conversion of accounts receivable from Better Nutrition, LLC in the principal amount of $170,403.
The note shall be paid to us in twenty-four (24) semi-monthly installments of $7,366, including principal and interest at 7.75% per annum, commencing May 15, 2006. As of March 31, 2007, the remaining principal balance on the note
was $149,311 and the note is in default.

On June 1, 2006, the Company entered into a lease with The Northwestern Mutual Life
Insurance Company, whereby the Company agreed to lease approximately 14,725 square feet of warehouse space for its warehousing and shipping operations in Henderson, Nevada, for a term of five years commencing on June 1, 2006 and ending on
May 31, 2011. This facility is used for a portion of the Companys warehousing and shipping operations. The initial rental under the lease was $76,865 annually.

On June 7, 2006, we issued 166,405 restricted shares of our common stock to Dynamic Health Products, Inc. 401(k) Plan for our contribution to the employees 401(k) benefit plan.

On June 9, 2006, the Company issued a Standby Letter Of Credit and Security Agreement to First Community Bank Of America, in the amount of $500,000 in
favor of Iovate Health Sciences USA, Inc. The Company pledged an aggregate of $200,000 in certificates of deposit as collateral for the letter of credit. In addition, Jugal K. Taneja, Chairman of the Board of the Company, pledged additional
collateral in the form of a $300,000 certificate of deposit and Mandeep K. Taneja, the Companys Chief Executive Officer, personally guaranteed the letter of credit.

On September 1, 2006, we issued a note payable to AFCO Credit Corporation, for insurance expenses associated with a new policy, in the principal amount of $132,052. The principal together with interest at the
rate of 7.732% per annum is payable in nine monthly installments commencing October 1, 2006 in the amount of $15,149. As of March 31, 2007, the principal balance on the note was $30,008.



28



---

##### Table of Contents

On September 1, 2006, we issued a note payable to AFCO Credit Corporation, for insurance expenses
associated with a new policy, in the principal amount of $25,347. The principal together with interest at the rate of 9.861% per annum is payable in nine monthly installments commencing October 1, 2006 in the amount of $2,933. As of
March 31, 2007, the principal balance on the note was $5,798.

On September 21, 2006, we issued a note payable to AFCO Credit
Corporation, for insurance expenses associated with a new policy, in the principal amount of $13,831. The principal together with interest at the rate of 10% per annum is payable in nine monthly installments commencing October 21, 2006 in
the amount of $1,601. As of March 31, 2007, the principal balance on the note was $4,727.

On November 1, 2006, we issued a note
payable to AFCO Credit Corporation, for insurance expenses associated with a new policy, in the principal amount of $32,136. The principal together with interest at the rate of 7.73% per annum is payable in seven monthly installments commencing
December 1, 2006 in the amount of $4,710. As of March 31, 2007, the principal balance on the note was $9,330.

On
November 7, 2006, the Company entered into a lease agreement with Becknell Wholesale I, LP, effective January 1, 2007, whereby the Company agreed to lease approximately 9,000 square feet of office and warehouse space for its warehousing
and shipping operations in Dallas, Texas. This facility is used for a portion of the Companys warehousing and shipping operations. The lease is for a term of 64 months commencing on January 1, 2007 and ending on April 30, 2012. The
initial rental under the lease is $42,750 annually.

On April 26, 2007, the
Company entered into a Business Loan Agreement with First Community Bank of America (FCB), whereby the Company issued a secured Promissory Note to FCB in the maximum principal amount of $1,000,000, or so much as may be outstanding,
together with interest on the unpaid outstanding principal balance from time to time. Loan advances will be made from time to time upon the request of the Company. The note matures on October 15, 2007. Annual interest on the note is equal to
the U.S. Prime Rate as published in The Wall Street Journal, plus 1%. Interest shall be calculated from the date of each advance until repayment of each advance. Interest on the note is payable monthly on the 26thday of each month, commencing May 26, 2007. There is no prepayment penalty on the note. The note is guaranteed by Jugal
K. Taneja, the Companys Chairman and Mandeep K. Taneja, the Companys Chief Executive Officer and President. In addition, Jugal Taneja and his spouse, and Mandeep Taneja have pledged certain shares of the Companys common stock as
collateral for the note. Proceeds of the note will be used for short-term working capital needs.



|Item 7. | FINANCIAL STATEMENTS.
|------- | ---------------------

All financial information
required by this Item is attached hereto following Item 14 of this Annual Report on Form 10-KSB.



|Item 8. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
|------- | -------------------------------------------------------------------------------------

None.



29



---

##### Table of Contents

|Item 8A. | 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 Annual Report, our chief executive officer and chief financial officer have concluded that the Companys
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)) were 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 and to ensure that such information is accumulated and communicated to our management, including our chief executive
officer and chief financial officer, to allow timely decisions regarding required disclosure.

Changes in internal controls. There have
been no changes in the Companys internal controls or in other factors that materially affected or were reasonably likely to materially affect these controls during the period covered by this report, nor were there any material weaknesses in
our internal controls. Accordingly, no corrective actions were required or undertaken.



|Item 8B. | OTHER INFORMATION.
|-------- | ------------------

None.

PART III



|Item 9. | DIRECTORS, EXECUTIVE OFFICERS, PROMOTORS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
|------- | ----------------------------------------------------------------------------------------------------------------

The following are the names and certain information regarding the current Directors and Executive Officers of the Company:



|                         |  |     |  |                                                            |  |               
|------------------------ |  | --- |  | ---------------------------------------------------------- |  | --------------
|Name                     |  | Age |  | Position                                                   |  | Director Since
|Jugal K. Taneja          |  | 63  |  | Chairman of the Board and Director                         |  | 1992          
|Mandeep K. Taneja        |  | 33  |  | Chief Executive Officer, President and Director            |  | 2000          
|Cani I. Shuman           |  | 50  |  | Chief Financial Officer, Secretary, Treasurer and Director |  | 2001          
|Kotha S. Sekharam, Ph.D. |  | 56  |  | Director                                                   |  | 1995          
|Rakesh K. Sharma, M.D.   |  | 49  |  | Director                                                   |  | 1999          
|Morton L. Stone          |  | 76  |  | Director                                                   |  | 2002          

Pursuant to the Companys bylaws, each director serves for a term of one year and until his
successor is duly qualified. Officers are elected annually by the Board of Directors (subject to the terms of any employment agreement), at the Companys annual meeting, to hold such office until an officers successor has been duly
appointed and qualified, unless an officer sooner dies, resigns or is removed by the Board. Some of the directors and executive officers of the



30



---

##### Table of Contents

Company also serve in various capacities with subsidiaries of the Company. Mandeep K. Taneja is the adult son of Jugal K. Taneja. There are no other family
relationships among any of the Companys other directors or executive officers.

Background of Executive Officers and Directors

Jugal K. Taneja has served as the Companys Chairman of the Board since its inception. Until June 1998 and from November 1999 until February 2002, he
also served as the Companys Chief Executive Officer. In addition to his service to the Company, Mr. Taneja operates several other companies. He has served as Co-Chairman of DrugMax, Inc. since December 2004. He previously served as
Chairman of the Board of DrugMax, Inc., and from October 2000 until December 2004 has served as DrugMaxs Chief Executive Officer. He previously served as DrugMaxs Chief Executive Officer from its inception in October 1993 through April
1995, and again from January 1996 until August 1999. Further, he served at various times over the years as DrugMaxs President and Secretary. DrugMax is a publicly-held company operating as a business to business wholesaler and retailer of
pharmaceuticals, over-the counter drugs, health and beauty care products and private label dietary supplements. Mr. Taneja also serves as a director and Chairman of the Board of GeoPharma, Inc., a publicly-held company that manufactures and
distributes nutritional and health products, and manufactures generic and over-the-counter drugs. Mr. Taneja also serves as a director of Vertical Health Solutions, Inc., a publicly-held company that distributes veterinary products.
Mr. Taneja holds degrees in Petroleum Engineering, Mechanical Engineering, and a Masters in Business Administration from Rutgers University.

Mandeep K. Taneja has served as a director of the Company and as the Companys President since November 2000. He has also served as the Companys Chief Executive Officer since December 2002. Prior to that he served as President of
the Companys subsidiary, Online Meds Rx, Inc., formerly known as Dynamic Life, Inc., since June 2000. In addition, he served as Director of Finance for Dynamic Life Korea Ltd. from April 2000 until November 2001. Prior to that he was employed
as an associate of Johnson, Blakely, Pope, Bokor, Ruppel & Burns, P.A. Mr. Taneja holds a Bachelor of Arts degree in political science from the University of Rochester as well as Management Certificates in marketing and organizational
behavior. He also holds a Juris Doctorate from the University of Miami and is an attorney. Mr. Taneja is the son of Jugal K. Taneja.

Cani I. Shuman has served as a director of the Company since August 2001 and has served as the Companys Chief Financial Officer since November 2000. Ms. Shuman has served as the Companys Secretary and Treasurer since April
2000, and was Corporate Controller of the Company from February 1999 through November 2000. Prior to that she served as Chief Financial Officer of the Company since January 1998. Prior to her employment with the Company in January 1998, she was
employed in public accounting with Hacker, Johnson, Cohen & Grieb, PA, and Copeland and Company, CPAs since January 1994. Prior to that, she held accounting positions in private industry. Ms. Shuman is a certified public accountant and
holds a Bachelor of Science degree in Accounting from the University of South Florida.

Dr. Kotha S. Sekharam has served as a
director of the Company since June 1996 and served as the Companys President from June 1996 through November 2000. Dr. Sekharam was a founder and a director of Nu-Wave Health Products, Inc., and served as its President from June 1996
through March 1998, and served as Nu-Waves Vice President from September 1995 until June 1996. The Company acquired 80% of Nu-Wave in September 1995 and the additional 20% of Nu-Wave in July 1997. From 1992 until September 1995, he served as
Director of Research and Development of Energy Factors, acquired by the Company in June 1998. Dr. Sekharam is



31



---

##### Table of Contents

also President of GeoPharma, Inc., a publicly-held company that manufactures and distributes nutritional and health products, and manufactures generic and
over-the-counter drugs. Dr. Sekharam holds a Ph.D. in food sciences from Central Food Technological Research Institute, Mysore, India, a United Nations university center and has over 15 years of experience in the food and health industry.

Rakesh K. Sharma, M.D. became a director of the Company in March 1999. Dr. Sharma is a cardiologist and is a member of the medical
staff of several hospitals in the Tampa Bay, Florida area.

Morton L. Stone became a director of the Company in February 2002. He was a
partner in Ulmer & Berne, LLP, a Cleveland, Ohio based law firm, until his retirement in December 1997. Mr. Stones field of concentration was in business and corporate law. Since that time, he has provided business consulting
services. He received undergraduate and law degrees from Case Western Reserve University.

Audit Committee

The Company has an audit committee, which consists of Dr. Kotha S. Sekharam, Dr. Rakesh K. Sharma and Morton L. Stone. At this time,
an audit committee financial expert is not required for the Company and it does not have an audit committee financial expert serving on its audit committee.

Compensation Committee

The Company has a compensation committee, which consists of Dr. Kotha S. Sekharam,
Dr. Rakesh K. Sharma and Morton L. Stone.

Executive Committee

The Company has an executive committee, which consists of Cani I. Shuman, Jugal K. Taneja and Mandeep K. Taneja

Section 16(a) Beneficial Ownership Reporting Compliance

Based solely upon a review of Forms 3, 4 and 5, furnished to the Company during the years ended March 31, 2007 and 2006, the Company is not aware of any director, officer or beneficial owner of more than ten percent of the
Companys common stock that failed to file reports required by Section 16(a) of the Securities Exchange Act of 1934 on a timely basis during the year ended March 31, 2007, except the following:



|                   |  |                        |  |  |  | 
|------------------ |  | ---------------------- |  |  |  | 
|Name               |  | Number of Late Filings |  |  |  | 
|William L. LaGamba |  | 4                      |  |  |  | 

Code of Ethics

The Company has adopted its Code of Ethics and Business Conduct for Officers, Directors and Employees, that applies to all of the officers, directors and employees of the Company. The Code of Ethics was filed as an
exhibit to the Companys March 31, 2003 Annual Report on Form 10-KSB.



32



---

##### Table of Contents

|Item 10. | EXECUTIVE COMPENSATION.
|-------- | -----------------------

SUMMARY COMPENSATION
TABLE

The following table sets forth the aggregate cash compensation paid during the two years ended March 31, 2007 and 2006 to
our Chief Executive Officer and our two most highly compensated executive officers other than our Chief Executive Officer. Other than as listed below, the Company had no executive officers whose total annual salary and bonus exceeded $100,000 for
that fiscal year.



|                                                                     |  |          |  |          |                |             |    |               |  |                    |    |                                        |    |                                            |  |                            |    |         |    |    |  |    |             |  |    |               
|-------------------------------------------------------------------- |  | -------- |  | -------- | -------------- | ----------- | -- | ------------- |  | ------------------ | -- | -------------------------------------- | -- | ------------------------------------------ |  | -------------------------- | -- | ------- | -- | -- |  | -- | ----------- |  | -- | --------------
|Name and PrincipalPosition                                           |  | Year     |  | Salary $ |                | Bonus $ (1) |    | StockAwards $ |  | OptionAwards $ (2) |    | Non-EquityIncentive PlanCompensation
$ |    | NonqualifiedDeferredCompensationEarnings $ |  | All OtherCompensation $(3) |    | Total $
|Mandeep K. Taneja, Chief Executive Officer and President (a)         |  | 20072006 |  | $$       | 175,148165,187 |             | $$ | 15,0000       |  | $$                 | 00 |                                        | $$ | 261,6320                                   |  | $$                         | 00 |         | $$ | 00 |  | $$ | 17,8486,408 |  | $$ | 469,628171,595
|Cani I. Shuman, Chief Financial Officer, Secretary and Treasurer (b) |  | 20072006 |  | $$       | 91,91986,072   |             | $$ | 10,0000       |  | $$                 | 00 |                                        | $$ | 62,9170                                    |  | $$                         | 00 |         | $$ | 00 |  | $$ | 3,5881,190  |  | $$ | 168,42487,262 
|Jugal K. Taneja, Chairman (c)                                        |  | 20072006 |  | $$       | 163,333150,000 |             | $$ | 00            |  | $$                 | 00 |                                        | $$ | 353,8740                                   |  | $$                         | 00 |         | $$ | 00 |  | $$ | 25,000500   |  | $$ | 542,207150,500

---

|(1) | The cash bonuses paid during the fiscal year ended March 31, 2007 were for services rendered during the fiscal year ended March 31, 2006.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------

|(2) | The value of option awards shown in this column represent the dollar amount of compensation expense recognized for financial statement reporting purposes in our financial statements
for the fiscal year ended March 31, 2007, based on the fair value of all options granted to the named executive officers. These values include expense for options granted during the fiscal year ended March 31, 2007 and expense for options
granted prior to April 1, 2006, all of which were converted into restricted shares of our common stock on March 28, 2007, and expense for value in excess upon conversion, in accordance with SFAS No. 123R, excluding forfeitures. There
were no forfeitures during the fiscal year ended March 31, 2007 by the named executive officers. There were no stock options granted to the named executive officers during the fiscal year ended March 31, 2006. These grants and the exchange
of stock options issued are included and discussed further below.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (a) | Compensation expense for restricted shares of our common stock issued to Mandeep Taneja in exchange for all of his stock options held:
| | --- | --------------------------------------------------------------------------------------------------------------------------------------



|           |  |                  |  |                                 |         |                                    |         |                                  |   |                         |  |   |        
|---------- |  | ---------------- |  | ------------------------------- | ------- | ---------------------------------- | ------- | -------------------------------- | - | ----------------------- |  | - | -------
|Grant Date |  | Number OfOptions |  | Black-Scholes Value At Issuance |         | Number Of Shares IssuedIn Exchange |         | Value ofShares IssuedIn Exchange |   | 2007CompensationExpense
|12/20/2002 |  | 100,000          |  | $                               | 15,918  |                                    | 71,626  |                                  | $ | 35,813                  |  | $ | 19,895 
|1/23/2004  |  | 25,000           |  | $                               | 24,874  |                                    | 5,000   |                                  | $ | 2,500                   |  | $ | 6,737  
|7/17/2006  |  | 250,000          |  | $                               | 75,000  |                                    | 88,492  |                                  | $ | 44,246                  |  | $ | 75,000 
|7/24/2006  |  | 500,000          |  | $                               | 160,000 |                                    | 150,793 |                                  | $ | 75,397                  |  | $ | 160,000
|           |  |                  |  |                                 |         |                                    |         |                                  |   |                         |  |   |        
|Totals     |  | 875,000          |  | $                               | 275,792 |                                    | 315,911 |                                  | $ | 157,956                 |  | $ | 261,632
|           |  |                  |  |                                 |         |                                    |         |                                  |   |                         |  |   |        



33



---

##### Table of Contents

| | (b) | Compensation expense for restricted shares of our common stock issued to Cani Shuman in exchange for all of her stock options held:
| | --- | -----------------------------------------------------------------------------------------------------------------------------------



|           |  |                  |  |                                 |        |                                    |         |                                  |   |                         |  |   |       
|---------- |  | ---------------- |  | ------------------------------- | ------ | ---------------------------------- | ------- | -------------------------------- | - | ----------------------- |  | - | ------
|Grant Date |  | Number OfOptions |  | Black-Scholes Value At Issuance |        | Number Of Shares IssuedIn Exchange |         | Value ofShares IssuedIn Exchange |   | 2007CompensationExpense
|12/20/2002 |  | 100,000          |  | $                               | 15,923 |                                    | 74,206  |                                  | $ | 37,103                  |  | $ | 21,180
|1/23/2004  |  | 25,000           |  | $                               | 24,873 |                                    | 5,000   |                                  | $ | 2,500                   |  | $ | 6,737 
|7/17/2006  |  | 100,000          |  | $                               | 35,000 |                                    | 41,269  |                                  | $ | 20,635                  |  | $ | 35,000
|           |  |                  |  |                                 |        |                                    |         |                                  |   |                         |  |   |       
|Totals     |  | 225,000          |  | $                               | 75,796 |                                    | 120,475 |                                  | $ | 60,238                  |  | $ | 62,917
|           |  |                  |  |                                 |        |                                    |         |                                  |   |                         |  |   |       



| | (c) | Compensation expense for restricted shares of our common stock issued to Jugal Taneja in exchange for all of his stock options held:
| | --- | ------------------------------------------------------------------------------------------------------------------------------------



|           |  |                  |  |                                 |         |                                    |         |                                  |   |                         |  |   |        
|---------- |  | ---------------- |  | ------------------------------- | ------- | ---------------------------------- | ------- | -------------------------------- | - | ----------------------- |  | - | -------
|Grant Date |  | Number OfOptions |  | Black-Scholes Value At Issuance |         | Number Of Shares IssuedIn Exchange |         | Value ofShares IssuedIn Exchange |   | 2007CompensationExpense
|12/20/2002 |  | 200,000          |  | $                               | 33,335  |                                    | 143,253 |                                  | $ | 71,627                  |  | $ | 39,292 
|1/23/2004  |  | 50,000           |  | $                               | 49,748  |                                    | 10,000  |                                  | $ | 5,000                   |  | $ | 13,473 
|10/1/2004  |  | 500,000          |  | $                               | 452,219 |                                    | 100,000 |                                  | $ | 50,000                  |  | $ | 226,109
|7/17/2006  |  | 250,000          |  | $                               | 75,000  |                                    | 88,492  |                                  | $ | 44,246                  |  | $ | 75,000 
|           |  |                  |  |                                 |         |                                    |         |                                  |   |                         |  |   |        
|Totals     |  | 1,000,000        |  | $                               | 610,302 |                                    | 341,745 |                                  | $ | 170,873                 |  | $ | 353,874
|           |  |                  |  |                                 |         |                                    |         |                                  |   |                         |  |   |        



|(3) | See the All Other Compensation table below for addition information.
|--- | --------------------------------------------------------------------

All Other Compensation

The following table reflects each component of the All Other Compensation column in the
Summary Compensation Table. For each named executive officer, these components consist of our matching contributions to our 401(k) Plan and perquisites. We do not provide tax gross-ups on director fees or any perquisites.



|                      |  |          |  |                         |            |              |    |                 |  |                             |             |  |    |            
|--------------------- |  | -------- |  | ----------------------- | ---------- | ------------ | -- | --------------- |  | --------------------------- | ----------- |  | -- | -----------
|Name                  |  |          |  | 401(k)Contributions (1) |            | DirectorFees |    | Perquisites (2) |  | Total All OtherCompensation
|Mandeep K. Taneja (a) |  | 20072006 |  | $$                      | 4,9501,273 |              | $$ | 1,000500        |  | $$                          | 11,8984,635 |  | $$ | 17,8486,408
|Cani I. Shuman        |  | 20072006 |  | $$                      | 2,588690   |              | $$ | 1,000500        |  | $$                          | 00          |  | $$ | 3,5881,190 
|Jugal K. Taneja (b)   |  | 20072006 |  |                         | N/AN/A     |              | $$ | 1,000500        |  | $$                          | 24,0000     |  | $$ | 25,000500  

---

|(1) | Restricted shares of our common stock were issued for the employers matching contribution to our 401(k) plan, in lieu of cash, to all participating employees. This column
reflects the dollar value of the shares issued.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | (a) Includes $7,000 paid as compensation for guarantee of letter of credit in 2007. Social club dues paid were $4,898 in 2007 and $4,635 in 2006.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------



| | (b) | Compensation for guarantee of letter of credit in 2007.
| | --- | -------------------------------------------------------



34



---

##### Table of Contents

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

There were no outstanding unexercised options, unvested shares of common stock or any awards under an equity incentive plan as of March 31, 2007 for
our Chief Executive Officer and our two most highly compensated executive officers other than the Chief Executive Officer, therefore the table has been omitted.

