UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



FORM 10-Q

(Mark One)

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



for the quarterly period ended June 30,
2014



OR



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



Commission File Number:  000-54550



SCRIPSAMERICA, INC.

(Exact name of registrant as specified in
its charter)



|DELAWARE                                                       |  | 26-2598594                          
|-------------------------------------------------------------- |  | ------------------------------------
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)



Corporate Office
Centre Tysons II, 1650 Tysons Boulevard, Suite 1580, Tysons Corner, VA 22102

(Address of principal executive offices)



800-957-7622

(Registrant’s telephone number)



Indicate by check mark whether the registrant:  (1)
has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 o



Indicate by check mark whether the registrant
has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted
and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files).

Yes x    No o



Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer or a small reporting company.  See the definitions
of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2
of the Exchange Act.



| | Large accelerated filer | £ | Accelerated filer         | £
| | ----------------------- | - | ------------------------- | -
| | Non-accelerated filer   | £ | Smaller reporting company | S



Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act).

Yes o    No x



As of August 14, 2014, the registrant had
135,901,195 shares of common stock, $.001 par value, issued and outstanding and 2,990,252 shares of Series A Preferred Stock issued
and outstanding.









SCRIPSAMERICA, INC.

QUARTERLY REPORT ON FORM 10-Q

QUARTER ENDED JUNE 30, 2014



TABLE OF CONTENTS



PART I.   FINANCIAL INFORMATION



|Item 1. | Financial Statements (Unaudited)                                                                             |   
|------- | ------------------------------------------------------------------------------------------------------------ | --
|        | Condensed Consolidated Balance Sheets  as of June 30, 2014 and December 31, 2013                             | 1 
|        | Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2014 and 2013    | 2 
|        | Condensed Consolidated Statements of Changes in Stockholders’ Deficit for the six months ended June 30, 2014 | 3 
|        | Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2014 and 2013              | 4 
|        | Condensed Notes to the Consolidated Financial Statements                                                     | 5 
|Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations                        | 30
|Item 4. | Controls and Procedures                                                                                      | 53





PART II.  OTHER INFORMATION



|Item 1.        | Legal Proceedings                                           | 54
|-------------- | ----------------------------------------------------------- | --
|Item 2.        | Unregistered Sales of Equity Securities and Use of Proceeds | 54
|Item 3.        | Defaults Upon Senior Securities                             | 55
|Item 4.        | Mine Safety Disclosures                                     | 55
|Item 5.        | Other Information                                           | 55
|Item 6.        | Exhibits                                                    | 56
|               |                                                             |   
|SIGNATURES     | 57                                                         
|               |                                                             |   
|CERTIFICATIONS |                                                            











i





PART I - FINANCIAL INFORMATION



|ITEM 1. | FINANCIAL STATEMENTS
|------- | --------------------



SCRIPSAMERICA, INC.

Condensed Consolidated Balance Sheets

(Unaudited)



|                                                                                                                                                                                         |  | June 30, |             |   | December 31, |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------- | ----------- | - | ------------ | -
|                                                                                                                                                                                         |  | 2014     |             |   | 2013         |  
|ASSETS                                                                                                                                                                                   |  |          |             |   |              |  
|Current Assets                                                                                                                                                                           |  |          |             |   |              |  
|Cash                                                                                                                                                                                     |  | $        | 345,627     |   |              | $
|Accounts receivable trade, net                                                                                                                                                           |  |          | 1,052,281   |   |              |  
|Receivable - contract packager, net of allowance of $163,262 and $408,150, respectively                                                                                                  |  |          | 1,157,926   |   |              |  
|Receivable - commissions WholeSaleRx                                                                                                                                                     |  |          | 73,489      |   |              |  
|Inventory                                                                                                                                                                                |  |          | 362,988     |   |              |  
|Intangible asset – licenses, net                                                                                                                                                         |  |          | 8,000       |   |              |  
|Prepaid expenses and other current assets                                                                                                                                                |  |          | 159,190     |   |              |  
|Total Current Assets                                                                                                                                                                     |  |          | 3,159,501   |   |              |  
|Property and Equipment, net                                                                                                                                                              |  |          | 22,525      |   |              |  
|Other Assets                                                                                                                                                                             |  |          |             |   |              |  
|Investments                                                                                                                                                                              |  |          | 278,265     |   |              |  
|Goodwill                                                                                                                                                                                 |  |          | 538,000     |   |              |  
|Other Assets                                                                                                                                                                             |  |          | 14,720      |   |              |  
|                                                                                                                                                                                         |  |          | 830,985     |   |              |  
|TOTAL ASSETS                                                                                                                                                                             |  | $        | 4,013,011   |   |              | $
|                                                                                                                                                                                         |  |          |             |   |              |  
|LIABILITIES AND STOCKHOLDERS' DEFICIT                                                                                                                                                    |  |          |             |   |              |  
|Current Liabilities                                                                                                                                                                      |  |          |             |   |              |  
|Line of credit                                                                                                                                                                           |  | $        | 12          |   |              | $
|Accounts payable and accrued expenses                                                                                                                                                    |  |          | 1,132,133   |   |              |  
|Purchase order financing - related party                                                                                                                                                 |  |          | 1,028,192   |   |              |  
|Term loans payable                                                                                                                                                                       |  |          | 502,251     |   |              |  
|Term loan payable - related party                                                                                                                                                        |  |          | 113,054     |   |              |  
|Royalty payable                                                                                                                                                                          |  |          | 7,323       |   |              |  
|Royalty payable - related party                                                                                                                                                          |  |          | 11,839      |   |              |  
|Stock to be issued                                                                                                                                                                       |  |          | 54,945      |   |              |  
|Current portion of long-term debt - related party                                                                                                                                        |  |          | 128,149     |   |              |  
|Convertible notes payable - net of discount $3,207 and $259,396 respectively                                                                                                             |  |          | 22,418      |   |              |  
|Derivative liability                                                                                                                                                                     |  |          | 15,660      |   |              |  
|Total Current Liabilities                                                                                                                                                                |  |          | 3,015,976   |   |              |  
|Non-Current Liabilities                                                                                                                                                                  |  |          |             |   |              |  
|Preferred stock dividends payable                                                                                                                                                        |  |          | 229,460     |   |              |  
|Convertible notes payable - related parties                                                                                                                                              |  |          | 108,776     |   |              |  
|Convertible notes payable - net of discounts $0 and $168,273 respectively                                                                                                                |  |          | 594,048     |   |              |  
|Long-term debt, less current portion - related party                                                                                                                                     |  |          | 164,776     |   |              |  
|Total Non-Current Liabilities                                                                                                                                                            |  |          | 1,097,060   |   |              |  
|Total Liabilities                                                                                                                                                                        |  |          | 4,113,036   |   |              |  
|                                                                                                                                                                                         |  |          |             |   |              |  
|Commitments and Contingencies                                                                                                                                                            |  |          |             |   |              |  
|Series A Convertible preferred stock - $.001 par value; 10,000,000 shares
authorized, 2,990,252 issued and outstanding                                                                   |  |          | 1,043,000   |   |              |  
|                                                                                                                                                                                         |  |          |             |   |              |  
|Stockholders' Deficit                                                                                                                                                                    |  |          |             |   |              |  
|Common stock - $0.001 par value; 250,000,000 shares
    authorized; 132,753,985 and 91,792,839 shares issued and outstanding as of June 30, 2014 and December 31, 2013,
    respectively |  |          | 132,754     |   |              |  
|Additional paid-in capital                                                                                                                                                               |  |          | 14,548,201  |   |              |  
|Accumulated deficit                                                                                                                                                                      |  |          | (15,477,543 | ) |              |  
|Total Stockholders' Deficit of ScripsAmerica, Inc.                                                                                                                                       |  |          | (796,588    | ) |              |  
|                                                                                                                                                                                         |  |          |             |   |              |  
|Deficit Attributed to Noncontrolling interest                                                                                                                                            |  |          | (346,437    | ) |              |  
|Total Stockholders' Deficit                                                                                                                                                              |  |          | (1,143,025  | ) |              |  
|                                                                                                                                                                                         |  |          |             |   |              |  
|TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT                                                                                                                                              |  | $        | 4,013,011   |   |              | $