DIRECTOR COMPENSATION

The following table summarizes the compensation we paid to our non-employee
directors during the fiscal year ended March 31, 2007. Compensation information for Mandeep Taneja, our Chief Executive Officer, Cani Shuman, our Chief Financial Officer and Jugal Taneja, our Chairman, is set forth in the Summary Compensation
Table above.



|                            |  |                                 |       |               |   |                   |  |                                        |        |                                            |   |                         |  |         |   |  |   |   |  |   |       
|--------------------------- |  | ------------------------------- | ----- | ------------- | - | ----------------- |  | -------------------------------------- | ------ | ------------------------------------------ | - | ----------------------- |  | ------- | - |  | - | - |  | - | ------
|Name                        |  | Fees Earned orPaid in Cash $(2) |       | StockAwards $ |   | OptionAwards $(3) |  | Non-EquityIncentive
PlanCompensation $ |        | NonqualifiedDeferredCompensationEarnings $ |   | All OtherCompensation $ |  | Total $
|Kotha S. Sekharam (a)       |  | $                               | 1,000 |               | $ | 0                 |  | $                                      | 65,611 |                                            | $ | 0                       |  | $       | 0 |  | $ | 0 |  | $ | 66,611
|Rakesh K. Sharma (a)        |  | $                               | 1,000 |               | $ | 0                 |  | $                                      | 65,611 |                                            | $ | 0                       |  | $       | 0 |  | $ | 0 |  | $ | 66,611
|Morton L. Stone (a)         |  | $                               | 1,000 |               | $ | 0                 |  | $                                      | 65,611 |                                            | $ | 0                       |  | $       | 0 |  | $ | 0 |  | $ | 66,611
|Robert A. Herrmann, Jr. (1) |  | $                               | 500   |               | $ | 0                 |  | $                                      | 35,000 |                                            | $ | 0                       |  | $       | 0 |  | $ | 0 |  | $ | 35,500

---

|(1) | Resigned from our Board effective October 23, 2006.
|--- | ---------------------------------------------------

|(2) | The amounts listed in this column include the payment of director fees for meetings attended. Fees earned by a director vary depending upon the number of Board meetings attended by
the director, and for those directors that are committee members, fees vary based on the number of committee meeting attended by the director.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | The value of option awards shown in this column represent the dollar amount of compensation expense recognized for financial statement reporting purposes in our financial statements
for the fiscal year ended March 31, 2007, based on the fair value of all options granted to the director. These values include expense for options granted during the fiscal year ended March 31, 2007 and expense for options granted prior to
April 1, 2006, all of which were converted into restricted shares of our common stock on March 28, 2007, and expense for value in excess upon conversion, in accordance with SFAS No. 123R, excluding forfeitures. Forfeitures amounted to
$35,000 during the fiscal year ended March 31, 2007 by Mr. Robert Herrmann. There were no stock options granted for our directors during the fiscal year ended March 31, 2006. These grants and the exchange of stock options issued are
included and discussed further below.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (a) | Compensation expense for restricted shares of our common stock issued to each non-employee director in exchange for all of their stock options held:
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------



|           |  |                  |  |                                 |        |                                    |         |                                  |   |                         |  |   |       
|---------- |  | ---------------- |  | ------------------------------- | ------ | ---------------------------------- | ------- | -------------------------------- | - | ----------------------- |  | - | ------
|Grant Date |  | Number OfOptions |  | Black-Scholes Value At Issuance |        | Number Of Shares IssuedIn Exchange |         | Value ofShares IssuedIn Exchange |   | 2007CompensationExpense
|12/20/2002 |  | 100,000          |  | $                               | 15,923 |                                    | 74,206  |                                  | $ | 37,103                  |  | $ | 21,180
|1/23/2004  |  | 35,000           |  | $                               | 34,822 |                                    | 7,000   |                                  | $ | 3,500                   |  | $ | 9,431 
|7/17/2006  |  | 100,000          |  | $                               | 35,000 |                                    | 41,269  |                                  | $ | 20,635                  |  | $ | 35,000
|           |  |                  |  |                                 |        |                                    |         |                                  |   |                         |  |   |       
|Totals     |  | 235,000          |  | $                               | 85,745 |                                    | 122,475 |                                  | $ | 61,238                  |  | $ | 65,611
|           |  |                  |  |                                 |        |                                    |         |                                  |   |                         |  |   |       



35



---

##### Table of Contents

Consulting Agreement

Jugal K. Taneja has been a valuable employee of the Company and management of the Company realized that Mr. Taneja has demonstrated a keen understanding of the Companys operations, such that it is desirable
to retain Mr. Tanejas services under a consulting agreement. On February 14, 2002, the Company entered into a Consulting Agreement with Jugal K. Taneja, to reflect his current position as a consultant to the Company. During the three
year term of the Consulting Agreement, commencing January 1, 2002, Mr. Taneja shall be deemed to be an independent contractor and is free to devote his time, energy and skill to any such person, firm or company as he deems advisable. The
annual compensation payable under the agreement was $240,000, as consideration for the services to be rendered under the agreement. On October 1, 2002, upon mutual agreement between the parties, the annual base compensation payable under the
agreement was reduced to $150,000. On July 17, 2006, upon mutual agreement between the parties, commencing August 1, 2006, the annual base compensation payable under the agreement was increased to $170,000. The agreement contains
confidentiality and non-compete provisions. The agreement has continued under the same terms and amounts, however, there is no written agreement at this time.

Employment Agreements

On September 30, 2004, the Company, through its wholly-owned subsidiary, BOSS, entered into an
Employment Agreement with Joseph Mies to serve as BOSSs Chief Operating Officer, effective October 1, 2004. The Employment Agreement provides for an initial three-year term ending September 30, 2007, with an annual base compensation
of $100,000. The agreement contains a provision for bonus compensation. The agreement also contains termination provisions for disability, for cause, and for good reason, and it also contains confidentiality and non-competition provisions that
prohibit him from competing with the Company under certain circumstances.

Employee And Non-Employee Stock Option Plans

1999 Stock Option Plan

In March 1999, the
Companys Board of Directors adopted the Companys 1999 Stock Option Plan, which has been approved by the Companys shareholders. The 1999 Plan will enable the Company to attract and retain top-quality executive employees, officers,
directors and consultants, and to provide such executive employees, officers, directors and consultants with an incentive to enhance stockholder return. The 1999 Plan will allow the grant to officers, directors, or other key employees and
consultants of the Company, of options to purchase up to a maximum aggregate of 6,000,000 shares of Company common stock.



36



---

##### Table of Contents

The Board of Directors of the Company or a committee of the Board may administer the 1999 Plan, and has
complete discretion to select the optionees and terms and conditions of each option, subject to the provisions of the 1999 Plan. Options granted under the 1999 Plan may be incentive stock options as defined in Section 411 of the
Internal Revenue Code of 1986 or so-called nonqualified options. The exercise price of incentive stock options may not be less than 100% of the fair market value of the Companys common stock as of the date of grant (110% of the fair market
value if the grant is to an employee who owns more than 10% of the total combined voting power of all classes of capital stock of the Company). The Internal Revenue Code currently limits to $100,000 the aggregate value of the common stock that may
be acquired in any one year pursuant to incentive stock options under the 1999 Plan or any other option plan adopted by the Company.

Nonqualified options may be granted under the 1999 Plan at an exercise price of not less than 100% of the fair market value of the Companys common stock on the date of grant. Nonqualified options also may be granted without regard to
any restriction on the amount of common stock that may be acquired pursuant to such options in any one year.

Subject to the limitations
contained in the 1999 Plan, options become exercisable at such times and in such installments as the Committee shall provide in the terms of each individual stock option agreement. The Committee must also provide in the terms of each stock option
agreement, when the option expires and becomes unexercisable, and may also provide for the option expiration of at least thirty days upon termination of employment for any reason. No option held by directors, executive officers or other persons
subject to Section 16 of the Securities Exchange Act of 1934 may be exercised during the first six months after such option is granted.

Unless otherwise provided in the applicable stock option agreement, upon termination of employment of an optionee, all options that were then exercisable would terminate three months (twelve months in the case of termination by reason of
death or disability) following termination of employment. Any options which were not fully vested and exercisable on the date of such termination would immediately be cancelled concurrently with the termination of employment.

Options granted under the 1999 Plan may not be exercised more than ten years after the grant (five years after the grant if the grant is an incentive
stock option to an employee who owns more than 10% of the total combined voting power of all classes of capital stock of the Company). Options granted under the 1999 Plan are not transferable and may be exercised only by the respective grantees
during their lifetime or by their heirs, executors or administrators in the event of death. Under the 1999 Plan, shares subject to cancelled or terminated options are reserved for subsequently granted options. The number of options outstanding and
the exercise price thereof are subject to adjustment in the case of certain transactions such as mergers, recapitalizations, stock splits or stock dividends. The 1999 Plan is effective for ten years, unless sooner terminated or suspended.

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. For the options granted, the balance of deferred consulting fees as of March 31, 2007 and 2006 was



37



---

##### Table of Contents

$83,127 and $249,382, respectively. The initial valuation of these options was $498,763. For the years ended March 31, 2007 and 2006, the Company
included compensation expense in the amount of $166,254 in selling, general and administrative expenses in the statements of operations, for these options.

On December 1, 2005, the Company granted options to purchase 2,500 shares of the Companys common stock to an employee, in accordance with the Companys 1999 Stock Option Plan. The exercise price of the
options is $0.39 (100% of the fair value of the Companys common stock on November 30, 2005). The options vest on December 1, 2006. 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 110.35% and a risk free interest rate of 4.47%.

On March 1, 2006, the Company granted
options to purchase 2,500 shares of the Companys common stock to an employee, in accordance with the Companys 1999 Stock Option Plan. The exercise price of the options is $0.43 (100% of the fair value of the Companys common stock
on February 28, 2006). The options vest on March 1, 2007. 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 110.35% and a risk free interest rate
of 4.77%.

On July 17, 2006, the Company granted options to purchase 650,000 shares of the Companys common stock to employees,
in accordance with the Companys 1999 Stock Option Plan. The exercise price of the options is $0.37 (100% of the fair value of the Companys common stock on July 16, 2006). The options vest approximately equally over a three year
period, commencing July 17, 2007. 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 114.74% and a risk free interest rate of 5.07%.

On July 17, 2006, the Company granted options to purchase 250,000 shares of the Companys common stock to Jugal Taneja, the Companys
Chairman and a principal shareholder of the Company, and options to purchase 250,000 shares of the Companys common stock to Mandeep Taneja, the Companys Chief Executive Officer and a principal shareholder of the Company, in accordance
with the Companys 1999 Stock Option Plan. The exercise price of the options is $0.407 (110% of the fair value of the Companys common stock on July 16, 2006). The options vest approximately equally over a three year period,
commencing July 17, 2007. 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 114.74% and a risk free interest rate of 3.56%.

On July 24, 2006, the Compensation Committee of the Companys Board of Directors granted options to purchase 500,000 shares of the
Companys common stock to Mandeep Taneja, as compensation for Mr. Tanejas personal guarantee to First Community Bank, on July 24, 2006, of the Standby Letter Of Credit and Security Agreement issued by the Company to First
Community Bank. The exercise price of the options is $0.44 (110% of the fair value of the Companys common stock on July 23, 2006). The options vest approximately equally over a three year period, commencing July 24, 2007. 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 114.74% and a risk free interest rate of 3.69%.



38



---

##### Table of Contents

The following represents the common stock options outstanding as of March 31, 2006 and 2007.



|                                           |  |            |  
|------------------------------------------ |  | ---------- | -
|Option balance outstanding, March 31, 2005 |  | 1,955,000  |  
|Granted                                    |  | 5,000      |  
|Exercised                                  |  | 0          |  
|Forfeited                                  |  | 0          |  
|                                           |  |            |  
|Option balance outstanding, March 31, 2006 |  | 1,960,000  |  
|Granted                                    |  | 1,650,000  |  
|Exercised                                  |  | 0          |  
|Exchanged for common stock                 |  | (2,905,000 | )
|Forfeited                                  |  | (705,000   | )
|                                           |  |            |  
|Option balance outstanding, March 31, 2007 |  | 0          |  
|                                           |  |            |  

As of March 31, 2007, there were no options outstanding. As of March 31, 2006, there
were 1,960,000 options outstanding.

On March 28, 2007, the Company issued an aggregate of 1,186,825 restricted shares of common stock
in exchange for the cancellation of 2,905,000 outstanding options to purchase common stock. The options had exercise prices ranging from $0.1625 to $1.14. All persons who received shares in exchange for cancellation of options entered into lock up
agreements, pursuant to which they are not permitted to sell, assign, encumber, grant an option with respect to, or transfer and/or dispose of such shares for a period of three years, except with prior written consent of the Company.

Forfeited options represent options granted to one or more employees of record whose employment is terminated , voluntarily or involuntarily, and based
on their termination date, such options were considered nonvested. In addition, forfeited options include an aggregate of 250,000 options issued in connection with an acquisition, which were subsequently cancelled.



|Item 11. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
|-------- | -----------------------------------------------------------------------------------------------

The following table sets forth certain information regarding beneficial ownership of the Companys securities as of March 31, 2007:



| |  |  | by each person who is known by us to beneficially own more than 5% of our securities;
| | - |  | -------------------------------------------------------------------------------------



| |  |  | by each of our officers and directors; and
| | - |  | ------------------------------------------



| |  |  | by all of our officers and directors as a group.
| | - |  | ------------------------------------------------



|               |  |                                                   |  |                                           |  |                                |  
|-------------- |  | ------------------------------------------------- |  | ----------------------------------------- |  | ------------------------------ | -
|Title Of Class |  | Name And Address Of Beneficial Owner(1)           |  | Amount AndNature OfBeneficialOwnership(2) |  | ApproximatePercent OfClass (%) |  
|Common         |  | Jugal K. Taneja(3)                                |  | 4,873,453                                 |  | 30.0                           | %
|Common         |  | Manju Taneja(4)                                   |  | 2,123,149                                 |  | 13.1                           | %
|Common         |  | Mandeep K. Taneja                                 |  | 1,843,007                                 |  | 11.3                           | %
|Common         |  | Laurus Master Fund, Ltd.(5)                       |  | 1,784,621                                 |  | 9.9                            | %
|Common         |  | William L. LaGamba(6)                             |  | 1,536,000                                 |  | 9.5                            | %
|Common         |  | Michele LaGamba(7)                                |  | 1,536,000                                 |  | 9.5                            | %
|Common         |  | Mihir K. Taneja                                   |  | 1,479,996                                 |  | 9.1                            | %
|Common         |  | Kotha S. Sekharam, Ph.D.(8)                       |  | 584,939                                   |  | 3.6                            | %
|Common         |  | Morton L. Stone                                   |  | 230,175                                   |  | 1.4                            | %
|Common         |  | Cani I. Shuman                                    |  | 150,475                                   |  | 0.9                            | %
|Common         |  | Rakesh K. Sharma, M.D.                            |  | 122,475                                   |  | 0.8                            | %
|Common         |  | All officers and directors as a group (6 persons) |  | 7,804,524                                 |  | 48.1                           | %

---

|(1) | Except as otherwise noted, the address for the above identified officers and directors is c/o Dynamic Health Products, Inc. at 12399 Belcher Road South, Suite 140, Largo, FL 33773.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



39



---

##### Table of Contents

|(2) | Beneficial ownership is determined in accordance with the rules of the Commission and generally includes voting or investment power with respect to the shares shown. Except where
indicated by footnote and subject to community property laws where applicable, the persons named in the table have sole voting and investment power with respect to all shares of voting securities shown as beneficially owned by them. Percentages are
based upon the assumption that each shareholder has exercised all of the currently exercisable options he or she owns which are currently exercisable or exercisable within 60 days and that no other shareholder has exercised any options he or she
owns.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Includes 1,652,740 shares beneficially owned by Manju Taneja, Jugal K. Tanejas spouse, as to which Mr. Taneja exercises no investment or voting power and disclaims
beneficial ownership. Also includes (i) 2,680,304 shares owned by Carnegie Capital, Ltd. and (ii) 70,000 shares owned by First Delhi Family Partnership, Ltd. Mr. Taneja is the general partner of Carnegie Capital, Ltd. and First Delhi
Family Partnership, Ltd. As such, Mr. Taneja holds sole voting and investment power with respect to the shares held of record by Carnegie Capital, Ltd. and First Delhi Family Partnership, Ltd.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Includes 470,409 shares beneficially owned by Jugal K. Taneja, as to which Manju Taneja exercises no investment or voting power and disclaims beneficial ownership. Excludes
(i) 2,680,304 shares owned by Carnegie Capital, Ltd., and (ii) 70,000 shares owned by First Delhi Family Partnership, Ltd., as to which Mrs. Taneja exercises no investment or voting power and disclaims beneficial ownership.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Includes 1,084,621 shares issuable upon conversion of convertible debentures. Laurus is also entitled to receive an additional 4,782,514 shares of common stock upon conversion of
presently convertible debentures, however, Laurus has contractually agreed to restrict their ability to convert their secured convertible notes such that the number of shares of common stock held by them in the aggregate and their affiliates after
such conversion or exercise does not exceed 9.9% of the then issued and outstanding shares of common stock as determined in accordance with Section 13(d) of the Securities Exchange Act of 1934. This restriction can be waived by Laurus upon 75
days prior written notice. Laurus Capital Management, LLC may be deemed a control person of the shares owned by Laurus Master Fund, Ltd. David Grin and Eugene Grin are the sole managing members of Laurus Capital Management, LLC. Laurus is not
a registered broker dealer or an affiliate of a broker dealer.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | Includes 552,000 shares owned by Michele LaGamba, Mr. LaGambas wife, as to which Mr. LaGamba exercises no investment or voting power and disclaims beneficial
ownership. Also includes and 505,000 shares held by Mr. LaGamba as custodian for their minor children.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) | Includes 479,000 shares owned by William L. LaGamba, and 505,000 shares held by Mr. LaGamba as custodian for their minor children, as to which Mrs. LaGamba exercises no
investment or voting power and disclaims beneficial ownership.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(8) | Includes 40,000 shares owned by Madhavi Sekharam, Dr. Sekharams spouse, as to which Dr. Sekharam exercises no investment or voting power and disclaims beneficial
ownership.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The above-referenced table is based on 16,241,860 shares issued and outstanding as of March 31, 2007.



40



---

##### Table of Contents

|Item 12. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
|-------- | -----------------------------------------------

As
of March 31, 2007 and 2006, the Companys investment in GeoPharma, Inc. (GeoPharma), consisting of 204,914 and 347,938 shares of its common stock, respectively, is included in marketable equity securities, net. 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 March 31, 2007 and 2006, the Companys investment in Vertical Health Solutions, Inc. (Vertical), consisting of 253,337 shares of its common stock, is included in marketable equity securities, net. Jugal K.
Taneja, a principal shareholder and Chairman of the Board of the Company is also a director and a principal shareholder of Vertical.

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

For the years ended March 31, 2007 and 2006, purchases of products from subsidiaries of GeoPharma were
$99,344 and $182,872, respectively, and sales of products to subsidiaries of GeoPharma were $65 and $31,157, respectively. As of March 31, 2007 and 2006, $26,363 and $26,554, respectively, were due to subsidiaries of GeoPharma and are included
in obligations to affiliates. As of March 31, 2007 and 2006, $3,960 and $2,175, respectively, were due from GeoPharma.

Research and
development is primarily contracted through Innovative Health Products, Inc. (Innovative), a wholly-owned subsidiary of GeoPharma, 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.