See accompanying notes to condensed
consolidated financial statements.

1







SCRIPSAMERICA, INC.

Condensed Consolidated Statements of
Operations

(Unaudited)



|                                                                                          |  | For the three months ended June 30, |             |   | For the six months ended June 30, |  
|----------------------------------------------------------------------------------------- |  | ----------------------------------- | ----------- | - | --------------------------------- | -
|                                                                                          |  | 2014                                |             |   | 2013                              |  
|Net revenues                                                                              |  |                                     |             |   |                                   |  
|Product revenues, net                                                                     |  | $                                   | 3,506,792   |   |                                   | $
|Revenues net, from contract packager                                                      |  |                                     | 119,216     |   |                                   |  
|Commission fees - WholeSaleRx                                                             |  |                                     | 74,713      |   |                                   |  
|Total net revenues                                                                        |  |                                     | 3,700,721   |   |                                   |  
|                                                                                          |  |                                     |             |   |                                   |  
|Cost of Goods Sold                                                                        |  |                                     |             |   |                                   |  
|Product                                                                                   |  |                                     | 291,600     |   |                                   |  
|Royalty expense                                                                           |  |                                     | 85,893      |   |                                   |  
|                                                                                          |  |                                     | 377,493     |   |                                   |  
|                                                                                          |  |                                     |             |   |                                   |  
|Gross Profit (Loss)                                                                       |  |                                     | 3,323,228   |   |                                   |  
|Selling, General and Administrative Expenses                                              |  |                                     | 3,310,170   |   |                                   |  
|Selling, General and Administrative Expenses share-based compensation issued for services |  |                                     | 734,697     |   |                                   |  
|Allowance for receivable - contract packager                                              |  |                                     | –           |   |                                   |  
|                                                                                          |  |                                     |             |   |                                   |  
|Total Operating Expenses                                                                  |  |                                     | 4,044,867   |   |                                   |  
|Loss from Operations                                                                      |  |                                     | (721,639    | ) |                                   |  
|Other Income (Expenses), net                                                              |  |                                     |             |   |                                   |  
|Interest expense                                                                          |  |                                     | (32,853     | ) |                                   |  
|Financing costs                                                                           |  |                                     | (10,438     | ) |                                   |  
|Loss from derivatives issued with debt greater than carrying value                        |  |                                     | –           |   |                                   |  
|Gain (Loss) on revaluation of derivatives                                                 |  |                                     | 879         |   |                                   |  
|Amortization of debt discount                                                             |  |                                     | (17,581     | ) |                                   |  
|Gain on extinguishment of debt                                                            |  |                                     | 127,033     |   |                                   |  
|Income from equity investments                                                            |  |                                     | –           |   |                                   |  
|                                                                                          |  |                                     | 67,040      |   |                                   |  
|                                                                                          |  |                                     |             |   |                                   |  
|Loss Before Provision for Income taxes                                                    |  |                                     | (654,599    | ) |                                   |  
|Provision for Tax
    Expense                                                             |  |                                     | –           |   |                                   |  
|Net Loss                                                                                  |  |                                     | (654,599    | ) |                                   |  
|Loss Attributed to noncontrolling interest                                                |  |                                     | (41,234     | ) |                                   |  
|Net Loss Attributed to ScripsAmerica, Inc.                                                |  |                                     | (613,365    | ) |                                   |  
|Preferred Stock Dividend                                                                  |  |                                     | (20,860     | ) |                                   |  
|Net Loss Available to Common Shareholders                                                 |  | $                                   | (634,225    | ) |                                   | $
|Loss Per Common Share                                                                     |  |                                     |             |   |                                   |  
|Basic and Diluted                                                                         |  | $                                   | (0.00       | ) |                                   | $
|Weighted Average Number of Common Shares                                                  |  |                                     |             |   |                                   |  
|Basic and Diluted                                                                         |  |                                     | 128,745,470 |   |                                   |  





See accompanying notes to condensed consolidated
financial statements.



2







SCRIPSAMERICA, INC.

Condensed Consolidated Statement of Changes
in Stockholders' Deficit

For the six months ended June 30, 2014
and year ended December 31, 2013



|                                                                |  | Common Stock |             |  | Additional Paid-In |   |         | Retained Earnings |  |   | Stockholders' Deficit |  |  | Deficit       |             |   | Total Stockholders' |  
|--------------------------------------------------------------- |  | ------------ | ----------- |  | ------------------ | - | ------- | ----------------- |  | - | --------------------- |  |  | ------------- | ----------- | - | ------------------- | -
|                                                                |  | Shares       |             |  | Amount             |   |         | Capital           |  |   | (Deficit)             |  |  | ScripsAmerica |             |   | Noncontrolling      |  
|                                                                |  |              |             |  |                    |   |         |                   |  |   |                       |  |  |               |             |   |                     |  
|Balance - January 1, 2013                                       |  |              | 91,792,839  |  |                    | $ | 91,794  |                   |  | $ | 10,046,457            |  |  | $             | (13,609,078 | ) |                     | $
|                                                                |  |              |             |  |                    |   |         |                   |  |   |                       |  |  |               |             |   |                     |  
|Common stock issued for cash                                    |  |              | 24,917,066  |  |                    |   | 24,917  |                   |  |   | 1,400,408             |  |  |               |             |   |                     |  
|Common stock issued for services - Directors                    |  |              | 68,000      |  |                    |   | 68      |                   |  |   | 6,772                 |  |  |               |             |   |                     |  
|Common stock issued for conversion of Convertible Notes payable |  |              | 8,563,213   |  |                    |   | 8,563   |                   |  |   | 1,173,715             |  |  |               | –           |   |                     |  
|Common stock issued for services - non employees                |  |              | 4,079,334   |  |                    |   | 4,079   |                   |  |   | 460,941               |  |  |               |             |   |                     |  
|Common stock issued for royalty payment                         |  |              | 705,703     |  |                    |   | 706     |                   |  |   | 86,087                |  |  |               |             |   |                     |  
|Common stock issued for debt financing charges                  |  |              | 1,740,550   |  |                    |   | 1,740   |                   |  |   | 222,281               |  |  |               |             |   |                     |  
|Common stock issued in settlement agreement                     |  |              | 887,280     |  |                    |   | 887     |                   |  |   | 124,494               |  |  |               |             |   |                     |  
|Dividends for convertible preferred stock                       |  |              |             |  |                    |   |         |                   |  |   |                       |  |  |               | (41,720     | ) |                     |  
|Common stock options issued for services - Directors            |  |              |             |  |                    |   |         |                   |  |   | 8,812                 |  |  |               |             |   |                     |  
|Common stock options issued for services – employees            |  |              |             |  |                    |   | 465,916 |                   |  |   |                       |  |  |               | 465,916     |   |                     |  
|Common stock warrants issued for financing costs                |  |              |             |  |                    |   |         |                   |  |   | 552,318               |  |  |               |             |   |                     |  
|Distribution taken from noncontrolling interest                 |  |              | –           |  |                    |   |         |                   |  |   |                       |  |  |               |             |   |                     |  
|Net Loss                                                        |  |              | –           |  |                    |   |         |                   |  |   |                       |  |  |               | (1,826,745  | ) |                     |  
|                                                                |  |              |             |  |                    |   |         |                   |  |   |                       |  |  |               |             |   |                     |  
|Balance - June 30, 2014                                         |  |              | 132,753,985 |  |                    | $ | 132,754 |                   |  | $ | 14,548,201            |  |  | $             | 15,477,543  | ) |                     | $





See accompanying notes to condensed consolidated
financial statements.





3







SCRIPSAMERICA, INC.

Condensed Consolidated Statements of
Cash Flows

(Unaudited)