PART IV



|Item 13. | EXHIBITS.
|-------- | ---------



|    |  |                                                                                                                     
|--- |  | --------------------------------------------------------------------------------------------------------------------
|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)     
|    | 
|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)



41



---

##### Table of Contents

|      |  |                                                                                                                              
|----- |  | -----------------------------------------------------------------------------------------------------------------------------
|      | 
|3.5   |  | Certificate of Amendment to Restated Articles of Incorporation of Dynamic Health Products, Inc., filed October 25, 2004. (5) 
|      | 
|10.1  |  | Securities Purchase Agreement between the Company and Laurus Master Fund, Ltd., dated as of September 30, 2004. (4)          
|      | 
|10.2  |  | Master Security Agreement between the Company and Laurus Master Fund, Ltd., dated as of September 30, 2004. (4)              
|      | 
|10.3  |  | Registration Rights Agreement between the Company and Laurus Master Fund, Ltd., dated as of September 30, 2004. (4)          
|      | 
|10.4  |  | Guaranty issued by Jugal K. Taneja to Laurus Master Fund, Ltd., dated as of September 30, 2004. (4)                          
|      | 
|10.5  |  | Subsidiary Guaranty between the Company and Laurus Master Fund, Ltd., dated as of September 30, 2004. (4)                    
|      | 
|10.6  |  | Supplemental Stock Pledge Agreement between the Company and Laurus Master Fund, Ltd., dated as of September 30, 2004. (4)    
|      | 
|10.7  |  | Subsidiary Stock Pledge Agreement between the Company and Laurus Master Fund, Ltd., dated as of September 30, 2004. (4)      
|      | 
|10.8  |  | Secured Convertible Term Note issued by the Company to Laurus Master Fund, Ltd., dated as of September 30, 2004. (4)         
|      | 
|10.9  |  | Lease Agreement by and between the Company and Robert OLeary and Linda OLeary, dated as of October 1, 2004. (7)            
|      | 
|10.10 |  | Employment Agreement between the Company and Joseph Mies, dated as of September 30, 2004. (7)                                
|      | 
|10.11 |  | Warehouse/Office Lease by and between the Company and Yale Mosk & Co, dated as of February 8, 2005. (7)                      
|      | 
|10.12 |  | Lease Agreement by and between the Company and GAM Realty, LLC, dated as of March 29, 2005. (7)                              
|      | 
|10.13 |  | Security Agreement by and among the Company and Laurus Master Fund, Ltd., dated as of March 29, 2005. (6)                    
|      | 
|10.14 |  | Secured Revolving Note issued by the Company to Laurus Master Fund, Ltd., dated as of March 29, 2005. (6)                    
|      | 
|10.15 |  | Secured Convertible Minimum Borrowing Note issued by the Company to Laurus Master Fund, Ltd., dated as of March 29, 2005. (6)
|      | 
|10.16 |  | Registration Rights Agreement between the Company and Laurus Master Fund, Ltd., dated as of March 29, 2005. (6)              



42



---

##### Table of Contents

|      |  |                                                                                                                                                                          
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      | 
|10.17 |  | Amendment No. 1 to Master Security Agreement between the Company and Laurus Master Fund, Ltd., dated as of September 30, 2004. (6)                                       
|      | 
|10.18 |  | Postponement Agreement by and between Laurus Master Fund, Ltd. and Dynamic Health Products, Inc., dated as of July 19, 2005. (8)                                         
|      | 
|10.19 |  | Postponement and Amendment Agreement by and among Laurus Master Fund, Ltd., Dynamic Health Products, Inc. and Subsidiary, dated as of April 28, 2006. (9)                
|      | 
|10.20 |  | Amended and Restated Secured Revolving Note issued to Laurus Master Fund, Ltd., effective as of March 29, 2005. (9)                                                      
|      | 
|10.21 |  | Amended and Restated Secured Convertible Minimum Borrowing Note issued to Laurus Master Fund, Ltd., effective as of March 29, 2005. (9)                                  
|      | 
|10.22 |  | Amended and Restated Secured Convertible Term Note issued to Laurus Master Fund, Ltd., effective as of September 30, 2004. (9)                                           
|      | 
|10.23 |  | Amended and Restated Registration Rights Agreement, restated as of April 28, 2006, by and between Laurus Master Fund, Ltd. and the Company. (9)                          
|      | 
|10.24 |  | Amendment Agreement by and among Laurus Master Fund, Ltd., Dynamic Health Products, Inc. and Subsidiary, dated as of May 24, 2006. (10)                                  
|      | 
|10.25 |  | Industrial Real Estate Lease by and between Bob OLeary Health Food Distributor Co., Inc. and The Northwestern Mutual Life Insurance Company, dated as of July 10, 2006. 
|      | 
|10.26 |  | Amendment Agreement, dated as of October 4, 2006, by and among Laurus Master Fund, Ltd., Dynamic Health Products, Inc. and Dynamic Marketing I, Inc. (11)                
|      | 
|10.27 |  | Second Amended and Restated Secured Convertible Minimum Borrowing Note issued to Laurus Master Fund, Ltd., effective as of October 4, 2006. (11)                         
|      | 
|10.28 |  | Second Amended and Restated Secured Revolving Note issued to Laurus Master Fund, Ltd., effective as of October 4, 2006. (11)                                             
|      | 
|10.29 |  | Second Amended and Restated Convertible Term Note issued to Laurus Master Fund, Ltd., effective as of October 4, 2006. (11)                                              
|      | 
|10.30 |  | Commercial Lease Agreement by and between Becknell Wholesale I, LP and Bob OLeary Health Food Distributor Co., Inc., dated as of November 10, 2006.                     
|      | 
|10.31 |  | Postponement And Amendment Agreement, dated as of April 11, 2007, by and among Laurus Master Fund, Ltd., Dynamic Health Products, Inc. and Dynamic Marketing I, Inc. (12)
|      | 
|10.32 |  | Business Loan Agreement, dated as of April 26, 2007, by and between Dynamic Health Products, Inc. and First Community Bank of America. (13)                              
|      | 
|10.33 |  | Promissory Note issued by the Company to First Community Bank of America, dated April 26, 2007. (13)                                                                     



43



---

##### Table of Contents

|      |  |                                                                                                                                                                     
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      | 
|10.34 |  | Commercial Security Agreement, dated as of April 26, 2007, by and between Dynamic Health Products, Inc. and First Community Bank of America. (13)                   
|      | 
|10.35 |  | Agreement And Plan Of Reorganization, dated as of May 14, 2007, by and among GeoPharma, Inc., Florida Merger Subsidiary Corp. and Dynamic Health Products, Inc. (14)
|      | 
|14.1  |  | Code of Ethics of Dynamic Health Products, Inc. (4)                                                                                                                 
|      | 
|21.1  |  | Dynamic Health Products, Inc.  List of Subsidiaries.                                                                                                               
|      | 
|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 September 30, 2004, file number 0-23031, filed in Washington, D.C. on October 6, 2004.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | 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.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | Incorporated by reference to the Companys Current Report on Form 8-K, dated March 29, 2005, file number 0-23031, filed in Washington, D.C. on April 1, 2005.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) | Incorporated by reference to the Companys Annual Report on Form 10-KSB for the year ended March 31, 2005, file number 0-23031, filed in Washington, D.C. on July 14, 2005.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(8) | Incorporated by reference to the Companys Registration Statement on Form S-2, dated August 19, 2005, file number 333-127692, filed in Washington, D.C. on August 19, 2005.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(9) | Incorporated by reference to the Companys Current Report on Form 8-K, dated April 28, 2006, file number 0-23031, filed in Washington, D.C. on May 3, 2006.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------

|(10) | Incorporated by reference to the Companys Current Report on Form 8-K, dated May 24, 2006, file number 0-23031, filed in Washington, D.C. on May 31, 2006.
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------



44



---

##### Table of Contents

|(11) | Incorporated by reference to the Companys Current Report on Form 8-K, dated October 4, 2006, file number 0-23031, filed in Washington, D.C. on October 5, 2006.
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

|(12) | Incorporated by reference to the Companys Current Report on Form 8-K, dated April 11, 2007, file number 0-23031, filed in Washington, D.C. on April 11, 2007.
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------

|(13) | Incorporated by reference to the Companys Current Report on Form 8-K, dated April 26, 2007, file number 0-23031, filed in Washington, D.C. on April 26, 2007.
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------

|(14) | Incorporated by reference to the Companys Current Report on Form 8-K, dated May 14, 2007, file number 0-23031, filed in Washington, D.C. on May 17, 2007.
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------



|Item 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES.
|-------- | ---------------------------------------

Audit Fees

Total fees billed for professional services rendered by the Companys principal accountant for the audit and review of the
Companys financial statements included in the Companys Form 10-QSBs and Form 10-KSBs, and services provided in connection with the Companys Form 8-Ks, Form S-2s, Form SB-2s, and Form S-8s, during the years ended March 31, 2007
and 2006 were $62,288 and $85,725, respectively.

Tax Fees

Total fees billed for professional services rendered by the Companys principal accountant for tax services relating to the preparation of the Companys federal and state income tax returns and tax advice
and planning during the years ended March 31, 2007 and 2006 were $10,110 and $3,911, respectively.

All Other Fees

Total fees billed for professional services rendered by the Companys principal accountant for consultation related to research of various accounting
issues addressed in SEC comments received by the Company and assistance in preparation of responses to the SEC during the years ended March 31, 2007 and 2006 were $14,975 and $25,951, respectively.

During the years ended March 31, 2007 and 2006, the Companys principal accountant only performed audit, tax and other related services, as
indicated above.

Pre-Approval Policies and Procedures

The Audit Committee Charter provides that the Audit Committee of the Companys Board of Directors has the sole authority and responsibility to pre-approve all audit services and permitted non-audit services to be
performed for the Company by its independent registered public accounting firm and the related fees. Pursuant to its charter, the Audit Committee has established pre-approval policies and procedures for permitted non-audit services. The Audit
Committee considers each engagement on a case-by-case basis according to certain required criteria, including that (i) the skill set necessary for the engagement should be unique to the Companys independent registered public account firm
and (ii) the engagement should not involve work that would result in the Companys independent registered public accounting firm eventually auditing its own work.



45



---

##### Table of Contents

SIGNATURES

In accordance with the requirements of Section 13 or 15(d) of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



|                    |  |                               |  |                                            
|------------------- |  | ----------------------------- |  | -------------------------------------------
|                    |  | DYNAMIC HEALTH PRODUCTS, INC.
|                    |  |                              
|Date: June 26, 2007 |  | By:                           |  | /s/ Mandeep K. Taneja                      
|                    |  |                               |  | Mandeep K. Taneja, Chief Executive Officer,
|                    |  |                               |  | President and Director                     

In accordance with the Exchange Act this report has been signed below by the following persons on
behalf of the registrant in the capacities as on June 26, 2007.



|          |  |                       |  |       |  |                                             
|--------- |  | --------------------- |  | ----- |  | --------------------------------------------
|Signature |  |                       |  | Title
|          |  |                       | 
|By:       |  | /s/ Jugal K. Taneja   |  |       |  | Chairman of the Board and Director          
|          |  | Jugal K. Taneja       |  |       |  |                                             
|          |  |                       | 
|By:       |  | /s/ Mandeep K. Taneja |  |       |  | Chief Executive Officer,                    
|          |  | Mandeep K. Taneja     |  |       |  | President and Director                      
|          |  |                       |  |       |  | (principal executive officer)               
|          |  |                       | 
|By:       |  | /s/ Cani I. Shuman    |  |       |  | Chief Financial Officer,                    
|          |  | Cani I. Shuman        |  |       |  | Secretary, Treasurer and Director           
|          |  |                       |  |       |  | (principal financial and accounting officer)
|          |  |                       | 
|By:       |  | /s/ Kotha S. Sekharam |  |       |  | Director                                    
|          |  | Kotha S. Sekharam     |  |       |  |                                             
|          |  |                       | 
|By:       |  |                       |  |       |  | Director                                    
|          |  | Rakesh K. Sharma      |  |       |  |                                             
|          |  |                       | 
|By:       |  |                       |  |       |  | Director                                    
|          |  | Morton L. Stone       |  |       |  |                                             



46



---

##### Table of Contents

CONTENTS



|                                                           |  |           
|---------------------------------------------------------- |  | ----------
|TABLE OF CONTENTS                                          |  | F-1       
|                                                           | 
|INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS REPORT     |  | F-2       
|                                                           | 
|FINANCIAL STATEMENTS                                       |  |           
|                                                           | 
|CONSOLIDATED BALANCE SHEETS                                |  | F-3       
|                                                           | 
|CONSOLIDATED STATEMENTS OF OPERATIONS                      |  | F-4       
|                                                           | 
|CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY |  | F-5       
|                                                           | 
|CONSOLIDATED STATEMENTS OF CASH FLOWS                      |  | F-6  F-7 
|                                                           | 
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                 |  | F-8  F-46



F - 1



---

##### Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors

Dynamic Health Products, Inc. and Subsidiaries

We have audited the
accompanying consolidated balance sheets of Dynamic Health Products, Inc. and Subsidiaries as of March 31, 2007 and 2006 and the related consolidated statements of operations, changes in shareholders equity, and cash flows for the years
ended March 31, 2007 and 2006. These consolidated financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control
over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Companys internal control. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of
Dynamic Health Products, Inc. and Subsidiaries as of March 31, 2007 and 2006 and the consolidated results of operations and cash flows for the years ended March 31, 2007 and 2006, in conformity with accounting principles generally accepted
in the United States of America.

As described in Note 1 to the consolidated financial statements, the Company has restated its consolidated financial
statements, as of March 31, 2006 and for the year then ended.



|                               
|-------------------------------
|/s/ BRIMMER, BUREK & KEELAN LLP
|Brimmer, Burek & Keelan LLP    
|                               
|Tampa, Florida                 
|June 26, 2007                  



F - 2



---

##### Table of Contents

DYNAMIC HEALTH PRODUCTS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

MARCH 31,



|                                                                                                                               |  |      |            |   |      |   |            |  
|------------------------------------------------------------------------------------------------------------------------------ |  | ---- | ---------- | - | ---- | - | ---------- | -
|                                                                                                                               |  | 2007 |            |   | 2006 |  
|ASSETS                                                                                                                         |  |      |            |   |      |   |            |  
|Current assets:                                                                                                                |  |      |            |   |      |   |            |  
|Cash and cash equivalents                                                                                                      |  | $    | 1,104,845  |   |      | $ | 1,009,012  |  
|Certificates of deposit                                                                                                        |  |      | 203,908    |   |      |   |           |  
|Marketable equity securities, net                                                                                              |  |      | 947,223    |   |      |   | 1,637,763  |  
|Accounts receivable, net                                                                                                       |  |      | 2,694,188  |   |      |   | 2,485,954  |  
|Inventories, net                                                                                                               |  |      | 6,021,047  |   |      |   | 4,478,970  |  
|Prepaid expenses                                                                                                               |  |      | 310,994    |   |      |   | 223,515    |  
|Deferred consulting fees                                                                                                       |  |      | 83,127     |   |      |   | 215,004    |  
|Other current assets                                                                                                           |  |      | 194,928    |   |      |   | 163,766    |  
|Due from affiliates                                                                                                            |  |      | 3,960      |   |      |   | 2,500      |  
|Notes receivable, net                                                                                                          |  |      | 205,125    |   |      |   | 165,708    |  
|Note receivable from affiliate                                                                                                 |  |      |           |   |      |   | 44,082     |  
|                                                                                                                               |  |      |            |   |      |   |            |  
|Total current assets                                                                                                           |  |      | 11,769,345 |   |      |   | 10,426,274 |  
|                                                                                                                               |  |     
|Property, plant and equipment, net                                                                                             |  |      | 714,043    |   |      |   | 743,846    |  
|                                                                                                                               |  |     
|Note receivable                                                                                                                |  |      |           |   |      |   | 29,940     |  
|Goodwill                                                                                                                       |  |      | 4,145,130  |   |      |   | 4,145,130  |  
|Intangible assets, net                                                                                                         |  |      | 464,268    |   |      |   | 749,217    |  
|Deferred consulting fees                                                                                                       |  |      |           |   |      |   | 83,127     |  
|Other assets                                                                                                                   |  |      | 21,831     |   |      |   | 77,517     |  
|Deferred income taxes                                                                                                          |  |      | 49,400     |   |      |   |           |  
|                                                                                                                               |  |      |            |   |      |   |            |  
|Total assets                                                                                                                   |  | $    | 17,164,017 |   |      | $ | 16,255,051 |  
|                                                                                                                               |  |      |            |   |      |   |            |  
|                                                                                                                               |  |     
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                                           |  |      |            |   |      |   |            |  
|Current liabilities:                                                                                                           |  |      |            |   |      |   |            |  
|Revolving note payable, net                                                                                                    |  | $    | 1,989,765  |   |      | $ | 1,609,240  |  
|Current portion of long-term obligations                                                                                       |  |      | 3,755,176  |   |      |   | 2,093,540  |  
|Accounts payable                                                                                                               |  |      | 7,911,918  |   |      |   | 5,090,685  |  
|Other payables                                                                                                                 |  |      | 676,034    |   |      |   | 411,530    |  
|Income tax payable                                                                                                             |  |      | 115        |   |      |   |           |  
|Accrued expenses                                                                                                               |  |      | 397,026    |   |      |   | 343,744    |  
|Accrued income taxes                                                                                                           |  |      | 925        |   |      |   | 5,819      |  
|Obligations to affiliates                                                                                                      |  |      | 26,363     |   |      |   | 26,551     |  
|Notes payable                                                                                                                  |  |      | 49,863     |   |      |   | 10,296     |  
|Derivative financial instruments                                                                                               |  |      | 650,529    |   |      |   | 1,523,376  |  
|                                                                                                                               |  |      |            |   |      |   |            |  
|Total current liabilities                                                                                                      |  |      | 15,457,714 |   |      |   | 11,114,781 |  
|Long-term obligations, less current portion                                                                                    |  |      | 11,837     |   |      |   | 61,899     |  
|Deferred income taxes                                                                                                          |  |      |           |   |      |   | 186,300    |  
|                                                                                                                               |  |      |            |   |      |   |            |  
|Total liabilities                                                                                                              |  |      | 15,469,551 |   |      |   | 11,362,980 |  
|                                                                                                                               |  |      |            |   |      |   |            |  
|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; 16,241,860 and 14,463,630 shares issued and outstanding            |  |      | 162,419    |   |      |   | 144,636    |  
|Additional paid-in capital                                                                                                     |  |      | 5,045,370  |   |      |   | 4,004,048  |  
|Retained earnings (deficit)                                                                                                    |  |      | (4,087,118 | ) |      |   | (272,354   | )
|Accumulated other comprehensive income:                                                                                        |  |      |            |   |      |   |            |  
|Unrealized gains (losses) on marketable equity securities, net of tax                                                          |  |      | 573,795    |   |      |   | 1,015,741  |  
|                                                                                                                               |  |      |            |   |      |   |            |  
|Total shareholders equity                                                                                                     |  |      | 1,694,466  |   |      |   | 4,892,071  |  
|                                                                                                                               |  |      |            |   |      |   |            |  
|Total liabilities and shareholders equity                                                                                     |  | $    | 17,164,017 |   |      | $ | 16,255,051 |  
|                                                                                                                               |  |      |            |   |      |   |            |  

See accompanying notes to consolidated financial statements.



F - 3



---

##### Table of Contents

DYNAMIC HEALTH PRODUCTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED MARCH 31,



|                                                             |  |      |            |   |            |   |            |  
|------------------------------------------------------------ |  | ---- | ---------- | - | ---------- | - | ---------- | -
|                                                             |  | 2007 |            |   | 2006       |  
|                                                             |  |      |            |   | (Restated) |  
|Revenues                                                     |  | $    | 56,810,439 |   |            | $ | 50,142,206 |  
|                                                             |  |     
|Cost of goods sold                                           |  |      | 46,354,506 |   |            |   | 40,985,199 |  
|                                                             |  |      |            |   |            |   |            |  
|Gross profit                                                 |  |      | 10,455,933 |   |            |   | 9,157,007  |  
|                                                             |  |     
|Operating expenses:                                          |  |      |            |   |            |   |            |  
|Selling, general and administrative expenses                 |  |      | 11,031,264 |   |            |   | 9,226,697  |  
|Amortization expense                                         |  |      | 309,949    |   |            |   | 300,522    |  
|Depreciation expense                                         |  |      | 192,280    |   |            |   | 154,526    |  
|                                                             |  |      |            |   |            |   |            |  
|Total operating expenses                                     |  |      | 11,533,493 |   |            |   | 9,681,745  |  
|                                                             |  |      |            |   |            |   |            |  
|Operating income (loss) before other income and expense      |  |      | (1,077,560 | ) |            |   | (524,738   | )
|                                                             |  |     
|Other income (expense):                                      |  |      |            |   |            |   |            |  
|Interest income                                              |  |      | 23,528     |   |            |   | 23,912     |  
|Other income and expenses, net                               |  |      | 53,752     |   |            |   | (161,347   | )
|Gain (loss) on sale of property                              |  |      | (34,776    | ) |            |   | (4,828     | )
|Gain on sale of marketable equity securities                 |  |      | 572,096    |   |            |   |           |  
|Gain from debt extinguishment                                |  |      | 153,750    |   |            |   |           |  
|Derivative instrument income (expense), net                  |  |      | 674,097    |   |            |   | 10,314,794 |  
|Derivative instrument interest expense                       |  |      | (3,311,752 | ) |            |   | (3,311,752 | )
|Interest expense                                             |  |      | (827,294   | ) |            |   | (749,873   | )
|                                                             |  |      |            |   |            |   |            |  
|Total other income (expense)                                 |  |      | (2,696,599 | ) |            |   | 6,110,906  |  
|                                                             |  |      |            |   |            |   |            |  
|Income (loss) before income taxes                            |  |      | (3,774,159 | ) |            |   | 5,586,168  |  
|                                                             |  |     
|Income tax expense (benefit)                                 |  |      | 40,605     |   |            |   | (317,742   | )
|                                                             |  |      |            |   |            |   |            |  
|Net income (loss)                                            |  |      | (3,814,764 | ) |            |   | 5,903,910  |  
|                                                             |  |     
|Preferred stock dividends                                    |  |      |           |   |            |   |           |  
|                                                             |  |      |            |   |            |   |            |  
|Net income (loss) available to common shareholders           |  | $    | (3,814,764 | ) |            | $ | 5,903,910  |  
|                                                             |  |      |            |   |            |   |            |  
|Basic income (loss) per share                                |  | $    | (0.25      | ) |            | $ | 0.41       |  
|                                                             |  |      |            |   |            |   |            |  
|Basic weighted average number of common shares outstanding   |  |      | 15,006,057 |   |            |   | 14,308,264 |  
|                                                             |  |      |            |   |            |   |            |  
|Diluted income (loss) per share                              |  | $    | (0.25      | ) |            | $ | 0.08       |  
|                                                             |  |      |            |   |            |   |            |  
|Diluted weighted average number of common shares outstanding |  |      | 15,006,057 |   |            |   | 21,481,634 |  
|                                                             |  |      |            |   |            |   |            |  

See accompanying notes to consolidated financial statements.