|                                                                            |  | For the six months end June 30, |           
|--------------------------------------------------------------------------- |  | ------------------------------- | ----------
|                                                                            |  | 2014                            |           
|Cash Flows from Operating Activities                                        |  |                                 |           
|Net Loss                                                                    |  | $                               | (1,912,379
|Adjustments to reconcile net loss to net cash used by operating activities: |  |                                 |           
|Income from equity method investee                                          |  |                                 | (1,309    
|Amortization of discount on convertible notes payable                       |  |                                 | 110,916   
|Loss from derivatives issued with debt                                      |  |                                 | –         
|Depreciation expense                                                        |  |                                 | 1,296     
|Amortization of licenses                                                    |  |                                 | 4,000     
|Amortization of loan fees                                                   |  |                                 | 8,000     
|Common stock issued for services                                            |  |                                 | 419,360   
|Common stock issued for payment of royalty fees                             |  |                                 | 86,793    
|Common stock issued for finance fees                                        |  |                                 | 66,000    
|Options issued for services - Employees                                     |  |                                 | 465,916   
|Options issued for services - Directors                                     |  |                                 | 8,812     
|Warrants issued for settlement fee                                          |  |                                 | 552,318   
|Change in derivative liability                                              |  |                                 | 511,911   
|Reserve on receivable  - Trade                                              |  |                                 | 10,000    
|Reserve on receivable  - Contract packager                                  |  |                                 | –         
|Gain on extinguishment of debt                                              |  |                                 | (583,945  
|Allowance for chargebacks                                                   |  |                                 | –         
|Change in operating assets and liabilities                                  |  |                                 |           
|Accounts receivable - trade                                                 |  |                                 | (1,062,281
|Accounts receivable - related party                                         |  |                                 | (49,266   
|Receivable - Contract packager                                              |  |                                 | (69,328   
|Prepaid expenses and other current assets                                   |  |                                 | (34,527   
|Inventory                                                                   |  |                                 | (87,978   
|Accounts payable and accrued expenses                                       |  |                                 | 868,575   
|Cash used in operating activities                                           |  |                                 | (686,616  
|                                                                            |  |                                 |           
|Cash Flows from Investing Activities                                        |  |                                 |           
|Acquisition of businesses                                                   |  |                                 | (175,000  
|Purchase of property and equipment                                          |  |                                 | (23,821   
|Deposit for acquisition of business                                         |  |                                 | (70,000   
|Cash provided by investing activities                                       |  |                                 | (268,821  
|                                                                            |  |                                 |           
|Cash Flows from Financing Activities                                        |  |                                 |           
|Proceeds under bank line of credit, net                                     |  |                                 | (99,210   
|Proceeds from Issuance of common stock                                      |  |                                 | 1,499,780 
|Proceeds from stock to be issued                                            |  |                                 | 43,500    
|Proceeds from term loan, net                                                |  |                                 | 53,981    
|Proceeds from convertible notes payable                                     |  |                                 | 114,750   
|Payments for convertible notes payable                                      |  |                                 | (95,480   
|Proceeds from notes payable                                                 |  |                                 | 250,000   
|Proceeds from notes payable - related party                                 |  |                                 | 75,000    
|Payments on note payable                                                    |  |                                 | (59,730   
|Payments on note payable - related party                                    |  |                                 | (11,946   
|Proceeds from PO financing from related party, net                          |  |                                 | (9,302    
|Payments to factor, net                                                     |  |                                 | –         
|Payments on convertible notes payable                                       |  |                                 | (321,482  
|Payments on convertible note payable - related party                        |  |                                 | (11,962   
|Payments on note payable - related party                                    |  |                                 | (59,891   
|Payments to members of noncontrolling interest                              |  |                                 | (114,237  
|Cash provided by financing activities                                       |  |                                 | 1,253,771 
|                                                                            |  |                                 |           
|                                                                            |  |                                 |           
|Net Increase (Decrease) in Cash                                             |  |                                 | 298,334   
|                                                                            |  |                                 |           
|Cash - Beginning of Period                                                  |  |                                 | 47,293    
|                                                                            |  |                                 |           
|Cash - End of Period                                                        |  | $                               | 345,627   
|                                                                            |  |                                 |           
|Supplemental Disclosures of Cash Flow Information                           |  |                                 |           
|Cash Paid:                                                                  |  |                                 |           
|Interest                                                                    |  | $                               | 67,103    
|Noncash financing and investing activities:                                 |  |                                 |           
|Accrued Preferred Dividend payable                                          |  | $                               | 41,720    
|Investments - Main Ave Pharmacy                                             |  |                                 | (300,000  
|Financing – loans obtain for Main Ave Pharmacy                              |  |                                 | 300,000   
|Conversion of note payable for common stock                                 |  | $                               | 597,821   



See accompanying notes to condensed consolidated
financial statements.



4







SCRIPSAMERICA, INC.

Condensed Notes to Consolidated Financial
Statements (Unaudited)

For the six months ended June 30, 2014





|1 - | Organization and Business
|--- | -------------------------





The accompanying financial statements
reflect financial information of ScripsAmerica, Inc. (the “Company” or “ScripsAmerica” or “we”
or “our”).



ScripsAmerica, Inc. was incorporated
in the State of Delaware on May 12, 2008. Since our inception, ScripsAmerica’s business model has evolved significantly.
Through March 2013, and to a lesser extent into early 2014, the Company primarily provided pharmaceutical distribution services
to a wide range of end users across the health care industry through major pharmaceutical
distributors in North America. The end users included retail, hospitals, long-term care facilities and government and home care
agencies. The majority of the Company’s revenue from this model came from orders facilitated by McKesson,the largest
pharmaceutical distributor in North America, and a few other major pharmaceutical distributors.



However, we had no exclusive contract
with McKesson and the Company’s other pharmaceutical distributors to utilize our services and our margins became compressed.
As a result, in 2013the business of providing these pharmaceutical distribution services
was curtailed and we are now primarily focused on generating revenue through (1) the marketing, sale and distribution of our RapiMed®
products, (2) our services to the independent pharmacy distribution business and (3) our entry into the specialty pharmacy business.



Specifically, we
have developed a branded OTC product called “RapiMed” (www.rapimeds.com), which is a children’s pain
reliever and fever reducer which is in the process of being launched in China though our joint venture entity Global Pharma
Hub, and which we hope to launch in retail outlets in North America upon obtaining financing sometime in 2015. We
have also entered into agreements with third parties pursuant to which we receive fees based on a formula tied to the
gross profit on sales of pharmaceutical products to independent pharmacies by such third parties. Lastly, in February
2014 we entered into an agreement with a New Jersey pharmacy, Main Ave Pharmacy Inc., that specializes in topical pain creams
and since we will have significant controlling interest via related party relationships and are the primary beneficiary,
the Company will consolidate financial activities of specialty pharmacy.