F - 4



---

##### Table of Contents

DYNAMIC HEALTH PRODUCTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS
EQUITY

FOR THE YEAR ENDED MARCH 31, 2007 AND 2006



|                                                                                                                  |  |                          |              |                          |   |        |   |         |   |                            |  |            |                             |   |         |                                         |   |           |                            |                                        |   |            |   |  |   |           |   |  |   |            |  
|----------------------------------------------------------------------------------------------------------------- |  | ------------------------ | ------------ | ------------------------ | - | ------ | - | ------- | - | -------------------------- |  | ---------- | --------------------------- | - | ------- | --------------------------------------- | - | --------- | -------------------------- | -------------------------------------- | - | ---------- | - |  | - | --------- | - |  | - | ---------- | -
|                                                                                                                  |  |                          |              |                          |   |        |   |         |   |                            |  |            |                             |   |         |                                         |   |           |                            | Accumulated Other Comprehensive Income |   |            |   | 
|                                                                                                                  |  |                          |              |                          |   |        |   |         |  
|                                                                                                                  |  | Series A Preferred Stock |              | Series B Preferred Stock |   |        |   |         |   | Additional Paid-in Capital |  |            | Retained Earnings (Deficit) |   |         | Unrealized Gains (Losses) on Securities |   |           | Total Shareholders Equity |                                       
|                                                                                                                  |  |                          | Common Stock |                          |   |        |  
|                                                                                                                  |  | Shares                   |              | Dollars                  |   | Shares |   | Dollars |   | Shares                     |  | Dollars    |                             |   |         |                                        
|Balances at March 31, 2005 (Restated)                                                                             |  |                         |              | $                        |  |        |  |         | $ |                           |  | 14,024,592 |                             | $ | 140,246 |                                         | $ | 3,735,266 |                            |                                        | $ | (6,176,264 | ) |  | $ | 711,602   |   |  | $ | (1,589,150 | )
|COMPREHENSIVE INCOME (LOSS)                                                                                       |  |                          |              |                          |   |        |   |         |   |                            |  |            |                             |   |         |                                         |   |           |                            |                                        |   |            |   |  |   |           |   |  |   |            |  
|Net income (loss)                                                                                                 |  |                         |              |                          |  |        |  |         |   |                           |  |           |                             |   |        |                                         |   |          |                            |                                        |   | 5,903,910  |   |  |   |           |   |  |   | 5,903,910  |  
|Unrealized gains (losses) on marketable equity securities (net of tax of $171,078)                                |  |                         |              |                          |  |        |  |         |   |                           |  |           |                             |   |        |                                         |   |          |                            |                                        |   |           |   |  |   | 304,139   |   |  |   | 304,139    |  
|                                                                                                                  |  |                          |              |                          |   |        |   |         |   |                            |  |            |                             |   |         |                                         |   |           |                            |                                        |   |            |   |  |   |           |   |  |   |            |  
|Comprehensive income (loss)                                                                                       |  |                          |              |                          |   |        |   |         |   |                            |  |            |                             |   |         |                                         |   |           |                            |                                        |   |            |   |  |   |           |   |  |   | 6,208,049  |  
|Issuance of 275,000 shares of common stock in connection with Postponement Agreement                              |  |                         |              |                          |  |        |  |         |   |                           |  | 275,000    |                             |   | 2,750   |                                         |   | 187,000   |                            |                                        |   |           |   |  |   |           |   |  |   | 189,750    |  
|Issuance of 14,038 shares of common stock as employer contribution to profit sharing plan                         |  |                         |              |                          |  |        |  |         |   |                           |  | 14,038     |                             |   | 140     |                                         |   | 8,283     |                            |                                        |   |           |   |  |   |           |   |  |   | 8,423      |  
|Issuance of 150,000 shares of common stock at $.50 per share                                                      |  |                         |              |                          |  |        |  |         |   |                           |  | 150,000    |                             |   | 1,500   |                                         |   | 73,500    |                            |                                        |   |           |   |  |   |           |   |  |   | 75,000     |  
|Cash paid in lieu of fractional shares for common stock exchanged, in relation to August 1998 reverse stock split |  |                         |              |                          |  |        |  |         |   |                           |  |           |                             |   |        |                                         |   | (1        | )                          |                                        |   |           |   |  |   |           |   |  |   | (1         | )
|                                                                                                                  |  |                          |              |                          |   |        |   |         |   |                            |  |            |                             |   |         |                                         |   |           |                            |                                        |   |            |   |  |   |           |   |  |   |            |  
|Balances at March 31, 2006                                                                                        |  |                         |              |                          |  |        |  |         |   |                           |  | 14,463,630 |                             |   | 144,636 |                                         |   | 4,004,048 |                            |                                        |   | (272,354   | ) |  |   | 1,015,741 |   |  |   | 4,892,071  |  
|COMPREHENSIVE INCOME (LOSS)                                                                                       |  |                          |              |                          |   |        |   |         |   |                            |  |            |                             |   |         |                                         |   |           |                            |                                        |   |            |   |  |   |           |   |  |   |            |  
|Net income (loss)                                                                                                 |  |                         |              |                          |  |        |  |         |   |                           |  |           |                             |   |        |                                         |   |          |                            |                                        |   | (3,814,764 | ) |  |   |           |   |  |   | (3,814,764 | )
|Unrealized gains (losses) on marketable equity securities (net of tax of $248,595)                                |  |                         |              |                          |  |        |  |         |   |                           |  |           |                             |   |        |                                         |   |          |                            |                                        |   |           |   |  |   | (441,946  | ) |  |   | (441,946   | )
|                                                                                                                  |  |                          |              |                          |   |        |   |         |   |                            |  |            |                             |   |         |                                         |   |           |                            |                                        |   |            |   |  |   |           |   |  |   |            |  
|Comprehensive income (loss)                                                                                       |  |                          |              |                          |   |        |   |         |   |                            |  |            |                             |   |         |                                         |   |           |                            |                                        |   |            |   |  |   |           |   |  |   | (4,256,710 | )
|Share-based compensation                                                                                          |  |                         |              |                          |  |        |  |         |   |                           |  |           |                             |   |        |                                         |   | 316,844   |                            |                                        |   |           |   |  |   |           |   |  |   | 316,844    |  
|Issuance of 150,000 shares of common stock in exchange for cancellation of common stock warrants                  |  |                         |              |                          |  |        |  |         |   |                           |  | 150,000    |                             |   | 1,500   |                                         |   | 35,247    |                            |                                        |   |           |   |  |   |           |   |  |   | 36,747     |  
|Issuance of 275,000 shares of common stock in connection with Postponement Agreement                              |  |                         |              |                          |  |        |  |         |   |                           |  | 275,000    |                             |   | 2,750   |                                         |   | 64,422    |                            |                                        |   |           |   |  |   |           |   |  |   | 67,172     |  
|Issuance of 166,405 shares of common stock as employer contribution to profit sharing plan                        |  |                         |              |                          |  |        |  |         |   |                           |  | 166,405    |                             |   | 1,664   |                                         |   | 43,265    |                            |                                        |   |           |   |  |   |           |   |  |   | 44,929     |  
|Issuance of 1,186,825 shares of common stock in exchange for common stock options                                 |  |                         |              |                          |  |        |  |         |   |                           |  | 1,186,825  |                             |   | 11,869  |                                         |   | 581,545   |                            |                                        |   |           |   |  |   |           |   |  |   | 593,414    |  
|Cash paid in lieu of fractional shares for common stock exchanged, in relation to August 1998 reverse stock split |  |                         |              |                          |  |        |  |         |   |                           |  |           |                             |   |        |                                         |   | (1        | )                          |                                        |   |           |   |  |   |           |   |  |   | (1         | )
|                                                                                                                  |  |                          |              |                          |   |        |   |         |   |                            |  |            |                             |   |         |                                         |   |           |                            |                                        |   |            |   |  |   |           |   |  |   |            |  
|Balances at March 31, 2007                                                                                        |  |                         |              | $                        |  |        |  |         | $ |                           |  | 16,241,860 |                             | $ | 162,419 |                                         | $ | 5,045,370 |                            |                                        | $ | (4,087,118 | ) |  | $ | 573,795   |   |  | $ | 1,694,466  |  
|                                                                                                                  |  |                          |              |                          |   |        |   |         |   |                            |  |            |                             |   |         |                                         |   |           |                            |                                        |   |            |   |  |   |           |   |  |   |            |  

See accompanying notes to consolidated financial statements.



F - 5



---

##### Table of Contents

DYNAMIC HEALTH PRODUCTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED MARCH 31,



|                                                                                                   |  |      |            |   |      |   |             |  
|-------------------------------------------------------------------------------------------------- |  | ---- | ---------- | - | ---- | - | ----------- | -
|                                                                                                   |  | 2007 |            |   | 2006 |  
|Cash flows from operating activities:                                                              |  |      |            |   |      |   |             |  
|Net income (loss)                                                                                  |  | $    | (3,814,764 | ) |      | $ | 5,903,910   |  
|                                                                                                   |  |     
|Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |  |      |            |   |      |   |             |  
|Depreciation and amortization                                                                      |  |      | 502,229    |   |      |   | 455,048     |  
|Amortization of deferred consulting fees                                                           |  |      | 215,004    |   |      |   | 308,755     |  
|Amortization of debt discount to interest expense                                                  |  |      | 139,873    |   |      |   | 60,493      |  
|Share-based compensation expense                                                                   |  |      | 910,258    |   |      |   |            |  
|Derivative instrument (income) expense, net                                                        |  |      | (674,097   | ) |      |   | (10,314,794 | )
|Derivative instrument interest expense                                                             |  |      | 3,311,752  |   |      |   | 3,311,752   |  
|(Gain) loss on sale property                                                                       |  |      | 34,776     |   |      |   | 4,828       |  
|Gain on sale of marketable equity securities                                                       |  |      | (572,096   | ) |      |   |            |  
|Gain from debt extinguishment                                                                      |  |      | (153,750   | ) |      |   |            |  
|Changes in operating assets and liabilities:                                                       |  |      |            |   |      |   |             |  
|Accounts receivable                                                                                |  |      | (378,637   | ) |      |   | (96,523     | )
|Inventories                                                                                        |  |      | (1,542,077 | ) |      |   | 422,467     |  
|Due to/from affiliates, net                                                                        |  |      | 16,857     |   |      |   | (56,959     | )
|Prepaid expenses                                                                                   |  |      | 160,816    |   |      |   | 216,804     |  
|Other current assets                                                                               |  |      | 65,958     |   |      |   | 54,699      |  
|Other assets                                                                                       |  |      | 55,686     |   |      |   | (12,308     | )
|Accounts payable                                                                                   |  |      | 2,821,233  |   |      |   | (69,923     | )
|Other payables                                                                                     |  |      | 264,504    |   |      |   | 138,637     |  
|Income tax payable                                                                                 |  |      | 115        |   |      |   |            |  
|Accrued expenses                                                                                   |  |      | 53,282     |   |      |   | (41,238     | )
|Accrued income taxes                                                                               |  |      | (4,894     | ) |      |   | 810         |  
|Deferred income taxes                                                                              |  |      | 12,894     |   |      |   | (321,777    | )
|                                                                                                   |  |      |            |   |      |   |             |  
|Net cash provided by (used in) operating activities                                                |  |      | 1,424,922  |   |      |   | (35,319     | )
|                                                                                                   |  |      |            |   |      |   |             |  
|Cash flows from investing activities:                                                              |  |      |            |   |      |   |             |  
|Purchases of property and equipment                                                                |  |      | (247,153   | ) |      |   | (122,702    | )
|Proceeds from sale of property                                                                     |  |      | 49,900     |   |      |   | 2,000       |  
|Proceeds from sale of marketable equity securities                                                 |  |      | 572,096    |   |      |   |            |  
|Repayments of notes receivable                                                                     |  |      | 63,806     |   |      |   | 135,345     |  
|Repayments of note receivable from affiliate                                                       |  |      | 25,577     |   |      |   | 2,471       |  
|Purchase of distributor agreement                                                                  |  |      | (25,000    | ) |      |   |            |  
|Purchase of certificates of deposit                                                                |  |      | (203,908   | ) |      |   |            |  
|Adjustment to purchase price of Dynamic Marketing, Inc.                                            |  |      |           |   |      |   | (17,517     | )
|Adjustment to purchase price of customer list                                                      |  |      |           |   |      |   | (7,306      | )
|Purchase of trademark                                                                              |  |      |           |   |      |   | (435        | )
|                                                                                                   |  |      |            |   |      |   |             |  
|Net cash provided by (used in) investing activities                                                |  |      | 235,318    |   |      |   | (8,144      | )
|                                                                                                   |  |      |            |   |      |   |             |  
|Cash flows from financing activities:                                                              |  |      |            |   |      |   |             |  
|Payments of long-term obligations                                                                  |  |      | (899,875   | ) |      |   | (593,631    | )
|Proceeds from issuance of short-term obligations                                                   |  |      | 8,959,376  |   |      |   | 10,400,590  |  
|Payments of short-term obligations                                                                 |  |      | (9,600,327 | ) |      |   | (10,700,044 | )
|Payment of common stock registration costs                                                         |  |      | (23,580    | ) |      |   |            |  
|Payments of fractional shares on common stock exchanged                                            |  |      | (1         | ) |      |   | (1          | )
|Proceeds from issuance of common stock                                                             |  |      |           |   |      |   | 75,000      |  
|                                                                                                   |  |      |            |   |      |   |             |  
|Net cash used in financing activities                                                              |  |      | (1,564,407 | ) |      |   | (818,086    | )
|                                                                                                   |  |      |            |   |      |   |             |  
|Net increase (decrease) in cash                                                                    |  |      | 95,833     |   |      |   | (861,549    | )
|                                                                                                   |  |     
|Cash at beginning of period                                                                        |  |      | 1,009,012  |   |      |   | 1,870,561   |  
|                                                                                                   |  |      |            |   |      |   |             |  
|Cash at end of period                                                                              |  | $    | 1,104,845  |   |      | $ | 1,009,012   |  
|                                                                                                   |  |      |            |   |      |   |             |  

See accompanying notes to consolidated financial statements.



F - 6



---

##### Table of Contents

DYNAMIC HEALTH PRODUCTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWSContinued

FOR THE YEARS ENDED MARCH 31,



|                                                                               |  |      |         |      |   |        
|------------------------------------------------------------------------------ |  | ---- | ------- | ---- | - | -------
|                                                                               |  | 2007 |         | 2006
|Supplemental disclosure of cash flow information:                              |  |      |         |      |   |        
|Cash paid during the period for interest                                       |  | $    | 698,798 |      | $ | 616,759
|                                                                               |  |      |         |      |   |        
|Cash paid during the period for income taxes                                   |  | $    | 50,563  |      | $ |       
|                                                                               |  |      |         |      |   |        
|Supplemental schedule of non-cash investing activities:                        |  |      |         |      |   |        
|Conversion of accounts receivable to note receivable                           |  | $    | 170,403 |      | $ | 330,993
|                                                                               |  |      |         |      |   |        
|Supplemental schedule of non-cash financing activities:                        |  |      |         |      |   |        
|Issuance of common stock in exchange for cancellation of common stock warrants |  | $    | 45,000  |      | $ |       
|                                                                               |  |      |         |      |   |        
|Issuance of common stock for employer contribution to profit sharing plan      |  | $    | 44,929  |      | $ | 8,423  
|                                                                               |  |      |         |      |   |        
|Issuance of common stock for postponement agreement                            |  | $    | 82,500  |      | $ | 189,750
|                                                                               |  |      |         |      |   |        
|Issuance of long-term obligations for purchase of equipment                    |  | $    |        |      | $ | 22,979 
|                                                                               |  |      |         |      |   |        
|Issuance of short-term obligations for prepaid expenses                        |  | $    | 203,366 |      | $ | 41,917 
|                                                                               |  |      |         |      |   |        

See accompanying notes to consolidated financial statements.



F - 7



---

##### Table of Contents

DYNAMIC HEALTH PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2007 AND 2006



NOTE 1SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Dynamic Health Products, Inc. (Company) develops, markets and distributes 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. The Companys products are primarily marketed throughout the United
States to independent pharmacies, regional and national chain drug stores, mail order facilities, mass merchandisers, deep discounters, gyms, health food stores, internet companies, distributors and brokers.

a. Principles of Consolidation

The accompanying
consolidated financial statements as of and for the years ended March 31, 2007 and 2006 include the accounts of Dynamic Health Products, Inc. and its principally wholly-owned subsidiaries (collectively the Company), Pharma Labs Rx,
Inc. (FL), Dynamic Life Products, Inc., Herbal Health Products, Inc., Online Meds Rx, Inc., and its subsidiary Dynamic Financial Consultants, LLC, Bryan Capital Limited Partnership, Pharma Labs Rx, Inc. (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.

b. Cash and Cash Equivalents

For purposes of the
statement of cash flows, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents.

c. Investments in Equity Securities

At March 31, 2007 and 2006, the marketable equity securities are classified as
available for sale. In accordance with Statement of Financial Accounting Standards No. 115, Accounting For Certain Investments In Debt And Equity Securities (SFAS 115), marketable equity securities available for sale are recorded in
the Companys financial statements at fair market value. The corresponding unrealized gain or loss in the fair market value in relation to cost is accounted for as a separate component of shareholders equity, net of tax.

d. Accounts Receivable

Accounts receivable are
stated at estimated net realizable value. Accounts receivable are comprised of balances due from customers net of estimated allowances for uncollectible accounts. In determining collectibility, historical trends are evaluated and specific customer
issues are reviewed to arrive at appropriate allowances (see Note 4).

e. Inventories

Inventories, net, are stated at the lower of cost or market. Cost is determined using the first-in, first-out method (see Note 5).



F - 8



---

##### Table of Contents

DYNAMIC HEALTH PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2007 AND 2006



f. Property, Plant and Equipment

Depreciation is provided for using the straight-line method, in amounts sufficient to relate the cost of depreciable assets to operations over their estimated service lives, which range from three to seven years.
Leasehold improvements are amortized using the straight-line method over the lives of the respective leases or the service lives of the improvements, whichever is shorter. Leased equipment under capital leases is amortized using the straight-line
method over the lives of the respective leases or over the service lives of the assets, whichever is shorter, for those leases that substantially transfer ownership. Accelerated methods are used for tax depreciation.

g. Equity Method Investments

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 or losses.

h. Intangible Assets

Intangible
assets consist primarily of goodwill, customer lists and loan costs. Effective April 1, 2002 with the adoption of Statement of Financial Accounting Standards No. 142, Goodwill And Other Intangibles (SFAS 142), intangible assets
with an indefinite life, namely goodwill, are not amortized. Intangible assets with a definite life are amortized on a straight-line basis with estimated useful lives ranging from one to five years. Loan costs are amortized on a straight-line basis
over the life of the loan. Intangible assets with indefinite lives will be tested for impairment yearly and will also be tested for impairment between the annual tests, should an event occur or should circumstances change that would indicate that
the carrying amount may be impaired. The Company has selected September 30 as the annual date to test these assets for impairment.

i. Impairment
of Assets

In accordance with the provisions of Statement of Financial Accounting Standards No. 144, Accounting For The
Impairment Or Disposal Of Long-Lived Assets (SFAS 144), the Companys policy is to evaluate whether there has been a permanent impairment in the value of long-lived assets, certain identifiable intangibles and goodwill when certain events
have taken place that indicate that the remaining unamortized balance may not be recoverable. When factors indicate that the intangible assets should be evaluated for possible impairment, the Company uses an estimate of related undiscounted cash
flows. A deficiency in these cash flows relative to the carrying amounts is an indication of the need for a write-down due to impairment. The impairment write-down would be the difference between the carrying amounts and the fair value of these
assets. Losses on impairment are recognized by a charge to earnings. Factors considered in the valuation include current operating results, trends and anticipated undiscounted future cash flows. There were no impairment losses recorded as of and for
the years ended March 31, 2007 and 2006.