The accompanying unaudited
interim condensed consolidated financial statements of the Company, have been prepared in accordance with accounting principles
generally accepted in the United States of America and the rules of the Securities and Exchange Commission (“SEC”)
and should be read in conjunction with the audited financial statements of ScripsAmerica, Inc. and related notes thereto contained
in the Company’s Form 10-K for the year ended December 31, 2013 filed with the SEC on April 15, 2014. Certain information
and note disclosure normally included in annual financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to those rules and regulations. In the opinion of management, all adjustments,
consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations
for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily
indicative of the results to be expected for the full year.





|2
 - | Liquidity, Business Risk and Going concern
|---- | ------------------------------------------



At June 30, 2014, the Company
had approximately $346,000 in cash and has continued to incur losses from operations. Our accumulated deficit is approximately
$15.5 million (at June 30, 2014). After taking into consideration our 2014 interim results to date and current projections for
the remainder of 2014, management believes that the Company’s cash flow from operations, coupled with recent financings,
may not be sufficient to support the working capital requirements, debt service, applicable debt maturity requirements, and operating
expenses through June 30, 2015.  The Company’s ability to continue as a going concern is highly dependent upon (i) management’s
ability to equal or exceed its planned operating cash flows, (ii) maintain continued availability on its line of credit and the
ability to obtain additional financing or capital to fund and reduce its debt service obligations coming due and its operating
expenses.



Our auditors raised substantial
doubt about the Company’s ability to continue as a going concern in their audit report on our 2013 consolidated financial
statements. The accompanying financial statements do not include any adjustments that may result from the outcome of this uncertainty.
Although the Company has successfully obtained various funding and financing in the past, future financing and funding options
cannot be expected based on past results.





5







SCRIPSAMERICA, INC.

Condensed Notes to Consolidated Financial
Statements (Unaudited)

For the six months ended June 30, 2014





We completed the development
of a children’s pain relief rapid orally disintegrating 80 mg and 160 mg tablets for OTC products. In January 2014, the Company
formed a joint venture entity, Global Pharma Hub, Inc., for the licensing, marketing and distribution of our pediatric RapiMed®
acetaminophen in foreign markets, with the initial market target in China. On March 10, 2014, we received a$200,000 purchase order for ourchildren’s pain relief rapid orally disintegrating80mg tablets from Global Pharma Hub for the China market. However, as of August 14, 2014, no shipments have been made.



In
addition, we estimate that we will need approximately $1.5 million of incremental funding to launch RapiMed® products
in the United States. The funding for launching the rapid orally disintegrating products in the U.S. is expected to come from the
sale of equity securities and/or debt financing.  However, such financing has not yet been secured.





|3 - | Summary of Significant Accounting Policies
|--- | ------------------------------------------



A summary of significant
accounting policies follows:



a.  Principles
of Consolidation - The condensed consolidated financial statements include the accounts
of the Company and all of its subsidiaries in which a controlling interest is maintained. All inter-company accounts and transactions
have been eliminated in consolidation. For investments which are considered to be a Variable Interest Entity (VIE), the Company
would be considered the primary beneficiary of the VIE if it has both of the following characteristics: (a) the power to direct
the activities of the VIE that most significantly impact the VIE’s economic performance and (b) the obligation to absorb
losses of the VIE that could potentially be significant or the right to receive benefits from the VIE that could potentially be
significant. Investments in entities in which the Company does not have a controlling financial interest, but over which we have
significant influence are accounted for using the equity method. Investments in which we do not have the ability to exercise significant
influence are accounted for using the cost method.



b.  Use of Estimates
- The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the balance sheet and reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.



c.Revenue
Recognition– Product
revenue associated with our pharmaceutical distribution services and our specialty pharmacy business is recognized when product
is shipped from a contract packager or our pharmacy to our customers warehouses or directly to a patient, and is adjusted
for anticipated charge backs from our customers which include inventory credits, discounts or volume incentives. These charge
back costs are received monthly from our customers and the sales revenue and accounts receivables are reduced accordingly
based on historical experience, customer contract programs, product pricing trends and the mix of products shipped.



Purchase
orders from our customers generate our shipments, provide persuasive evidence that an arrangement exists and that the pricing is
determinable. The credit worthiness of our customers assures that collectability is reasonably assured.



We
also recognize revenue from our contract packager on a net basis according to ASC 605-45, Revenue Recognition: Principal Agent
Considerations.Since we are not deemed to be theprincipal in these sales transactions we do not report the transaction
on a gross basis in our statement of operations. These sales transactions relate to a contract that a Contract Packager has obtained
with a government agency. The revenue is reported in a separate line in the statement of operations as “Revenues net, from
Contract Packager”, and the gross sales are reduced by the cost of sales fees from our Contract Packager.



Commission
fees are recognized when earned on shipments of generic pharmaceutical and OTC products by our pharmaceutical partner, which is
DEA and State-licensed to store and distribute controlled substances. Per our agreement with our pharmaceutical partner, the Company
will earn a 14% commission on the gross profit (sales less cost of goods sold, freight in and credits and allowances) of products
shipped to independent pharmacies







6





SCRIPSAMERICA, INC.

Condensed Notes to Consolidated Financial
Statements (Unaudited)

For the six months ended June 30, 2014





d.  Accounts
Receivable Trade, net-Accounts receivable are stated at estimated net realizable value.  These
receivable are from our specialty pharmacy, in which we only ship prescription products to patients upon payment approval by the
patients’ insurance company. Payments are usually received with 30 days of product being shipped. As of June 30, 2014, $10,000
has been recorded as an allowance for doubtful accounts. As of December 31, 2013, no allowance for doubtful accounts was deemed
necessary.



e.  Property and Equipment
-Property and equipment are stated at cost less accumulated depreciation. The Company computes depreciation using the
straight-line method over the estimated useful lives of the assets. Maintenance costs that do not significantly extend the useful
lives of the respective assets and repair costs are charged to operating expense as incurred.



f.  Intangible assets
- The Company amortizes the cost of other intangibles over their useful lives unless such lives are deemed indefinite. Intangible assets with indefinite lives are not amortized; however,
they are tested annually for impairment and written down to fair value if required.