F - 9



---

##### Table of Contents

DYNAMIC HEALTH PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2007 AND 2006



j. Income Taxes

The Company utilizes the guidance provided by Statement of Financial Accounting Standards No. 109, Accounting For Income Taxes (SFAS 109). Under the liability method specified by SFAS 109, deferred
tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities as measured by the enacted tax rates which will be in effect when these differences reverse. Deferred tax
expense is the result of changes in deferred tax assets and liabilities. Valuation allowances are provided if necessary to reduce deferred tax assets to the amount expected to be realized.

k. Earnings (Loss) Per Common Share

Earnings (loss)
per share are computed using the basic and diluted calculations on the face of the statement of operations. Basic earnings (loss) per share is calculated by dividing net income (loss) available to common shareholders by the weighted average number
of shares of common stock outstanding for the period. Diluted earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of shares of common stock outstanding for the period, adjusted for the dilutive effect
of common stock equivalents, using the treasury stock method (see Note 20).

l. Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles, requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at March 31, 2007 and 2006, as well as the reported amounts of revenues and expenses for the years ended March 31, 2007 and
2006. The actual outcome of the estimates could differ from the estimates made in the preparation of the financial statements.

m. Revenue Recognition

In accordance with Staff Accounting Bulletin No. 101, Revenue Recognition In Financial Statements (SAB101), revenues
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. Costs incurred by the Company for shipping, handling and warehousing are included in selling, general and administrative expenses, and were $2,119,397 and $1,933,674, for the years ended March 31, 2007 and 2006, respectively.



F - 10



---

##### Table of Contents

DYNAMIC HEALTH PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2007 AND 2006



n. Advertising Costs

In accordance with Statement of Position No. 93-7, Reporting On Advertising Costs (SOP 93-7), the Company charges advertising costs, including those for catalog sales and direct mail, to expense as
incurred. Advertising expenses are included in selling, general and administrative expenses in the statements of operations and were $359,712 and $421,038 for the years ended March 31, 2007 and 2006, respectively.

For cooperative advertising allowances received from third party manufacturers and vendors, the Company applies EITF Issue No. 02-16
Accounting By A Customer (Including A Reseller) For Certain Consideration Received From A Vendor. These allowances are included as a reduction in cost of goods sold and were $419,623 and $318,455, respectively, for the years ended
March 31, 2007 and 2006, respectively.

o. Research and Development Costs

The Company charges research and development costs to expense as incurred.

p. Stock Based Compensation

Prior to April 1, 2006, the Company had adopted the disclosure-only
provisions of SFAS No. 123, Accounting for Stock Based Compensation, but applied Accounting Principles Board Opinion No. 25 and related interpretations in accounting for options issued to employees. Under Opinion No. 25,
the intrinsic method was used to determine compensation expense when the fair market value of the stock exceeded the exercise price on the date of grant. No compensation expense had been recognized for stock options granted during the year ended
March 31, 2006, except for the amortization of deferred compensation expense that arose in connection with those options granted on October 1, 2004, to Jugal Taneja, the Chairman of the Board of the Company, for his guarantee of the Laurus
convertible debt. If the Company had elected to recognize compensation expense for stock options based on the fair value at the grant date consistent with the method prescribed by SFAS No. 123, net income (loss) and related per share amounts
would have been reduced (increased) (see Note 18).

On April 1, 2006, the Company adopted SFAS No. 123 (revised 2004),
Share-Based Payment (FAS 123(R)), which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors based on estimated fair values. The Company adopted FAS 123(R)
using the modified prospective transition method. Under the modified prospective transition method, compensation cost is recognized on a prospective basis for all share-based payments granted prior to, but not yet vested as of April 1, 2006,
based on the grant date fair value estimated in accordance with the original provisions of FAS 123(R). For share-based payment awards granted after April 1, 2006, the Company recognizes compensation cost based on estimated grant date fair value
using the Black-Scholes option pricing model. In accordance with the modified prospective method, the Companys consolidated financial statements for prior periods have not been restated to reflect, and do not include, the impact of FAS 123(R)
(see Note 18).



F - 11



---

##### Table of Contents

DYNAMIC HEALTH PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2007 AND 2006



q. Fair Value of Financial Instruments

The Company, in estimating its fair value disclosures for financial instruments, uses the following methods and assumptions:

Cash, Accounts Receivable, Accounts Payable and Accrued Expenses: The carrying amounts reported in the balance sheet for cash, accounts receivable,
accounts payable and accrued expenses approximate their fair value due to their relatively short maturity.

Short-Term Obligations:
The fair value of the Companys fixed-rate short-term obligations is estimated using discounted cash flow analyses, based on the Companys current incremental borrowing rates for similar types of borrowing arrangements. At March 31,
2007 and 2006, the fair value of the Companys short-term obligations approximated its carrying value.

Revolving Note Payable:
The carrying amount of the Companys revolving note payable approximates fair market value since the interest rate on this instrument corresponds to market interest rates.

Long-Term Obligations: The fair value of the Companys fixed-rate long-term obligations is estimated using discounted cash flow analyses,
based on the Companys current incremental borrowing rates for similar types of borrowing arrangements. At March 31, 2007 and 2006, the fair value of the Companys fixed-rate long-term obligations approximated its carrying value.

r. Reclassifications

Certain
reclassifications have been made to the financial statements as of and for the year ended March 31, 2006 to conform to the presentation as of and for the year ended March 31, 2007.

s. Restatement

Diluted Earnings Per Share

The Company corrected its calculations of diluted earnings per share and the diluted weighted average number of common shares outstanding for the year
ended March 31, 2006, to take into effect the as if converted method and the treasure stock method. The effect of the restatement of diluted earnings per share on the Companys comparative statement of operations for the year ended
March 31, 2006 was $(0.32).



F - 12



---

##### Table of Contents

DYNAMIC HEALTH PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2007 AND 2006



NOTE 2RELATED PARTY TRANSACTIONS

As of March 31, 2007 and 2006, the Companys investment in GeoPharma, Inc. (GeoPharma), consisting of 204,914 and 347,938 shares of
its common stock, respectively, is included in marketable equity securities, net (see Note 3). 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 March 31, 2007 and 2006, the Companys investment in Vertical Health Solutions, Inc. (Vertical), consisting of
253,337 shares of its common stock, is included in marketable equity securities, net (see Note 3). Jugal K. Taneja, a principal shareholder and Chairman of the Board of the Company is also a director and a principal shareholder of Vertical.

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

For the
years ended March 31, 2007 and 2006, purchases of products from subsidiaries of GeoPharma were $99,344 and $182,872, respectively, and sales of products to subsidiaries of GeoPharma were $65 and $31,157, respectively. As of March 31, 2007
and 2006, $26,363 and $26,554, respectively, were due to subsidiaries of GeoPharma and are included in obligations to affiliates. As of March 31, 2007 and 2006, $3,960 and $2,175, respectively, were due from GeoPharma.

Research and development is primarily contracted through Innovative Health Products, Inc. (Innovative), a wholly-owned subsidiary of
GeoPharma, 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.

NOTE 3MARKETABLE EQUITY SECURITIES, NET

At March 31, 2007 and 2006, investments in marketable equity securities, net are summarized as follows:

Available for sale equity securities:



|                           |  |      |         |   |      |   |          
|-------------------------- |  | ---- | ------- | - | ---- | - | ---------
|                           |  | 2007 |         |   | 2006
|Cost of securities         |  | $    | 50,667  |   |      | $ | 50,667   
|Plus gross unrealized gain |  |      | 901,622 |   |      |   | 1,587,096
|Less gross unrealized loss |  |      | (5,066  | ) |      |   |         
|                           |  |      |         |   |      |   |          
|Fair value                 |  | $    | 947,223 |   |      | $ | 1,637,763
|                           |  |      |         |   |      |   |          

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 years ended March 31, 2007 and 2006, the Company had no realized losses. The



F - 13



---

##### Table of Contents

DYNAMIC HEALTH PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2007 AND 2006



change in marketable equity securities included in earnings for the year ended March 31, 2007 was $572,096, of which $572,096 of unrealized holding
gains were reclassified from accumulated other comprehensive income into earnings. For the year ended March 31, 2006, the Company had no realized gains.

NOTE 4ACCOUNTS RECEIVABLE, NET

At March 31, 2007 and 2006, accounts receivable, net consist of the following:



|                                          |  |      |           |   |      |   |           |  
|----------------------------------------- |  | ---- | --------- | - | ---- | - | --------- | -
|                                          |  | 2007 |           |   | 2006 |  
|Accounts receivable                       |  | $    | 2,945,141 |   |      | $ | 2,701,935 |  
|Less allowance for uncollectible accounts |  |      | (250,953  | ) |      |   | (215,981  | )
|                                          |  |      |           |   |      |   |           |  
|Total                                     |  | $    | 2,694,188 |   |      | $ | 2,485,954 |  
|                                          |  |      |           |   |      |   |           |  

For the years ended March 31, 2007 and 2006, bad debt expense charged to operations for
estimated uncollectible accounts receivable was $152,513 and $105,127, respectively, whereas uncollectible accounts receivable written off during the years amounted to $117,540 and $49,972, respectively.

NOTE 5INVENTORIES

At March 31, 2007 and
2006, inventories, net consist of the following:



|                              |  |      |           |   |      |   |           |  
|----------------------------- |  | ---- | --------- | - | ---- | - | --------- | -
|                              |  | 2007 |           |   | 2006 |  
|Raw materials                 |  | $    | 102,947   |   |      | $ | 93,344    |  
|Work in process               |  |      |          |   |      |   | 502       |  
|Finished goods                |  |      | 5,988,014 |   |      |   | 4,483,098 |  
|                              |  |      |           |   |      |   |           |  
|                              |  |      | 6,090,961 |   |      |   | 4,576,944 |  
|Less reserve for obsolescence |  |      | (69,914   | ) |      |   | (97,974   | )
|                              |  |      |           |   |      |   |           |  
|Total                         |  | $    | 6,021,047 |   |      | $ | 4,478,970 |  
|                              |  |      |           |   |      |   |           |  

NOTE 6NOTES RECEIVABLE, NET

At March 31, 2007 and 2006, notes receivable, net consist of the following:



|                                       |  |      |          |   |      |   |        
|-------------------------------------- |  | ---- | -------- | - | ---- | - | -------
|                                       |  | 2007 |          |   | 2006
|Notes receivable                       |  | $    | 312,125  |   |      | $ | 195,648
|Less allowance for uncollectible notes |  |      | (107,000 | ) |      |   |       
|                                       |  |      |          |   |      |   |        
|Total                                  |  | $    | 205,125  |   |      | $ | 195,648
|                                       |  |      |          |   |      |   |        



F - 14



---

##### Table of Contents

DYNAMIC HEALTH PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2007 AND 2006



For the years ended March 31, 2007 and 2006, bad debt expense charged to operations for estimated
uncollectible notes receivable was $107,000 and zero, respectively, whereas uncollectible notes receivable written off during the years amounted to zero.

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 us in twenty-three
(23) monthly installments of $15,000, including principal and interest at 8% per annum, commencing June 15, 2005. As of March 31, 2007, the remaining principal balance on this note was $152,935 and the note is in default.

On May 15, 2006, the Company received a promissory note in conversion of accounts receivable from Better Nutrition, LLC in the
principal amount of $170,403. The note shall be paid to us in twenty-four (24) semi-monthly installments of $7,366, including principal and interest at 7.75% per annum, commencing May 15, 2006. As of March 31, 2007, the remaining
principal balance on the note was $149,311 and the note is in default.

NOTE 7PROPERTY, PLANT AND EQUIPMENT, NET

At March 31, 2007 and 2006, property, plant and equipment, net consist of the following:



|                                               |  |      |           |   |      |   |           |  
|---------------------------------------------- |  | ---- | --------- | - | ---- | - | --------- | -
|                                               |  | 2007 |           |   | 2006 |  
|Machinery and equipment                        |  | $    | 481,784   |   |      | $ | 470,131   |  
|Furniture, fixtures and equipment              |  |      | 538,691   |   |      |   | 400,748   |  
|Vehicles                                       |  |      | 32,017    |   |      |   | 102,663   |  
|Leasehold improvements                         |  |      | 66,992    |   |      |   | 28,299    |  
|                                               |  |      |           |   |      |   |           |  
|                                               |  |      | 1,119,484 |   |      |   | 1,001,841 |  
|Less accumulated depreciation and amortization |  |      | (405,441  | ) |      |   | (257,995  | )
|                                               |  |      |           |   |      |   |           |  
|Total                                          |  | $    | 714,043   |   |      | $ | 743,846   |  
|                                               |  |      |           |   |      |   |           |  

Depreciation expense charged to operations was $192,280 and $154,526 for the years ended
March 31, 2007 and 2006, respectively.

The Company leases five facilities. One serves as the Companys corporate headquarters
and is also used for its offices, warehousing and shipping operations, two that are used for its offices, warehousing and shipping operations, and two that are used for its warehousing and shipping operations.



F - 15



---

##### Table of Contents

DYNAMIC HEALTH PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2007 AND 2006



NOTE 8GOODWILL, NET

At March 31, 2007 and 2006, goodwill, net, consists of the following:



|                              |  |      |           |      |   |          
|----------------------------- |  | ---- | --------- | ---- | - | ---------
|                              |  | 2007 |           | 2006
|Goodwill                      |  | $    | 4,145,130 |      | $ | 4,145,130
|                              |  |     
|Less accumulated amortization |  |      |          |      |   |         
|                              |  |      |           |      |   |          
|Total                         |  | $    | 4,145,130 |      | $ | 4,145,130
|                              |  |      |           |      |   |          

As of March 31, 2007 and 2006, goodwill represented an intangible, resulting from the
acquisitions of BOSS and Dynamic Marketing, Inc. (DM). Goodwill is analyzed each September 30 for impairment as it has an indeterminant life. Based on the Companys analysis performed, no impairment losses were required to have
been recorded during the fiscal years ended March 31, 2007 and 2006. For income tax purposes, no deductible expense is anticipated for the acquisition goodwill.

NOTE 9INTANGIBLE ASSETS, NET

At March 31, 2007 and 2006, intangible assets, net, consist
of the following:



|                              |  |      |           |   |      |   |           |  
|----------------------------- |  | ---- | --------- | - | ---- | - | --------- | -
|                              |  | 2007 |           |   | 2006 |  
|Loan costs                    |  | $    | 527,492   |   |      | $ | 527,492   |  
|Customer lists                |  |      | 610,306   |   |      |   | 610,306   |  
|Distributor agreement         |  |      | 25,000    |   |      |   |          |  
|Trademarks                    |  |      | 10,039    |   |      |   | 13,330    |  
|                              |  |      |           |   |      |   |           |  
|                              |  |      | 1,172,837 |   |      |   | 1,151,128 |  
|Less accumulated amortization |  |      | (708,569  | ) |      |   | (401,911  | )
|                              |  |      |           |   |      |   |           |  
|Total                         |  | $    | 464,268   |   |      | $ | 749,217   |  
|                              |  |      |           |   |      |   |           |  

Amortization expense charged to operations was $309,949 and $300,522 for the years ended
March 31, 2007 and 2006, respectively.

The Company incurred loan costs in the amount of $305,818 associated with the $6 million of
funding received on September 30, 2004, in connection with the acquisition of BOSS. The customer list and trademarks acquired with the acquisition of BOSS amounted to $285,000 and $8,062, respectively. In addition, the Company incurred loan
costs in the amount of $221,674 associated with the funding received on March 29, 2005, in connection with the acquisition of DM. The customer list acquired with the acquisition of DM amounted to $165,000. On February 14, 2005, the Company
purchased a customer list for $160,306 from Protech Distributing, Inc. As of March 31, 2007 and 2006, no factors existed that would suggest impairment of these assets.



F - 16



---

##### Table of Contents

DYNAMIC HEALTH PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2007 AND 2006



NOTE 10INVESTMENTS IN UNCONSOLIDATED AFFILIATES

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

Investment in Tribeca Beverage Company

The Company owned 30%, or 300,000 shares of common stock of 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 of $166,939 in the investment. Tribeca discontinued its operations as of December 31, 2006.

NOTE 11INCOME TAXES

Income tax expense (benefit) for the years ended March 31, 2007 and
2006 are as follows:



|                                      |  |      |         |   |      |   |          |  
|------------------------------------- |  | ---- | ------- | - | ---- | - | -------- | -
|                                      |  | 2007 |         |   | 2006 |  
|Current income tax expense (benefit)  |  | $    | 53,499  |   |      | $ | 810      |  
|Deferred income tax expense (benefit) |  |      | (12,894 | ) |      |   | (318,552 | )
|                                      |  |      |         |   |      |   |          |  
|Income tax expense (benefit)          |  | $    | 40,605  |   |      | $ | (317,742 | )
|                                      |  |      |         |   |      |   |          |  

Income taxes for the years ended March 31, 2007 and 2006 differ from the amounts computed by
applying the effective income tax rate of 37% to income before income taxes as a result of the following:



|                                                     |  |      |             |      |   |            |  
|---------------------------------------------------- |  | ---- | ----------- | ---- | - | ---------- | -
|                                                     |  | 2007 |             | 2006 |  
|Computed tax expense (benefit) at the statutory rate |  | $    | (1,396,500) |      | $ | 2,066,900  |  
|Increase (decrease) in taxes resulting from:         |  |      |             |      |   |            |  
|Non-deductible items                                 |  |      | 25,700      |      |   | 27,400     |  
|Derivative (income) expense and other adjustments    |  |      | 1,138,405   |      |   | (2,712,042 | )
|Increase in valuation allowance                      |  |      | 273,000     |      |   | 300,000    |  
|                                                     |  |      |             |      |   |            |  
|Income tax expense (benefit)                         |  | $    | 40,605      |      | $ | (317,742   | )
|                                                     |  |      |             |      |   |            |  



F - 17



---

##### Table of Contents

DYNAMIC HEALTH PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2007 AND 2006



Temporary differences that give rise to deferred tax assets and liabilities:



|                                                |  |      |           |   |      |   |          |  
|----------------------------------------------- |  | ---- | --------- | - | ---- | - | -------- | -
|                                                |  | 2007 |           |   | 2006 |  
|Deferred tax assets:                            |  |      |           |   |      |   |          |  
|Bad debts                                       |  | $    | 134,700   |   |      | $ | 81,200   |  
|Inventories                                     |  |      | 120,700   |   |      |   | 36,500   |  
|Net operating loss carryforward                 |  |      | 716,300   |   |      |   | 616,000  |  
|Accrued vacation                                |  |      | 21,400    |   |      |   | 21,600   |  
|Amortization                                    |  |      | 100,900   |   |      |   | 30,600   |  
|                                                |  |      |           |   |      |   |          |  
|Gross deferred tax assets                       |  |      | 1,094,000 |   |      |   | 785,900  |  
|Less valuation allowance                        |  |      | (573,000  | ) |      |   | (300,000 | )
|                                                |  |      |           |   |      |   |          |  
|                                                |  | $    | 521,000   |   |      | $ | 485,900  |  
|                                                |  |      |           |   |      |   |          |  
|Deferred tax liabilities:                       |  |      |           |   |      |   |          |  
|Deferred revenue                                |  | $    | 5,800     |   |      | $ | 6,600    |  
|Depreciation                                    |  |      | 128,400   |   |      |   | 68,500   |  
|Unrealized gain on marketable equity securities |  |      | 337,400   |   |      |   | 597,100  |  
|                                                |  |      |           |   |      |   |          |  
|Gross deferred tax liability                    |  | $    | 471,600   |   |      | $ | 672,200  |  
|                                                |  |      |           |   |      |   |          |  
|Net increase (decrease) in valuation allowance  |  | $    | 273,000   |   |      | $ | 300,000  |  
|                                                |  |      |           |   |      |   |          |  

As of March 31, 2007 and 2006, the Company had a current income tax liability of $115 and
zero, respectively, an accrued income tax liability of $925 and $5,819, respectively, a net deferred income tax asset of $49,400 and zero, respectively, and a net deferred income tax liability of zero and $186,300, respectively, which primarily
represents the potential future tax expense associated with the unrealized gains on marketable equity securities, and is partially offset due to potential utilization of net operating losses not previously recognized. The Company has net operating
losses that expire through March 31, 2027.

NOTE 12REVOLVING NOTE PAYABLE

On March 29, 2005, the Company entered into agreements with Laurus Master Fund, Ltd. (Laurus), a Cayman Islands corporation, 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.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F - 18



---

##### Table of Contents

DYNAMIC HEALTH PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2007 AND 2006



The combined principal amount that may be outstanding under the $2,000,000 minimum borrowing note and
the $4,000,000 revolving note at any point in time cannot exceed $4,000,000.

The proceeds of the funding were used for the March 31,
2005 acquisition of Dynamic Marketing, Inc., for costs associated with the acquisition and for working capital. 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.

We incurred loan costs of $221,674
associated with the notes. As of March 31, 2007 and 2006, the outstanding principal balance on the notes was $2,274,413 and $2,751,564, respectively.

Because the common stock underlying the conversion feature embedded in the $2,000,000 convertible minimum borrowing note and the warrant are subject to our Registration Rights Agreement with Laurus, they have been
accounted for as derivative instrument liabilities (see Note 15). The embedded derivative instruments (primarily the conversion feature) related to the $2,000,000 convertible minimum borrowing note were bifurcated and recorded as a derivative
instrument liability. The warrants were valued using the Black-Scholes option pricing model at $937,500. Because the fair value of the warrants of $937,500 and the fair value of the bifurcated derivative instrument of $2,530,973 exceeded the
proceeds received, the convertible minimum borrowing note was initially recorded at zero and an initial expense of $1,468,473 was recognized to record the warrants and the bifurcated derivative instrument at their fair values (see Note 15).

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. In connection with the September 12, 2005 stock issuance, the lender waived this provision. 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.



F - 19



---

##### Table of Contents

DYNAMIC HEALTH PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2007 AND 2006



115% of the full principal amount of the convertible notes is due upon default under the terms of the
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. In connection with the April 2006 Postponement and Amendment Agreement with Laurus, this provision was modified from 4.99% to 9.99%. In
addition, this restriction would not apply in the event there was an event of default or if we sought to redeem the outstanding balance of the convertible debentures.

The warrants were exercisable until seven years from the date of the notes at a purchase price equal to $1.37 per share. The warrants were exercisable on a cashless basis. In the event that the warrants were exercised
on a cashless basis, then the Company would not receive any proceeds. In addition, the exercise price of the warrants would 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 minimum borrowing note. In September 2005, we sold 150,000 restricted shares of our common stock at a price below market. In connection therewith, Laurus waived their
anti-dilution provisions related to all convertible notes and warrants issued to Laurus. In connection with the April 2006 Postponement and Amendment Agreement with Laurus, we issued 52,941 restricted shares of our common stock to Laurus, in
exchange for cancellation of the 750,000 warrants.

The Company was 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 conversion option. If the registration statement was 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 was 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 was subsequently withdrawn by the Company.

On July 19, 2005, the Company entered into a Postponement Agreement with Laurus, whereby Laurus agreed to postpone the Companys obligation to make certain amortization payments on its September 30, 2004 secured convertible
note (see Note 14). 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 Registration Statement.

On August 19, 2005, the Company filed such Registration Statement on Form S-2 for the registration of up to 3,219,690 shares of the Companys
common stock, including up to 2,194,690 shares of common stock underlying the March 29, 2005 convertible minimum borrowing note issued to Laurus, in the principal amount of $2,000,000, up to 750,000 shares issuable upon the exercise of common
stock purchase warrants, and up to 275,000 shares issued in connection with the July 19, 2005 Postponement Agreement. Such Registration Statement was subsequently withdrawn by the Company on May 11, 2006.

In November 2005, the Company reached an agreement with Laurus in principle pursuant to which we will be obligated to pay Laurus $48,000 as payment in
full for all late effectiveness fees. The agreement was subject to negotiation and execution of a definitive agreement.



F - 20



---

##### Table of Contents

DYNAMIC HEALTH PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2007 AND 2006



On April 28, 2006, the Company entered into a Postponement and Amendment Agreement with Laurus,
pursuant to which the Company modified the September 30, 2004 and the March 29, 2005 earlier agreements among the parties. The Postponement and Amendment Agreement provides for the following:



| |  |  | Principal payments under the September 30, 2004 note are reduced by $137,500 per month for the eight months commencing May 2006, all of which shall be paid on
the maturity date of the convertible note;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Companys obligation to repay overadvances of up to $1,721,000 under the March 29, 2005 notes shall be suspended for a period of eight months;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | All of the common stock purchase warrants issued to Laurus in connection with the September 30, 2004 and March 29, 2005 agreements are cancelled in their
entirety;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In connection with the foregoing, the Company issued 150,000 restricted shares of our common stock to Laurus, for cancellation of the warrants issued to Laurus;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In connection with the foregoing, the Company issued 275,000 restricted shares of our common stock to Laurus, for postponement of the portion of principal payments
in connection with the September 30, 2004 note.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The fair value of the 275,000 shares issued in connection with the
April 28, 2006 Postponement and Amendment Agreement was $45,000, based upon the closing price of our common stock on that date. This financing cost was recorded as a discount on the September 2004 note and the discount is being amortized to
interest expense over the life of the note, in accordance with EITF 96-19 Debtors Accounting for a Modification or Exchange of Debt Instruments.

In connection with the Postponement and Amendment Agreement, the Company also executed restated promissory notes in favor of Laurus and an amended and restated registration rights agreement (the Restated
Registration Rights Agreement). Pursuant to the Restated Registration Rights Agreement, we agreed to file a registration statement by June 30, 2006, covering the resale of the securities issued or issuable to Laurus. The Company was
obligated to have such registration statement declared effective by September 30, 2006, but there were no stated penalties for failure to meet such deadline.

On July 3, 2006, the Company filed a Registration Statement on Form SB-2 for the registration of up to 10,221,275 shares of the Companys common stock, including up to 2,194,690 shares of common stock
underlying the March 2005 secured convertible notes, up to 7,326,585 shares of common stock underlying the September 2004 secured convertible notes, 275,000 shares of common stock underlying the July 2005 postponement agreement, and 425,000 shares
of common stock underlying the April 2006 amendment and postponement agreement. Such Registration Statement was subsequently withdrawn by the Company on October 4, 2006.



F - 21



---

##### Table of Contents

DYNAMIC HEALTH PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2007 AND 2006



On October 4, 2006, the Company entered into an agreement with Laurus pursuant to which the
Company modified the earlier agreements among the parties (the Amendment Agreement). The Amendment Agreement (i) eliminated the obligation of the Company to register for resale the shares of common stock underlying the securities
sold in September 2004, and (ii) removed Laurus right to waive 9.99% ownership limitations contained in their convertible debentures.

In connection with the Amendment Agreement, the Company also executed second amended and restated promissory notes in favor of Laurus. Pursuant to the Amendment Agreement, the Company agreed to file a registration statement by
October 20, 2006, covering the resale of certain securities issued or issuable to Laurus. The Company was obligated to have such registration statement declared effective by November 30, 2006, but there were no stated penalties for failure
to meet such deadline. Laurus could have declared the obligations in default and sought immediate repayment, but it gave no indication of doing so. If immediate repayment had been required, we would not have had sufficient funds and Laurus could
have taken legal action to recover amounts due from our assets.

On October 20, 2006, the Company filed a Registration Statement on
Form SB-2 for the registration of up to 2,761,335 shares of the Companys common stock, including up to 2,061,335 shares of common stock underlying the March 2005 secured convertible notes, 275,000 shares of common stock underlying the July
2005 postponement agreement, and 425,000 shares of common stock underlying the April 2006 amendment and postponement agreement. On December 14, 2006, March 8, 2007 and March 27, 2007, the Company filed amendments to this
Registration Statement on Form SB-2. On April 9, 2007, the Securities and Exchange Commission declared the Registration Statement to be effective.

On May 24, 2006, the Company entered into an Amendment Agreement with Laurus, pursuant to which the Company modified earlier agreements among the parties. In connection with the March 29, 2005 financing, the
Company received certain overadvances of funds in the aggregate amount of $572,094, as of May 24, 2006. In accordance with the Amendment Agreement, Laurus permitted the Company to sell a sufficient number of shares of GeoPharma, pledged by the
Company to Laurus, in connection with the September 30, 2004 financing, by June 5, 2006 in satisfaction of the overadvances, with the proceeds being paid to Laurus. Any remaining unsold shares of GeoPharma were delivered to Laurus to be
held pursuant to the original pledge agreement.

On April 11, 2007, the Company entered into a Postponement and Amendment Agreement
with Laurus pursuant to which the Company modified the earlier agreements among the parties. The agreement provides for the following:



| |  |  | Principal payments under the September 2004 note are reduced to $75,000 per month for each of the months commencing January 2007 through the maturity date of the
note, at which time all deferred payments become due and owing;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Companys obligation to repay overadvances of up to $1,721,000 under the March 2005 revolving note shall be due and payable on December 31, 2007;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------



F - 22



---

##### Table of Contents

DYNAMIC HEALTH PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2007 AND 2006



| |  |  | In consideration for the foregoing, the Company issued an aggregate of 350,000 restricted shares of its common stock to Laurus.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------

The revolving note payable provides for borrowings utilizing an asset based formula, based on eligible accounts receivable and inventory, less certain
allowances and reserves.

Revolving note payable consists of the following at March 31, 2007 and 2006:



|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  |      |            |   |      |   |            |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ---- | ---------- | - | ---- | - | ---------- | -
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  | 2007 |            |   | 2006 |  
|Principal balance of revolving note payable collateralized by all assets, interest payable at prime (8.25% at March 31, 2007 and 7.75% at March 31, 2006) plus 2% through March 29,
2008.                                                                                                                                                                                                                                                                                                        |  | $    | 2,274,413  |   |      | $ | 2,751,564  |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  |     
|Less face value of convertible portion of revolving note payable, accounted for as a derivative financial instrument liability, convertible into shares of the Companys common stock at a
conversion price of $1.13 per share. Proceeds from the convertible debenture were allocated first to the embedded conversion feature and the residual to the debenture. The resulting discount is being amortized through period charges to interest
expense using the effective interest method. (a) |  |      | (2,000,000 | ) |      |   | (2,000,000 | )
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  |     
|Plus amortization of discount recorded as derivative instrument interest expense using an effective interest rate of 300%. (a)                                                                                                                                                                                                                                                                                                                                                                   |  |      | 1,715,352  |   |      |   | 857,676    |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  |      |            |   |      |   |            |  
|Total                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  | $    | 1,989,765  |   |      | $ | 1,609,240  |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  |      |            |   |      |   |            |  

---

|(a) | See Note 15 for information on the derivative instrument liabilities related to the warrants issued to Laurus and the bifurcated embedded derivative instruments related to the
convertible minimum borrowing note.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F - 23



---

##### Table of Contents

DYNAMIC HEALTH PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2007 AND 2006



NOTE 13SHORT-TERM OBLIGATIONS

Short-term obligations consist of the following at March 31, 2007 and 2006:



|                                                                                                              |  |      |        |      |   |       
|------------------------------------------------------------------------------------------------------------- |  | ---- | ------ | ---- | - | ------
|                                                                                                              |  | 2007 |        | 2006
|Note payable, unsecured, due in monthly payments of $15,149, including interest at 7.732%, through June 2007. |  | $    | 30,008 |      | $ |      
|Note payable, unsecured, due in monthly payments of $2,933, including interest at 9.861%, through June 2007.  |  |      | 5,798  |      |   |      
|Note payable, unsecured, due in monthly payments of $1,601, including interest at 10%, through June 2007.     |  |      | 4,727  |      |   |      
|Note payable, unsecured, due in monthly payments of $4,710, including interest at 7.73%, through June 2007.   |  |      | 9,330  |      |   |      
|Note payable, unsecured, due in monthly payments of $3,478, including interest at 8.25%, through June 2006.   |  |      |       |      |   | 10,296
|                                                                                                              |  |      |        |      |   |       
|Total                                                                                                         |  | $    | 49,863 |      | $ | 10,296
|                                                                                                              |  |      |        |      |   |       



F - 24



---

##### Table of Contents

DYNAMIC HEALTH PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2007 AND 2006



NOTE 14LONG-TERM OBLIGATIONS

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
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 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). Upon an issuance of shares of common stock below the fixed conversion price, the fixed conversion price of the note will be reduced accordingly. In connection with the September 12, 2005
stock issuance, the lender waived this provision. The conversion price of the note 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.

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
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.



F - 25



---

##### Table of Contents

DYNAMIC HEALTH PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2007 AND 2006



We incurred loan costs in the amount of $305,818 associated with the convertible note. As of
March 31, 2007 and 2006, the outstanding principal balance on the convertible note was $3,687,500 and $4,500,000, respectively. As of March 31, 2007 and 2006, 989,758 shares of Company common stock have 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. In connection with the April 2006 Postponement and Amendment Agreement with Laurus, this provision was
modified from 4.99% to 9.99%. In addition, this restriction would not apply in the event there was a default or if we sought to redeem the outstanding balance of the convertible debentures.

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 the 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 were 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 were exercisable on a
cashless basis. In the event that the warrants were exercised on a cashless basis, then the Company would not receive any proceeds. In addition, the exercise price of the warrants was to 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. In connection therewith, Laurus waived their
anti-dilution provisions related to all convertible notes and warrants issued to Laurus. In September 2005, we sold 150,000 restricted shares of our common stock at a price below market. In connection therewith, Laurus waived their anti-dilution
provisions related to all convertible notes and warrants issued to Laurus. In connection with the April 2006 Postponement and Amendment Agreement with Laurus, we issued 97,059 restricted shares of our common stock to Laurus, in exchange for
cancellation of the 1,375,000 warrants.

Because the common stock underlying the conversion feature embedded in the $6,000,000 convertible
note and the warrant are subject to our Registration Rights Agreement with Laurus, they have been accounted for as derivative instrument assets or liabilities (see Note 15). The interest rate index derivative asset related to the interest rate index
feature was recorded as a derivative instrument asset. The embedded derivative instruments (primarily the conversion feature) related to the $6,000,000 convertible note were bifurcated and recorded as a derivative instrument liability. The warrants
were valued using the Black-Scholes option pricing model at $1,357,125. Because the fair value of the warrants of $1,357,125 and the fair value of the bifurcated derivative instrument of $6,579,999 exceeded the proceeds received, the convertible
minimum borrowing note was initially recorded at zero and a charge to income of $1,937,124 was recognized to record the warrants and the bifurcated derivative instrument at their fair values (see Note 15).



F - 26



---

##### Table of Contents

DYNAMIC HEALTH PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2007 AND 2006



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 a put option on
the pledged shares of GeoPharma, Inc. at $6.00 per share. Additionally, the note guaranteed by the Companys Chairman of the Board, Jugal K. Taneja.

On October 29, 2004, we filed a Registration Statement on Form S-2 for the registration of up to 8,701,585 shares of the our 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. Such registration statement is no longer current.

On July 19, 2005, we entered
into a Postponement Agreement with Laurus, whereby Laurus agreed to postpone our obligation to make certain amortization payments on its secured convertible note and, in consideration therefore, we issued to Laurus 275,000 shares of our restricted
common stock. Pursuant to the agreement, the principal portion of the monthly amount that is due in connection with the September 30, 2004 note, 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 us, to extend the dates for the filing requirements of our Registration Statement in connection with the March 29, 2005 financing and in
connection with the shares issued under the Postponement Agreement.

The fair value of the 275,000 shares issued in connection with the
July 19, 2005 Postponement Agreement was $189,750, based upon the closing price of our common stock on that date. This financing cost was recorded as a discount on the September 2004 note and the discount is being amortized to interest expense
over the life of the note, in accordance with EITF 96-19 Debtors Accounting for a Modification or Exchange of Debt Instruments.

On August 19, 2005, the Company filed a Registration Statement on Form S-2 for the registration of up to 3,219,690 shares of the Companys common stock, including up to 2,194,690 shares of common stock underlying the
March 29, 2005 Secured Convertible Notes issued to Laurus, in the principal amount of $4,000,000, up to 750,000 shares issuable upon the exercise of common stock purchase warrants, and up to 275,000 shares issued in connection with the
July 19, 2005 Postponement Agreement. Such Registration Statement was subsequently withdrawn by the Company on May 11, 2006.

On
April 28, 2006, the Company entered into a Postponement and Amendment Agreement with Laurus, pursuant to which the Company modified the September 30, 2004 and the March 29, 2005 earlier agreements among the parties. The Postponement
and Amendment Agreement provides for the following:



| |  |  | Principal payments under the September 30, 2004 note are reduced by $137,500 per month for the eight months commencing May 2006, all of which shall be paid on
the maturity date of the convertible note;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F - 27



---

##### Table of Contents

DYNAMIC HEALTH PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2007 AND 2006



| |  |  | The Companys obligation to repay overadvances of up to $1,721,000 under the March 29, 2005 notes shall be suspended for a period of eight months;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | All of the common stock purchase warrants issued to Laurus in connection with the September 30, 2004 and March 29, 2005 agreements are cancelled in their
entirety;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In connection with the foregoing, the Company issued 150,000 restricted shares of our common stock to Laurus, for cancellation of the warrants issued to Laurus;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In connection with the foregoing, the Company issued 275,000 restricted shares of our common stock to Laurus, for postponement of the portion of principal payments
in connection with the September 30, 2004 note.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The fair value of the 275,000 shares issued in connection with the
April 28, 2006 Postponement and Amendment Agreement was $45,000, based upon the closing price of our common stock on that date. This financing cost was recorded as a discount on the September 2004 note and the discount is being amortized to
interest expense over the life of the note, in accordance with EITF 96-19 Debtors Accounting for a Modification or Exchange of Debt Instruments.

In connection with the Postponement and Amendment Agreement, the Company also executed restated promissory notes in favor of Laurus and an amended and restated registration rights agreement (the Restated
Registration Rights Agreement). Pursuant to the Restated Registration Rights Agreement, we agreed to file a registration statement by June 30, 2006, covering the resale of the securities issued or issuable to Laurus. The Company was
obligated to have such registration statement declared effective by September 30, 2006, but there were no stated penalties for failure to meet such deadline.

On May 24, 2006, the Company entered into an Amendment Agreement with Laurus, pursuant to which the Company modified earlier agreements among the parties. In connection with the March 29, 2005 financing, the
Company received certain overadvances of funds in the aggregate amount of $572,094, as of May 24, 2006. In accordance with the Amendment Agreement, Laurus permitted the Company to sell a sufficient number of shares of GeoPharma, pledged by us
to Laurus, in connection with the September 30, 2004 financing, by June 5, 2006 in satisfaction of the overadvances, with the proceeds being paid to Laurus. Any remaining unsold shares of GeoPharma were delivered to Laurus to be held
pursuant to the original pledge agreement.

On July 3, 2006, the Company filed a Registration Statement on Form SB-2 for the
registration of up to 10,221,275 shares of the Companys common stock, including up to 2,194,690 shares of common stock underlying the March 2005 secured convertible notes, up to 7,326,585 shares of common stock underlying the September 2004
secured convertible notes, 275,000 shares of common stock



F - 28



---

##### Table of Contents

DYNAMIC HEALTH PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2007 AND 2006



underlying the July 2005 postponement agreement, and 425,000 shares of common stock underlying the April 2006 amendment and postponement agreement. Such
Registration Statement was subsequently withdrawn by the Company on October 4, 2006.

On October 4, 2006, the Company entered
into an agreement with Laurus pursuant to which the Company modified the earlier agreements among the parties (the Amendment Agreement). The Amendment Agreement (i) eliminated the obligation of the Company to register for resale the
shares of common stock underlying the securities sold in September 2004, and (ii) removed Laurus right to waive 9.99% ownership limitations contained in their convertible debentures.

In connection with the Amendment Agreement, the Company also executed second amended and restated promissory notes in favor of Laurus. Pursuant to the
Amendment Agreement, the Company agreed to file a registration statement by October 20, 2006, covering the resale of certain securities issued or issuable to Laurus. The Company was obligated to have such registration statement declared
effective by November 30, 2006, but there were no stated penalties for failure to meet such deadline. Laurus could have declared the obligations in default and sought immediate repayment, but it gave no indication of doing so. If immediate
repayment had been required, we would not have had sufficient funds and Laurus could have taken legal action to recover amounts due from our assets.

On October 20, 2006, the Company filed a Registration Statement on Form SB-2 for the registration of up to 2,761,335 shares of the Companys common stock, including up to 2,061,335 shares of common stock
underlying the March 2005 secured convertible notes, 275,000 shares of common stock underlying the July 2005 postponement agreement, and 425,000 shares of common stock underlying the April 2006 amendment and postponement agreement. On
December 14, 2006, March 8, 2007 and March 27, 2007, the Company filed amendments to this Registration Statement on Form SB-2. On April 9, 2007, the Securities and Exchange Commission declared the Registration Statement to
be effective.