We review the carrying values of property and equipment
and long-lived intangible assets for impairment whenever events or changes in circumstances indicate that their carrying values
may not be recoverable. Such events or circumstances include the following:



| | o | significant declines in an asset’s market price;
| | - | ------------------------------------------------

| | o | significant deterioration in an asset’s physical condition;
| | - | -----------------------------------------------------------

| | o | significant changes in the nature or extent of an asset’s use or operation;
| | - | ---------------------------------------------------------------------------

| | o | significant adverse changes in the business climate that could impact an asset’s value, including adverse actions or
assessments by regulators;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------

| | o | accumulation of costs significantly in excess of original expectations related to the acquisition or construction of an asset;
| | - | ------------------------------------------------------------------------------------------------------------------------------

| | o | current-period operating or cash flow losses combined with a history of such losses or a forecast that demonstrates continuing
losses associated with an asset’s use; and
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | expectations that it is more likely than not that an asset will be sold or otherwise disposed of significantly before the end
of its previously estimated useful life.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



If impairment indicators are present,
we determine whether an impairment loss should be recognized by testing the applicable asset or asset group’s carrying value
for recoverability. This test requires long-lived assets to be grouped at the lowest level for which identifiable cash flows are
largely independent of the cash flows of other assets and liabilities, the determination of which requires judgment. We estimate
the undiscounted future cash flows expected to be generated from the use and eventual disposal of the assets and compare that estimate
to the respective carrying values in order to determine if such carrying values are recoverable. This assessment requires the exercise
of judgment in assessing the future use of and projected value to be derived from the eventual disposal of the assets to be held
and used. If the carrying value of the assets is not recoverable, then we record a loss for the difference between the assets’
fair value and respective carrying value. We believe our current assumptions and estimates are reasonable and appropriate. Unanticipated
events and changes in market conditions, however, could affect such estimates, resulting in the need for an impairment charge in
future periods



g.
Receivable – Contract Packager- The Company has receivables from Marlex Pharmaceuticals, Inc.
(“Contract Packager”), in the amount of $1,157,926 and $1,088,598 at June 30, 2014 and December 31, 2013,
respectively. This receivable consists of purchase order (PO) financing, revenue earned for U.S. government sales and monthly
payments due from the settlement agreement entered into on September 6, 2013. Under the September 6, 2013 settlement
agreement, the Company is entitled to recover $408,150 of these receivables of which $244,893 has been recovered as of June
30, 2014. Since collectability is not certain on the remaining receivable, we have fully reserved it as of June 30, 2014 and
December 31, 2013.





7







SCRIPSAMERICA, INC.

Condensed Notes to Consolidated Financial
Statements (Unaudited)

For the six months ended June 30, 2014



h.Receivable
– related party –WholesaleRx, our pharmaceutical partner in which we have a 14% investment,
is an entity from which we recognize Commission fees when earned on shipments of generic pharmaceutical and OTC products by our
pharmaceutical partner, which is DEA and State-licensed to store and distribute controlled substances. The receivable consists
of PO financing, and revenue earned for commission sales agreement entered into in November 1, 2013 (as subsequently amended by
oral agreements).



iInventory
-Inventories represent purchased finished products at our PIMD inventory location and at a third party manufacture’s
warehouse location. Raw materials represent the cost of purchased material use to make our compounded prescription products at
our Main Ave Pharmacy location. Both finished products and raw material costs are stated at the lower of cost or market determined
by the first in, first out method.



k.  Derivative
Financial Instruments-Derivative financial instruments consist of financial instruments or other contracts that contain
a notional amount and one or more underlying values (e.g. interest rate, security price or other variable) that require no initial
net investment and permit net settlement. Derivative financial instruments may be free-standing or embedded in other financial
instruments. Further, derivative financial instruments are, initially, and subsequently, measured at fair value and recorded as
liabilities or, in rare instances, assets. The Company generally does not use derivative financial instruments to hedge exposures
to cash-flow, market or foreign-currency risks. However, the Company has entered into various types of financing arrangements to
fund its business capital requirements, including convertible debt and other financial instruments. These contracts require evaluation
to determine whether derivative features embedded in host contracts require bifurcation and fair value measurement or, in the case
of freestanding derivatives (principally warrants) whether certain conditions for equity classification have been achieved. In
instances where derivative financial instruments require liability classification, the Company is required to initially and subsequently
measure such instruments at fair value.



Derivative financial instruments
are initially recorded at fair value and subsequently adjusted to fair value at the close of each reporting period. The Company
estimates fair values of derivative financial instruments using various techniques (and combinations thereof) that are considered
to be consistent with the objective measuring fair values. In selecting the appropriate technique, management considers, among
other factors, the nature of the instrument, the market risks that it embodies and the expected means of settlement. For less complex
derivative instruments, such as free-standing warrants, the Company generally uses the Black-Scholes-Merton option valuation technique
because it embodies all of the requisite assumptions (including trading volatility, dividend yield, estimated terms and risk free
rates) necessary to fair value these instruments. Estimating fair values of derivative financial instruments requires the development
of significant and subjective estimates that may, and are likely to, change over the duration of the instrument with related changes
in internal and external market factors. In addition, option-based techniques are highly volatile and sensitive to changes in the
trading market price of our common stock, which has a high-historical volatility. Since derivative financial instruments are initially
and subsequently carried at fair values, our income (loss) will reflect the volatility in these estimate and assumption changes.



8







SCRIPSAMERICA,
                                         INC.