On April 11, 2007, the Company entered into a Postponement and Amendment Agreement with Laurus pursuant to which the
Company modified the earlier agreements among the parties. The agreement provides for the following:



| |  |  | Principal payments under the September 2004 note are reduced to $75,000 per month for each of the months commencing January 2007 through the maturity date of the
note, at which time all deferred payments become due and owing;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Companys obligation to repay overadvances of up to $1,721,000 under the March 2005 revolving note shall be due and payable on December 31, 2007;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In consideration for the foregoing, the Company issued an aggregate of 350,000 restricted shares of its common stock to Laurus.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------



F - 29



---

##### Table of Contents

DYNAMIC HEALTH PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2007 AND 2006



Long-term obligations consist of the following at March 31, 2007 and 2006:



|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |      |            |   |      |   |            |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | -
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  | 2007 |            |   | 2006 |  
|Convertible note payable collateralized by all assets, due in monthly principal payments (see above), plus interest at prime (8.25% at
March 31, 2007 and 7.75% at March 31, 2006) plus 2%, through September 2007.                                                                                                                                                                                                                                                                             |  | $    | 3,687,500  |   |      | $ | 4,500,000  |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |     
|Less face value of convertible note payable, accounted for as a derivative financial instrument liability, convertible into shares of the
Companys common stock at a conversion price of $0.90 per share. Proceeds from the convertible debenture were allocated first to the warrants and to the embedded conversion feature and the residual to the debenture. The resulting discount is
being amortized through period charges to interest expense using the effective interest method. (a) |  |      | (6,000,000 | ) |      |   | (6,000,000 | )
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |     
|Plus amortization of discount recorded as derivative instrument interest expense using an effective interest rate of 300%. (a)                                                                                                                                                                                                                                                                                                                                                                  |  |      | 6,135,190  |   |      |   | 3,681,115  |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |     
|Less discount recorded for July 19, 2005 postponement agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                |  |      | (189,750   | ) |      |   | (189,750   | )
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |     
|Less discount recorded for April 28, 2006 postponement agreement.                                                                                                                                                                                                                                                                                                                                                                                                                               |  |      | (82,500    | ) |      |   |           |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |     
|Plus amortization of discount as interest expense, related to postponement agreements.                                                                                                                                                                                                                                                                                                                                                                                                          |  |      | 200,366    |   |      |   | 60,493     |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |     
|Note payable collateralized by certain equipment, due in monthly payments of approximately $1,662, including interest at 10%, through December
2007.                                                                                                                                                                                                                                                                                                                                            |  |      |           |   |      |   | 31,902     |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |     
|Note payable collateralized by a vehicle, due in monthly payments of $412, including interest at 4.02%, through January 2009.                                                                                                                                                                                                                                                                                                                                                                   |  |      |           |   |      |   | 12,855     |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |     
|Note payable collateralized by a vehicle, due in monthly payments of $666, including interest at 1.9%, through February 2010.                                                                                                                                                                                                                                                                                                                                                                   |  |      |           |   |      |   | 30,090     |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |     
|Capitalized lease obligation for certain equipment, due in monthly payments of $499, including interest at 11.33%, through July
2010.                                                                                                                                                                                                                                                                                                                                                           |  |      | 16,207     |   |      |   | 20,111     |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |     
|Other                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |      |           |   |      |   | 8,623      |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |      |            |   |      |   |            |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |      | 3,767,013  |   |      |   | 2,155,439  |  
|Less current maturities                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |      | 3,755,176  |   |      |   | 2,093,540  |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |      |            |   |      |   |            |  
|Total                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  | $    | 11,837     |   |      | $ | 61,899     |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |      |            |   |      |   |            |  



F - 30



---

##### Table of Contents

DYNAMIC HEALTH PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2007 AND 2006



---

|(a) | See Note 15 for information on the derivative instrument assets or liabilities related to the warrants issued to Laurus and the bifurcated embedded derivative instruments related to
the convertible note.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

At March 31, 2007, principal repayments of long-term obligations are as follows:



|                      |  |   |          
|--------------------- |  | - | ---------
|Year Ending March 31, |  |  
|2008                  |  | $ | 3,691,870
|2009                  |  |   | 4,892    
|2010                  |  |   | 5,476    
|2011                  |  |   | 1,469    
|2012                  |  |   |         
|Thereafter            |  |   |         
|                      |  |   |          
|Total                 |  | $ | 3,703,707
|                      |  |   |          

NOTE 15DERIVATIVE FINANCIAL INSTRUMENTS

The captions derivative financial instruments consist of (a) the embedded conversion feature bifurcated from the September 2004 and the March 2005
convertible debentures, (b) the Warrants issued in connection with the September 2004 and March 2005 convertible debts and (c) interest rate index. These derivative financial instruments are indexed to an aggregate of 6,160,908 and
9,494,656 shares, respectively, at March 31, 2007 and 2006, and are carried at fair value.

We use the Black-Scholes option price
model to value embedded conversion feature components of any bifurcated embedded derivative instruments that are recorded as derivative assets or derivative liabilities. See Note 12 and Note 14 related to embedded derivative instruments that have
been bifurcated from our notes payable to Laurus. We use the discounted present value of future cash flows to value derivative financial assets.

In valuing the embedded conversion feature components of the bifurcated embedded derivative instruments and the detachable warrants, at the time they were issued and at March 31, 2007 and 2006, we used the market price of our common
stock on the date of valuation, an expected dividend yield of zero and the remaining period or maturity date of the convertible debt instruments. Even though the warrants issued in September 2004 were to expire in five years and the warrants issued
March 2005 were to expire in seven years, we assumed they would be exercised in three years, the life of the convertible debt instruments, based on normal practices by the lender. All convertible instruments and warrants can be exercised by the
holder at any time.

Because of the limited trading history of our common stock prior to the acquisition of BOSS on October 1, 2004,
the expected volatility of our common stock over the remaining life of the warrants has been estimated at 126% based on not only the history of our stock price but also a review of the volatility of entities considered by management as comparable.



F - 31



---

##### Table of Contents

DYNAMIC HEALTH PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2007 AND 2006



The embedded conversion features in the convertible notes issued to Laurus are subject to the
requirements of EITF 00-19 and SFAS 133. The Company is required by EITF 00-19 and SFAS 133 to bifurcate the embedded conversion features and warrants, and account for them as derivative instrument liabilities. These derivative instrument
liabilities were initially recorded at their fair values and are then adjusted to fair value at the end of each subsequent reporting period, with any changes in the fair value recognized as income or expense in the period of change. The most
significant component of this compound derivative instrument is the embedded conversion feature, which is revalued using the Black-Scholes option pricing model. The interest rate index derivative has been accounted for as a standalone financial
derivative asset.

The proceeds received from Laurus were first allocated to the fair value of the freestanding warrants and then to the
fair value of the bifurcated embedded derivative instruments included in the convertible notes. The remaining proceeds were then allocated to the convertible notes, resulting in those notes being recorded at a significant discount from their face
amounts. For the $6,000,000 term note, that discount, is being accreted into its face amount using the effective interest method over the term of the note. For the $2,000,000 minimum borrowing note, that discount, is also being accreted to its face
amount using the effective interest method over the term of the note.

The effective interest rate used to amortize the debt discount on
the September 2004 6.75% convertible debenture and the March 2005 7.75% convertible debenture, amounted to 300% and 300%, respectively. Amortization of the discounts, which are included in derivative interest expense, amounted to $2,454,076 and
$857,676, respectively, for the year ended March 31, 2007, and $2,454,076 and $857,676, respectively, for the year ended March 31, 2006.

The initial fair value for derivative financial instrument liabilities was determined using the Black-Scholes option pricing model. Significant assumptions used in the determination of fair value of the September 2004 and March 2005
embedded conversion features and detachable warrants were: volatility of 126%, a dividend rate of zero and a risk free interest rated of 4.20%. At each reporting period, the remaining term and risk free rate used varies depending on the factors
existing at those dates.

Interest Rate Index Derivative

The September 2004 and March 2005 convertible debt financings included provisions to potentially lower the stated interest rates on the instruments in the event the price of the Companys common stock was to
increase by over 25% of the stated conversion price relating to the financing. For the September 2004 financing, the stated interest rate of 6.75% could be reduced by 200 basis points for every 25% increase in the Companys common stock price
above the conversion price. This provision could potentially reduce the interest rate, but not below zero, and would not result in an increase in the interest rate. The provision only took effect upon the effectiveness of a registration statement.
The registration statement became effective on November 15, 2004 for the September 2004 financing and thus triggered the interest rate index (IRI) provision. Since the registration statements filed for the March 2005 financing did
not become effective, this provision did not take effect.

Since the IRI is directly affected by the price of the Companys common
stock and has a value dependent on the price of the stock, it was determined to be a derivative asset. The fair value of the asset was determined using the present value of the projected



F - 32



---

##### Table of Contents

DYNAMIC HEALTH PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2007 AND 2006



cash flow benefit of the potential reduction in the interest rate over the term of the loan. The initial fair value of the present value of discounted future
cash flows from the projected reduction in the interest on the September 2004 convertible debt was $335,126. Since the price of the Companys stock has decreased, the fair value of the IRI decreased to zero as of March 31, 2007 and 2006.
Upon the future filing of a registration statement for both financings and when such registration statement is declared effective, the IRI for each instrument will be calculated based upon the discounted present value of the projected reduction in
stated interest on the convertible debts.

The initial fair value for derivative financial assets was determined using a discounted present
value of projected future cash flows. The significant assumptions in the determination of fair value of the September 2004 interest rate index (IRI) were: normal borrowing rate of 6.75% and a projected price of the Companys common stock using
a historical weighted average price of the common stock over a period equivalent to the projected life of the instrument. At each reporting period, the remaining term and a newly computed weighted average price of the Companys common stock is
determined based upon updated historical activity.



F - 33



---

##### Table of Contents

DYNAMIC HEALTH PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2007 AND 2006



At March 31, 2007 and 2006, the following derivative asset and liabilities related to common
stock warrants and embedded derivative instruments were outstanding:



|                                                                                                                                        |  |                 |         |                                       |   |                          |      |                     |   |                         |  |                         |         |  |   |        
|--------------------------------------------------------------------------------------------------------------------------------------- |  | --------------- | ------- | ------------------------------------- | - | ------------------------ | ---- | ------------------- | - | ----------------------- |  | ----------------------- | ------- |  | - | -------
|Derivative Financial Asset                                                                                                              |  |                 |         |                                       |   |                          |      |                     |   |                         |  |                        
|                                                                                                                                        |  |                 |         |                                       |   |                         
|Issue Date                                                                                                                              |  | Expiration Date |         | Instrument                            |   | Exercise Price Per Share |      | Value At Issue Date |   | Value At March 31, 2007 |  | Value At March 31, 2006
|9/30/2004                                                                                                                               |  | 9/30/2007       |         | Laurus $6,000,000 term note           |   | $                        | 0.90 |                     | $ | 335,126                 |  | $                       |        |  | $ |       
|                                                                                                                                        |  |                 |         |                                       |   |                          |      |                     |   |                         |  |                         |         |  |   |        
|Fair value of freestanding interest rate index derivative instrument asset                                                              |  | $               |        |                                       | $ |                        
|                                                                                                                                        |  |                 |         |                                       |   |                          |      |                     |   |                         |  |                         |         |  |   |        
|                                                                                                                                        |  |                 |         |                                      
|Derivative Financial Liabilities                                                                                                        |  |                 |         |                                       |   |                          |      |                     |   |                         |  |                        
|                                                                                                                                        |  |                 |         |                                       |   |                         
|Issue Date                                                                                                                              |  | Expiration Date |         | Instrument                            |   | Exercise Price Per Share |      | Value At Issue Date |   | Value At March 31, 2007 |  | Value At March 31, 2006
|9/30/2004                                                                                                                               |  | 9/30/2007       |         | 1,375,000 warrants issued to Laurus   |   | $                        | 1.04 |                     | $ | 1,357,125               |  | $                       |        |  | $ | 192,500
|3/29/2005                                                                                                                               |  | 3/29/2008       |         | 750,000 warrants issued to Laurus     |   | $                        | 1.37 |                     | $ | 937,500                 |  | $                       |        |  | $ | 120,000
|                                                                                                                                        |  |                 |         |                                       |   |                          |      |                     |   |                         |  |                         |         |  |   |        
|Fair value of freestanding derivative instrument liabilities for warrants                                                               |  | $               |        |                                       | $ | 312,500                 
|                                                                                                                                        |  |                 |         |                                       |   |                          |      |                     |   |                         |  |                         |         |  |   |        
|                                                                                                                                        |  |                 |         |                                       |   |                         
|Issue Date                                                                                                                              |  | Expiration Date |         | Instrument                            |   | Exercise Price Per Share |      | Value At Issue Date |   | Value At March 31, 2007 |  | Value At March 31, 2006
|9/30/2004                                                                                                                               |  | 9/30/2007       |         | Laurus $6,000,000 term note           |   | $                        | 0.90 |                     | $ | 6,579,999               |  | $                       | 368,750 |  | $ | 800,001
|3/29/2005                                                                                                                               |  | 3/29/2008       |         | Laurus $2,000,000 revolving term note |   | $                        | 1.13 |                     | $ | 2,530,973               |  | $                       | 247,788 |  | $ | 318,585
|                                                                                                                                        |  |                 |         |                                       |   |                          |      |                     |   |                         |  |                         |         |  |   |        
|Fair value of bifurcated embedded derivative instrument liabilities associated with the above mentioned instruments                     |  | $               | 616,538 |                                       | $ | 1,118,586               
|                                                                                                                                        |  |                 |         |                                       |   |                          |      |                     |   |                         |  |                         |         |  |   |        
|                                                                                                                                        |  |                 |         |                                       |   |                         
|Issue Date                                                                                                                              |  | Expiration Date |         | Instrument                            |   | Exercise Price Per Share |      | Value At Issue Date |   | Value At March 31, 2007 |  | Value At March 31, 2006
|9/30/2004                                                                                                                               |  | 9/30/2007       |         | Laurus $6,000,000 term note           |   | $                        | 0.90 |                     | $ | 748,187                 |  | $                       | 17,916  |  | $ | 62,658 
|3/29/2005                                                                                                                               |  | 3/29/2008       |         | Laurus $2,000,000 revolving term note |   | $                        | 1.13 |                     | $ | 273,968                 |  | $                       | 16,075  |  | $ | 29,632 
|                                                                                                                                        |  |                 |         |                                       |   |                          |      |                     |   |                         |  |                         |         |  |   |        
|Fair value of interest portion of bifurcated embedded derivative instrument liabilities associated with the above mentioned instruments |  | $               | 33,991  |                                       | $ | 92,290                  
|                                                                                                                                        |  |                 |         |                                       |   |                          |      |                     |   |                         |  |                         |         |  |   |        
|Total derivative financial instrument liabilities                                                                                       |  | $               | 650,529 |                                       | $ | 1,523,376               
|                                                                                                                                        |  |                 |         |                                       |   |                          |      |                     |   |                         |  |                         |         |  |   |        

NOTE 16COMMITMENTS AND CONTINGENCIES

Operating Leases

The Company has operating leases for facilities and certain machinery and equipment
that expire at various dates through 2014. Certain leases provide an option to extend the lease term. Certain leases provide for payment by the Company of any increases in property taxes, insurance, and common area maintenance over a base amount and
others provide for payment of all property taxes and insurance by the Company.

Future minimum lease payments, by year and in aggregate
under non-cancelable operating leases, consist of the following at March 31, 2007:



F - 34



---

##### Table of Contents

DYNAMIC HEALTH PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2007 AND 2006



|                      |  |   |          
|--------------------- |  | - | ---------
|Year Ending March 31, |  |  
|2008                  |  | $ | 533,764  
|2009                  |  |   | 555,802  
|2010                  |  |   | 543,808  
|2011                  |  |   | 290,487  
|2012                  |  |   | 176,436  
|Thereafter            |  |   | 250,661  
|                      |  |   |          
|                      |  | $ | 2,350,958
|                      |  |   |          

Total rent expense for the years ended March 31, 2007 and 2006 was $595,634 and $612,973
respectively.

Letter Of Credit

On
June 9, 2006, the Company issued a Standby Letter Of Credit and Security Agreement to First Community Bank Of America, in the amount of $500,000 in favor of Iovate Health Sciences USA, Inc. The Company pledged an aggregate of $200,000 in
certificates of deposit as collateral for the letter of credit. In addition, Jugal K. Taneja, Chairman of the Board of the Company, pledged additional collateral in the form of a $300,000 certificate of deposit and Mandeep K. Taneja, the
Companys Chief Executive Officer, personally guaranteed the letter of credit.

Consulting Agreement

Effective January 1, 2002, the Company entered into a Consulting Agreement with Jugal K. Taneja. Mr. Taneja has served as the Companys
Chairman of the Board since its inception. Until June 1998 and from November 1999 until February 14, 2002, he also served as the Companys Chief Executive Officer. The Consulting Agreement provides for an initial three-year term ending
January 1, 2005, and bi-monthly payments of $10,000, based on an annual base compensation of $240,000. On October 1, 2002, upon mutual agreement between the parties, the annual base compensation payable under the agreement was reduced to
$150,000. On July 17, 2006, upon mutual agreement between the parties, commencing August 1, 2006, the annual base compensation payable under the agreement was increased to $170,000. The agreement contains termination provisions for
disability, for cause, and for good reason, and it also contains confidentiality and non-competition provisions that prohibit him from competing with the Company under certain circumstances. The period covered by the non-competition provisions will
end three years after the termination of the consultants consulting agreement with the Company. The agreement has continued under the same terms and amounts, however, there is no written agreement at this time.

Employment Agreements

On September 30, 2004,
the Company, through its wholly-owned subsidiary, BOSS, entered into an Employment Agreement with Joseph Mies to serve as BOSSs Chief Operating Officer, effective October 1, 2004. The Employment Agreement provides for an initial
three-year term ending September 30, 2007, with an annual base compensation of $100,000. The agreement contains a



F - 35



---

##### Table of Contents

DYNAMIC HEALTH PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2007 AND 2006



provision for bonus compensation. The agreement also contains termination provisions for disability, for cause, and for good reason, and it also contains
confidentiality and non-competition provisions that prohibit him from competing with the Company under certain circumstances.

On
March 30, 2005, the Company, through its wholly-owned subsidiary, DMI, entered into an Employment Agreement with Gregg Madsen. On March 27, 2007, upon mutual agreement between the parties, the agreement was cancelled.

Litigation

The Company is, from time to time,
involved in litigation relating to claims arising out of its operations in the ordinary course of business. The Company believes that none of the claims that were outstanding as of March 31, 2007 and 2006 should have a material adverse impact
on its financial condition or results of operations.

NOTE 17STOCK WARRANTS

At March 31, 2007 and 2006, the Company had outstanding warrants to purchase 500,000 and 2,625,000 shares of the Companys common stock,
respectively.

On June 4, 2004, pursuant to a Financial Consulting Agreement, the Company issued 300,000 3-year life warrants to
purchase common stock, for consulting services. For the 300,000 warrants, the exercise prices range from $1.50 to $2.50 per share, with vesting after one year and expiring on June 4, 2007. 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. 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 warrants issued in connection with the
financial consulting agreements, the balance of deferred consulting fees as of March 31, 2007 and 2006 was zero and $48,750, respectively. The initial valuation of these warrants was $442,500. For the years ended March 31, 2007 and 2006,
the Company included consulting expense in the amount of $48,750 and $142,500, respectively, in selling, general and administrative expenses in the statements of operations, for these warrants.

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, at an exercise price of $1.04 per share, subject to certain adjustments pursuant to the Securities Purchase Agreement, and they were to expire in September 2009. On April 28, 2006, in
accordance with a Postponement and Amendment Agreement with Laurus, the warrants were cancelled in their entirety (see Note 14).

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, at an exercise price of $1.37 per share, subject to
certain adjustments pursuant to the Security Agreement, and they were to expire in March 2012. On April 28, 2006, in accordance with a Postponement and Amendment Agreement with Laurus, the warrants were cancelled in their entirety (see Note
12).



F - 36



---

##### Table of Contents

DYNAMIC HEALTH PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2007 AND 2006



NOTE 18STOCK OPTIONS

The Companys Stock Option Plan (SOP) was adopted in March 1999 to provide for the grant to employees up to 6,000,000 incentive stock options within the meaning of Section 422 of the Internal
Revenue Code. The SOP, which is administered by the Companys Board of Directors, is intended to provide incentives to directors, officers, and other key employees and enhance the Companys ability to attract and retain qualified
employees. Stock options are granted for the purchase of common stock at a price not less than the 100% of fair market value of the Companys common stock on the date of the grant (110% for holders of more than 10% of the total combined voting
power of all classes of capital stock then outstanding).

On April 1, 2006, the Company adopted SFAS No. 123 (revised 2004),
Share-Based Payment (FAS 123(R)), that addresses the accounting for share-based payment transactions in which an enterprise receives employee services in exchange for either equity instruments of the enterprise or liabilities that are
based on the fair value of the enterprises equity instruments or that may be settled by the issuance of such equity instruments. The statement eliminated the ability to account for share-based compensation transactions, as the Company formerly
did, using the intrinsic value method as prescribed by APB Opinion No. 25, and generally requires that such transactions be accounted for using a fair-value-based method and recognized as expenses in the Companys consolidated statement of
operations.

The Company adopted FAS 123(R) using the modified prospective method which requires the application of the accounting standard
as of April 1, 2006. The Companys consolidated financial statements as of and for the year ended March 31, 2007 reflects the impact of adopting FAS 123(R). In accordance with the modified prospective method, the consolidated
financial statements for the prior periods have not been restated to reflect, and do not include, the impact of FAS 123(R).

Share-based
compensation expense recognized during the year is based on the value of the portion of share-based payment awards that is ultimately expected to vest. Share-based compensation expense recognized in the consolidated statement of operations during
the year ended March 31, 2007 included compensation expense for the share-based payment awards granted prior to March 31, 2006 and thereafter, based on the grant date fair value estimated in accordance with FAS 123(R). As share-based
compensation expense recognized in the statement of operations is based on awards ultimately expected to vest, it will be reduced for estimated forfeitures. FAS 123(R) requires forfeitures to be estimated at the time of grant and revised, if
necessary, in subsequent periods if actual forfeitures differ from those estimates.

As a result of adopting FAS 123(R), $910,258 of
share-based compensation was charged against income for the year ended March 31, 2007. For the year ended March 31, 2006, the following table illustrates the effect on net income (loss) and earnings (loss) per share had we applied the fair
value recognition provisions of Statement of Financial Accounting Standards No. 123, Accounting for Share-Based Compensation, to share-based employee compensation.