Condensed Notes to Consolidated Financial
Statements (Unaudited)

For the six months ended June 30, 2014



l.  Fair Value Measurements-The
Company follows the provision of ASC No. 820, Fair Value Measurements and Disclosures(“ASC 820”).  ASC
820 clarifies that fair value is an estimate of the exit price, representing the amount that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between market participants (i.e., the exit price at the measurement
date) and provides for use of a fair value hierarchy that prioritizes inputs to valuation techniques used to measure fair value
into three levels:



Level 1: Unadjusted
quoted prices in active markets for identical assets or liabilities.



Level 2: Input other
than quoted market prices that are observable, either directly or indirectly, and reasonably available.  Observable inputs
reflect the assumptions market participants would use in pricing the asset or liability and are developed based on market data
obtained from sources independent of the Company.



Level 3: Unobservable
inputs reflect the assumptions that the Company develops based on available information about what market participants would use
in valuing the asset or liability.



An asset or
liability’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the
fair value measurement. Availability of observable inputs can vary and is affected by a variety of factors.



The Company uses judgment in determining the fair value
of assets and liabilities, and level 3 assets and liabilities involve greater judgment than level 1 and level 2 assets and liabilities.



The carrying values of accounts receivable,
inventory, accounts payable and accrued expenses, royalty payable, and notes payable approximate their fair values due to their
short-term maturities. The carrying value of the Company’s investments approximate fair value because the investments were
made in 2013 and the carrying value includes the Company’s share of the investee’s earnings from the date of acquisition
to March 31, 2014. (See Note 7.) The carrying value of the Company’s long-term debt approximates fair value due to the borrowing
rates currently available to the Company for loans with similar terms. See note 12 for fair value of derivative liabilities.



m.  Advertising Expenses-The Company expenses advertising costs as incurred.  The Company incurred advertising expenses in the
amount of $2,758 and $159,917 for the three month period ended June 30, 2014 and 2013, respectively, and $29,017 and 204,413 for
the six months ended June 30, 2014 and 2013, respectively.



n.  Stock-Based
Compensation– Compensation expense is recognized for the fair value of all share-based payments issued to employees.
As of June 30, 2014 and December 31, 2013, the Company issued 10,400,000 and 5,015,000, respectively for employee stock options
that required calculating the fair value using a pricing model such as the Black-Scholes pricing model. See Note 13 for fair value
of these employee stock options.



For non-employees, stock grants
issued for services are valued at either the invoiced or contracted value of services provided, or the fair value of stock at
the date the agreement is reached, whichever is more readily determinable. For stock options and warrants granted to non-employees,
the fair value at the grant date is used to value the expense if the options or warrants are for future services, they are revalued
at each reporting period.



9







In calculating the estimated fair
value of its stock options and warrants, the Company used a Black-Scholes pricing model which requires the consideration of the
following seven variables for purposes of estimating fair value:



| | · | the stock option or warrant exercise price,
| | - | -------------------------------------------

| | · | the expected term of the option or warrant,
| | - | -------------------------------------------

| | · | the grant date fair value of our common stock, which is issuable upon exercise of the option or
warrant,
| | - | --------------------------------------------------------------------------------------------------------

| | · | the expected volatility of our common stock,
| | - | --------------------------------------------

| | · | expected dividends on our common stock (although we do not anticipate paying dividends in the foreseeable
future),
| | - | ------------------------------------------------------------------------------------------------------------------

| | · | the risk free interest rate for the expected option or warrant term, and
| | - | ------------------------------------------------------------------------

| | · | the expected forfeiture rate.
| | - | -----------------------------



o.  Earnings
(Loss) Per Share - Basic net income (loss) per common share is computed using the weighted average number of common shares
outstanding during the period. Diluted earnings per share include additional dilution from common stock equivalents, such as stock
issuable pursuant to the exercise of stock warrants, options, convertible notes payable and Series A convertible preferred shares.
Common stock equivalents are not included in the computation of diluted earnings per share when the Company reports a loss because
to do so would be anti-dilutive. As of June 30, 2014, common stock equivalents consisted of preferred stock convertible into 5,980,504
shares of common stock, warrants convertible into 5,228,572 shares, options convertible into 10,400,000 shares and notes payable
convertible into 4,546,494 shares of common stock.



p.  Reclassification
-Certain reclassifications have been made to the 2013 financial statements to conform to the interim 2014 condensed financial
statements presentation. These reclassifications had no effect on net loss or cash flows as previously reported.



q.  Recent Accounting Pronouncements
– In May 2014, the FASB issued Accounting Standards Update No.  2014-09, Revenue from Contracts with Customers:
Topic 606 (“ASU 2014-09”), to supersede nearly all existing revenue recognition guidance under GAAP. The core principle
of ASU 2014-09 is to recognize revenue when promised goods or services are transferred to customers in an amount that reflects
the consideration that is expected to be received for those goods or services. ASU 2014-09 defines a five-step process to achieve
this principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process
than required under existing GAAP, including identifying performance obligations in the contract, estimating the amount of variable
consideration to include in the transaction price and allocating the transaction price to each separate performance obligation.
The new standard permits the use of either the retrospective or cumulative effect transition methods. ASU 2014-09 is effective
for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early
application is not permitted. We are currently in the process of evaluating this new guidance.



Management does not believe
that any recently issued but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying
financial statements.





10







SCRIPSAMERICA, INC.