F - 37



---

##### Table of Contents

DYNAMIC HEALTH PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2007 AND 2006



|                                 |  |                           |          
|-------------------------------- |  | ------------------------- | ---------
|                                 |  | Year Ended March 31, 2006
|Net income (loss):               |  |                           |          
|As reported                      |  | $                         | 5,903,910
|                                 |  |                           |          
|Pro forma                        |  | $                         | 5,416,677
|                                 |  |                           |          
|Basic income (loss) per share:   |  |                           |          
|As reported                      |  | $                         | 0.41     
|                                 |  |                           |          
|Pro forma                        |  | $                         | 0.38     
|                                 |  |                           |          
|Diluted income (loss) per share: |  |                           |          
|As reported                      |  | $                         | 0.08     
|                                 |  |                           |          
|Pro forma                        |  | $                         | 0.05     
|                                 |  |                           |          

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. For the options granted, the balance of deferred consulting fees as of March 31, 2007 and
2006 was $83,127 and $249,382, respectively. The initial valuation of these options was $498,763. For the years ended March 31, 2007 and 2006, the Company included compensation expense in the amount of $166,254 in selling, general and
administrative expenses in the statements of operations, for these options.

On December 1, 2005, the Company granted options to
purchase 2,500 shares of the Companys common stock to an employee, in accordance with the Companys 1999 Stock Option Plan. The exercise price of the options is $0.39 (100% of the fair value of the Companys common stock on
November 30, 2005). The options vest on December 1, 2006. 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 110.35% and a risk free interest rate
of 4.47%.

On March 1, 2006, the Company granted options to purchase 2,500 shares of the Companys common stock to an employee,
in accordance with the Companys 1999 Stock Option Plan. The exercise price of the options is $0.43 (100% of the fair value of the Companys common stock on February 28, 2006). The options vest on March 1, 2007. 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 110.35% and a risk free interest rate of 4.77%.

On July 17, 2006, the Company granted options to purchase 650,000 shares of the Companys common stock to employees, in accordance with the
Companys 1999 Stock Option Plan. The exercise price of the options is $0.37 (100% of the fair value of the Companys common stock on July 16, 2006). The options vest approximately equally over a three year period, commencing
July 17, 2007. 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 114.74% and a risk free interest rate of 5.07%.



F - 38



---

##### Table of Contents

DYNAMIC HEALTH PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2007 AND 2006



On July 17, 2006, the Company granted options to purchase 250,000 shares of the Companys
common stock to Jugal Taneja, the Companys Chairman and a principal shareholder of the Company, and options to purchase 250,000 shares of the Companys common stock to Mandeep Taneja, the Companys Chief Executive Officer and a
principal shareholder of the Company, in accordance with the Companys 1999 Stock Option Plan. The exercise price of the options is $0.407 (110% of the fair value of the Companys common stock on July 16, 2006). The options vest
approximately equally over a three year period, commencing July 17, 2007. 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 114.74% and a risk free
interest rate of 3.56%.

On July 24, 2006, the Compensation Committee of the Companys Board of Directors granted options to
purchase 500,000 shares of the Companys common stock to Mandeep Taneja, as compensation for Mr. Tanejas personal guarantee to First Community Bank, on July 24, 2006, of the Standby Letter Of Credit and Security Agreement issued
by the Company to First Community Bank. The exercise price of the options is $0.44 (110% of the fair value of the Companys common stock on July 23, 2006). The options vest approximately equally over a three year period, commencing
July 24, 2007. 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 114.74% and a risk free interest rate of 3.69%.

On March 28, 2007, the Company offered all persons who held outstanding vested and unvested options to purchase common stock, which were issued
pursuant to the terms of the Companys stock option plan, to replace all of his or her outstanding vested and unvested options into a new number of restricted common shares. As a result, the Company issued an aggregate of 1,186,825 restricted
shares of common stock in exchange for the cancellation of 2,905,000 outstanding options to purchase common stock. The options had exercise prices ranging from $0.1625 to $1.14. All persons who received shares in exchange for cancellation of options
entered into lock up agreements, pursuant to which they are not permitted to sell, assign, encumber, grant an option with respect to, or transfer and/or dispose of such shares for a period of three years, except with prior written consent of the
Company. As a result of the exchanges, the compensation expense recorded by the Company in excess of the Black-Scholes grant date fair value was $143,907, for the year ended March 31, 2007.

The fair value of each option granted is estimated on the grant date using the Black-Scholes option pricing model, with the following weighted average
assumptions:



|                        |  |            |   |  |            |  
|----------------------- |  | ---------- | - |  | ---------- | -
|                        |  | 2007       |   |  | 2006       |  
|Risk-free interest rate |  | 3.56%-5.07 | % |  | 4.47%-4.77 | %
|Dividend yield          |  |           |   |  |           |  
|Volatility              |  | 114.74     | % |  | 110.35     | %
|Average expected term   |  | 7 years    |   |  | 7 years    |  



F - 39



---

##### Table of Contents

DYNAMIC HEALTH PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2007 AND 2006



The following summarizes information about the aggregate stock option activity for the years ended
March 31, 2007 and 2006:



|                                                                                              |  |                  |   |      |                                 |     |                  |           |                                 |   |    
|--------------------------------------------------------------------------------------------- |  | ---------------- | - | ---- | ------------------------------- | --- | ---------------- | --------- | ------------------------------- | - | ---
|                                                                                              |  | 2007             |   | 2006
|                                                                                              |  | Number of Shares |   |      | Weighted Average Exercise Price |     | Number of Shares |           | Weighted Average Exercise Price
|Outstanding, beginning of year                                                                |  | 1,960,000        |   |      | $                               | .82 |                  | 1,955,000 |                                 | $ | .82
|Granted                                                                                       |  | 1,650,000        |   |      |                                 | .40 |                  | 5,000     |                                 |   | .41
|Exercised                                                                                     |  |                 |   |      |                                 |    |                  |          |                                 |   |   
|Exchanged for common stock                                                                    |  | (2,905,000       | ) |      |                                 |    |                  |          |                                 |   |   
|Expired and forfeited                                                                         |  | (705,000         | ) |      |                                 |    |                  |          |                                 |   |   
|                                                                                              |  |                  |   |      |                                 |     |                  |           |                                 |   |    
|Outstanding, end of year                                                                      |  |                 |   |      | $                               |    |                  | 1,960,000 |                                 | $ | .82
|                                                                                              |  |                  |   |      |                                 |     |                  |           |                                 |   |    
|Options vested, end of year                                                                   |  |                 |   |      | $                               |    |                  | 1,186,663 |                                 | $ | .58
|                                                                                              |  |                  |   |      |                                 |     |                  |           |                                 |   |    
|Weighted average fair value of options granted during the years ended March 31, 2007 and 2006 |  |                  |   |      | $                               | .33 |                  |           |                                 | $ | .27
|                                                                                              |  |                  |   |      |                                 |     |                  |           |                                 |   |    

As of March 31, 2007, there were no options outstanding. As of March 31, 2006, there
were 1,960,000 options outstanding. Any options which are forfeited or cancelled before expiration become available for future grants.

NOTE
19SHAREHOLDERS EQUITY

In August 1998, upon the filing by the Company of Articles of Amendment to its Articles of
Incorporation, the Company established Series A Convertible Preferred Stock. The Series A Preferred Stock was issued in conjunction with the Companys acquisition of Energy Factors. Terms associated with the issuance of the Series A Preferred
are: (1) Shareholders are not entitled to receive dividends, (2) Liquidation preference of $5 per share over any junior stock, including common stock, (3) Automatic conversion to one share of common stock if the average closing price
of the common stock for any five consecutive trading day period is $5 per share or more, and (4) Holders of Series A Preferred are entitled to the same voting rights as shareholders of common stock as a single class.

In September 1998, upon the filing by the Company of Articles of Amendment to its Articles of Incorporation, the Company established Series B 6%
Cumulative Convertible Preferred Stock. The Series B Cumulative Convertible Preferred Stock was issued for cash used in the operations of the Company. Terms associated with the issuance of Series B Preferred are: (1) Shareholders are entitled
to receive dividends on each outstanding share at an annual rate of 6%, (2) Liquidation preference of $2.50 per share over any junior stock, including common stock, (3) Automatic conversion to one share of common stock if the average
closing price of the common stock for any five consecutive trading day period is $5 per share or more, and (4) Holders of Series B Preferred have no voting rights.



F - 40



---

##### Table of Contents

DYNAMIC HEALTH PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2007 AND 2006



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

Effective August 1, 2003, upon the filing by the Company of Articles of Amendment to its Articles of Incorporation on
July 30, 2003, the four-for-one forward stock split was effected, with a record date of August 1, 2003. The payment date for the additional shares of Company common stock was August 12, 2003.

On October 22, 2004 a Special Meeting of Stockholders of the Company was held at the Companys corporate headquarters. At the meeting, a
minimum of 81% of all of the shareholders of record of the Companys common stock, at the close of business on September 20, 2004, voted to approve the amendment to the Companys articles of incorporation to (a) increase the
authorized number of shares of common stock from 20,000,000 shares to 45,000,000 shares, and (b) to change the quorum requirements for various stockholder actions from 75% of the holders of outstanding shares of the Companys common stock
to the affirmative vote of the holders of a majority of the outstanding shares of the Companys common stock then entitled to vote.

On October 25, 2004, the Company filed the Certificate of Amendment to Restated Articles of Incorporation of Dynamic Health Products, Inc. to accomplish the above.

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 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. Such Registration Statement is no longer current.

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 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. The Company subsequently withdrew such Registration Statement on August 19,
2005.

On August 19, 2005, the Company filed a Registration Statement on Form S-2 for the registration of up to 3,219,690 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, up to 750,000 shares issuable upon the exercise of common stock purchase
warrants and 275,000 shares of common stock underlying the July 2005 postponement agreement. The Company subsequently withdrew such Registration Statement on May 11, 2006.



F - 41



---

##### Table of Contents

DYNAMIC HEALTH PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2007 AND 2006



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 August 31, 2005, the Company issued 14,038 restricted shares of common stock to Dynamic Health Products, Inc. 401(k) Plan for the Companys contribution to the employees 401(k) benefit plan.

On September 12, 2005, 150,000 shares of restricted common stock of the Company were sold to a non-affiliated third party investor at $.50 per
new share, for gross proceeds of $75,000. Proceeds were used to provide additional working capital for the Company.

On April 28,
2006, the Company entered into a Postponement and Amendment Agreement with Laurus Master Fund, Ltd., pursuant to which the Company modified the September 30, 2004 and the March 29, 2005 earlier agreements among the parties. Pursuant to the
agreement, the principal portion of the monthly amount that is due under the September 30, 2004 convertible note on the first business day of each of the months from May 2006 through December 2006, in the amount of $187,500 per month, shall be
reduced by $137,500 per month. and, in consideration therefore, the Company issued to Laurus 275,000 shares of restricted common stock of the Company. In addition, Laurus agreed to the cancellation of all of the common stock purchase warrants issued
to Laurus in connection with the September 30, 2004 and March 29, 2005 agreements and, in consideration therefore, the Company issued to Laurus 150,000 shares of restricted common stock of the Company. 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.

In connection with the Postponement and Amendment Agreement, the Company also executed restated promissory notes in favor of Laurus and an amended and restated registration rights agreement (the Restated
Registration Rights Agreement). Pursuant to the Restated Registration Rights Agreement, we agreed to file a registration statement by June 30, 2006, covering the resale of the securities issued or issuable to Laurus. The Company was
obligated to have such registration statement declared effective by September 30, 2006, but there were no stated penalties for failure to meet such deadline.

On June 7, 2006, the Company issued 166,405 restricted shares of its common stock to Dynamic Health Products, Inc. 401(k) Plan for the Companys contribution to the employees 401(k) benefit plan.

On July 3, 2006, the Company filed a Registration Statement on Form SB-2 for the registration of up to 10,221,275 shares of the Companys
common stock, including up to 2,194,690 shares of common stock underlying the March 2005 secured convertible notes, up to 7,326,585 shares of common stock underlying the September 2004 secured convertible notes, 275,000 shares of common stock
underlying the July 2005 postponement agreement, and 425,000 shares of common stock underlying the April 2006 amendment and postponement agreement. Such Registration Statement was subsequently withdrawn by the Company on October 4, 2006.



F - 42



---

##### Table of Contents

DYNAMIC HEALTH PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2007 AND 2006



On October 4, 2006, the Company entered into an agreement with Laurus pursuant to which the
Company modified the earlier agreements among the parties (the Amendment Agreement). The Amendment Agreement (i) eliminated the obligation of the Company to register for resale the shares of common stock underlying the securities
sold in September 2004, and (ii) removed Laurus right to waive 9.99% ownership limitations contained in their convertible debentures.

In connection with the Amendment Agreement, the Company also executed second amended and restated promissory notes in favor of Laurus. Pursuant to the Amendment Agreement, the Company agreed to file a registration statement by
October 20, 2006, covering the resale of certain securities issued or issuable to Laurus. The Company was obligated to have such registration statement declared effective by November 30, 2006, but there were no stated penalties for failure
to meet such deadline. Laurus could have declared the obligations in default and sought immediate repayment, but it had given no indication of doing so. If immediate repayment had been required, we would not have had sufficient funds and Laurus
could have taken legal action to recover amounts due from our assets.

On October 20, 2006, the Company filed a Registration Statement
on Form SB-2 for the registration of up to 2,761,335 shares of the Companys common stock, including up to 2,061,335 shares of common stock underlying the March 2005 secured convertible notes, 275,000 shares of common stock underlying the July
2005 postponement agreement, and 425,000 shares of common stock underlying the April 2006 amendment and postponement agreement. On December 14, 2006, March 8, 2007 and March 27, 2007, the Company filed amendments to this
Registration Statement on Form SB-2. On April 9, 2007, the Securities and Exchange Commission declared the Registration Statement to be effective.

On March 28, 2007, the Company issued an aggregate of 1,186,825 restricted shares of common stock in exchange for the cancellation of 2,905,000 outstanding options to purchase common stock. The options had
exercise prices ranging from $0.1625 to $1.14. All persons who received shares in exchange for cancellation of options entered into lock up agreements, pursuant to which they are not permitted to sell, assign, encumber, grant an option with respect
to, or transfer and/or dispose of such shares for a period of three years, except with prior written consent of the Company.



F - 43



---

##### Table of Contents

DYNAMIC HEALTH PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2007 AND 2006



NOTE 20EARNINGS (LOSS) PER SHARE

The following sets forth the computation of basic and diluted net earnings per common share for the years ended March 31, 2007 and 2006:



|                                                                                                   |  |      |            |   |            |   |           
|-------------------------------------------------------------------------------------------------- |  | ---- | ---------- | - | ---------- | - | ----------
|                                                                                                   |  | 2007 |            |   | 2006      
|                                                                                                   |  |      |            |   | (Restated)
|Numerator:                                                                                         |  |      |            |   |            |   |           
|Net income (loss)                                                                                  |  | $    | (3,814,764 | ) |            | $ | 5,903,910 
|Less preferred stock dividends                                                                     |  |      |           |   |            |   |          
|                                                                                                   |  |      |            |   |            |   |           
|Net income (loss) available to common shareholders                                                 |  |      | (3,814,764 | ) |            |   | 5,903,910 
|                                                                                                   |  |      |            |   |            |   |           
|Less derivative instrument income and interest expense, net , from convertible notes               |  |      |           |   |            |   | 4,246,950 
|                                                                                                   |  |      |            |   |            |   |           
|Net income (loss) available to common shareholders after assumed conversion of dilutive securities |  | $    | (3,814,764 | ) |            | $ | 1,656,960 
|                                                                                                   |  |      |            |   |            |   |           
|Denominator:                                                                                       |  |      |            |   |            |   |           
|Weighted average shares outstanding                                                                |  |      | 15,006,057 |   |            |   | 14,308,264
|Effect of dilutive securities:                                                                     |  |      |            |   |            |   |           
|Convertible notes                                                                                  |  |      |           |   |            |   | 6,769,912 
|Warrants                                                                                           |  |      |           |   |            |   |          
|Stock options                                                                                      |  |      |           |   |            |   | 403,458   
|                                                                                                   |  |      |            |   |            |   |           
|Weighted average fully diluted shares outstanding                                                  |  |      | 15,006,057 |   |            |   | 21,481,634
|                                                                                                   |  |      |            |   |            |   |           
|Net earnings (loss) per common share                                                              |  |      |            |   |            |   |           
|Basic                                                                                              |  | $    | (0.25      | ) |            | $ | .41       
|                                                                                                   |  |      |            |   |            |   |           
|Diluted                                                                                            |  | $    | (0.25      | ) |            | $ | .08       
|                                                                                                   |  |      |            |   |            |   |           

For the year ended March 31, 2007, warrants on 500,000 shares of common stock and 5,867,135
shares issuable upon conversion of convertible notes were not included in the computation of diluted earnings (loss) per share because their effects were anti-dilutive. For the year ended March 31, 2006, options on 1,552,582 shares of common
stock and warrants on 2,625,000 shares of common stock were not included in the computation of diluted earnings per share because their effects were anti-dilutive. See Note 1 for further information regarding the restatement.

NOTE 21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 years ended March 31, 2007 and 2006, DPS Nutrition Inc. accounted 11%, 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.



F - 44



---

##### Table of Contents

DYNAMIC HEALTH PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2007 AND 2006



Financial instruments that potentially subject the Company to concentrations of credit risk include
cash deposits with commercial banks and brokerage firms. At March 31, 2007 and 2006, the Company maintained cash balances in excess of the Federal Deposit Insurance Companys $100,000 insurance limit.

NOTE 22SUBSEQUENT EVENTS

On April 11,
2007, the Company entered into a Postponement and Amendment Agreement with Laurus pursuant to which the Company modified the earlier agreements among the parties. The agreement provides for the following:



| |  |  | Principal payments under the September 2004 note are reduced to $75,000 per month for each of the months commencing January 2007 through the maturity date of the
note, at which time all deferred payments become due and owing;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Companys obligation to repay overadvances of up to $1,721,000 under the March 2005 revolving note shall be due and payable on December 31, 2007;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In consideration for the foregoing, the Company issued an aggregate of 350,000 restricted shares of its common stock to Laurus.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------

On April 26, 2007, the Company entered into a Business Loan Agreement with First Community
Bank of America (FCB), whereby the Company issued a secured Promissory Note to FCB in the maximum principal amount of $1,000,000, or so much as may be outstanding, together with interest on the unpaid outstanding principal balance from
time to time. Loan advances will be made from time to time upon the request of the Company. The note matures on October 15, 2007. Annual interest on the note is equal to the U.S. Prime Rate as published in The Wall Street Journal, plus
1%. Interest shall be calculated from the date of each advance until repayment of each advance. Interest on the note is payable monthly on the 26thday of each month, commencing May 26, 2007. There is no prepayment penalty on the note. The note is guaranteed by Jugal K. Taneja, the Companys Chairman and Mandeep K. Taneja, the
Companys Chief Executive Officer and President. In addition, Jugal Taneja and his spouse, and Mandeep Taneja have pledged certain shares of the Companys common stock as collateral for the note. Proceeds of the note will be used for
short-term working capital needs.

On May 14, 2007, the Company and GeoPharma, Inc. entered into a definitive agreement (the
Merger Agreement) under which the Company will merge with and into a wholly-owned subsidiary of GeoPharma in a stock transaction (the Merger). The Board of Directors of the Company determined that the Merger would further the
Companys long-term business objectives, including without limitation, providing additional capital to support continued growth.

Under the terms of the Merger Agreement, GeoPharma will exchange approximately 0.1429 shares of its common stock for each share of Company common stock and fractional shares will be rounded up to the nearest whole share. Based on an average
10-day market closing price of GeoPharmas common stock from May 1-14, 2007 of $4.24 per share, the transaction would be valued at $14 million, based on an estimated 3.3 million shares of GeoPharma common stock to be issued to the
shareholders of the Company in the Merger. The actual value at consummation of the Merger will be based on GeoPharmas share price at that time.



F - 45



---

##### Table of Contents

DYNAMIC HEALTH PRODUCTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2007 AND 2006



Completion of the Merger of the Company into a wholly-owned subsidiary of GeoPharma and the issuance
of the GeoPharma common shares to the shareholders of the Company is subject to the approval of the transaction by the shareholders of both companies, the conversion of the Companys convertible notes prior to the closing of the Merger, the
receipt of required regulatory approvals, and the satisfaction of usual and customary closing conditions. The Merger Agreement contains certain termination rights for both the Company and GeoPharma.

Directors and executive officers of GeoPharma beneficially own and are entitled to vote approximately 43% of the shares of GeoPharma common stock
outstanding. Directors and executive officers of the Company beneficially own and are entitled to vote approximately 47% of the shares of Company common stock outstanding.

There are certain material relationships between the Company and its affiliates, and GeoPharma and its affiliates. In this regard, Jugal K. Taneja is the
Chairman of the Board of Directors of the Company and GeoPharma, and he is a principal shareholder of both companies. Mandeep K. Taneja is the Chief Executive Officer, President, a director and a principal shareholder of the Company. Mihir K. Taneja
is the Chief Executive Officer of GeoPharma and a principal shareholder of both companies. Mandeep Taneja and Mihir Taneja are Jugal Tanejas sons. Kotha S. Sekharam is the President of GeoPharma, a director of both companies, and a principal
shareholder of GeoPharma. William L. LaGamba, a principal shareholder of the Company is also a director of GeoPharma. Currently, the Company holds 204,914 shares of common stock of GeoPharma.

On May 15, 2007, the Company and GeoPharma filed with the Securities and Exchange Commission (the SEC) a joint proxy
statement/prospectus on Form S-4, in connection with the proposed acquisition of the Company by GeoPharma pursuant to the terms of the definitive Merger Agreement.



F - 46