Condensed Notes to Consolidated Financial
Statements (Unaudited)

For the six months ended June 30, 2014







|4 - | Revenues net, from contract packager and commission fees
|--- | --------------------------------------------------------





The
Company had a Joint Operating Agreement with the Contract Packager, which was superseded by an agreement entered into on September
6, 2013. Under this September 6thagreement the Company is entitled to receive
a percentage of the Contract Packager’s profit, as defined, net of financing charges and royalties. Since we are not deemed
to be theprincipal in these sales transactions we do not report these sales transactions on a gross basis in our condensed
statements of operations. The revenue is reported separately in the condensed statements of operations as “Revenues net,
from Contract Packager”. The gross sales and cost of sales from this U.S. government contacts were:



|                                       |  | Three month sales as of June 30, |           |  | Six month sales as of June 30, | 
|-------------------------------------- |  | -------------------------------- | --------- |  | ------------------------------ | 
|                                       |  | 2014                             |           |  | 2013                           | 
|Sales from U.S. government contract    |  |                                  | 3,519,621 |  |                                | 
|Cost on U.S. government, per agreement |  |                                  | 3,400,405 |  |                                | 
|Revenue - net , from contract packager |  |                                  | 119,216   |  |                                | 



In August 2013, we entered into
an agreement with a pharmaceutical partner (Wholesale Rx) which began shipping generic pharmaceutical and OTC products to independent
pharmacies. Under this agreement, which was amended on November 1, 2013, and then, subsequently amended by oral agreements, we
received a commission of 14% on gross margins of pharmaceutical products sold. For the three and six months period ended June 30,
2014, this commission structure generated commission revenue of $74,713 and $157,737, respectively.



| | 5 - | Inventory
| | --- | ---------



Inventory consists of the following:



|                                           |  | As of June 30, 2014 |         |  | As of December 31, 2013 | 
|------------------------------------------ |  | ------------------- | ------- |  | ----------------------- | 
|Finished product at subcontract –RapiMed®  |  |                     | 275,010 |  |                         | 
|Finished product at PIMD, net of discounts |  |                     | 22,545  |  |                         | 
|Raw material at Main Ave Pharmacy          |  |                     | 65,433  |  |                         | 
|Total Inventory                            |  |                     | 362,988 |  |                         | 



No inventory reserves have been
made since all product are less than 12 months in age. The finished goods product at subcontractor is for product to be sold once
we get approval from China regulators.



11







SCRIPSAMERICA, INC.

Condensed Notes to Consolidated Financial
Statements (Unaudited)

For the six months ended June 30, 2014





|6 - | Prepaid Expenses and Other Current Assets
|--- | -----------------------------------------



|Prepaid expenses and other current assets consist of the following : |  |   |              
|-------------------------------------------------------------------- |  | - | -------------
|                                                                     |  |   |              
|                                                                     |  |   | June 30, 2014
|Prepayment for product to be manufactured                            |  | $ | - (a)        
|Prepaid insurances                                                   |  |   | 9,649        
|Deferred financing costs, net                                        |  |   | 22,326       
|Deposit for purchase Pharma-Net America LLC                          |  |   | 70,000 (b)   
|Prepaid other                                                        |  |   | 23,600       
|Advances to WholesaleRx                                              |  |   | 33,615       
|Total prepaid expenses and other current assets                      |  | $ | 159,190      



| | (a) | Funds provided for production of RapiMed® tablets by third party manufacturer.
                                                                       The production was completed and the tablets were reclassified as inventory in June 2014.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b) | The Company has made a $70,000 deposit for a 100% ownership in a start-up limited liability
company based in Florida named Pharma-Net America LLC (“Pharma-Net”). Pharma-Net’s business purpose is to provide doctor’s
offices with special software that would act as a platform/link/network with the PBMs and doctors. It will provide 3rd
party access for doctors, payers (insurance companies) and pharmacies. The agreement and final terms have not been signed or finalized
by either party as of August 14, 2014.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



12







SCRIPSAMERICA, INC.

Condensed Notes to Consolidated Financial
Statements (Unaudited)

For the six months ended June 30, 2014





| | 7 - | Investments
| | --- | -----------



WholesaleRx



As of June 30, 2014, the Company
has a 14% non-controlling ownership interest in WholesaleRx, Inc., which represents over 700 such independent pharmacy operations
and is DEA and State-licensed to store and distribute controlled substances (which are drugs that have the potential for abuse
or dependence and are regulated under thefederal Controlled Substances Act).
WholesaleRxorders the goods from the manufacturers and has them shipped
to its warehouse facility. WholesaleRx thenships thegoods to the
pharmacies in the bottles as received by the manufacturer. Upon receiving orders from the pharmacies, goods will be sent to them
COD which will eliminate any accounts receivable realization issues. Prior to November 1, 2013, the Company and WholesaleRx had
an oral agreement to pursuant to which the Company secured third party financing to fund WholesaleRx’s purchase orders and
the Company would receive 12.5% of the WholesaleRx’s “gross profit” for the prior month (which gross profit would
consist of (i) sales to all customers minus (ii) cost of goods sold, freight in (to WholesaleRx), credits and allowances).



Per the November 1, 2013 agreement
the Company agreed to make an equity investment of $400,000 for 12,000 shares, which will represent a 20% ownership interest in
WholesaleRx, and to provide purchase order financing. WholesaleRx will pay the Company, on or before the 15th calendar day of each
month, 14% of the gross profit (as described above) for the prior calendar month. If WholesaleRx is late in paying such 14% fee,
then the amount owed will accrue interest at the rate of 18% per annum until paid. The subscription amount was to be paid in three
installments, $150,000 upon execution of the agreement, $125,000 on December 31, 2013 which was paid in January 2014 and $125,000
on February 15, 2014, which has not been paid as of August 14, 2014.



Subsequent to November 1, 2013,
the Company and Wholesale Rx made certain changes to the agreement, whereby the Company’s investment was reduced to $275,000,
and the Company’s ownership interest was reduced to 14%, and the Company’s monthly fee was reduced to 14% of the gross
profit for the preceding month if the purchase order financing was used during such prior month but only 8% if the purchase order
financing was not used in such prior month. The subsequent amendments to the arrangement have not been reduced to a formal, written
agreement and some of the arrangements are oral amendments. The parties are operating under their understanding of the current
arrangement and Wholesale Rx is current in its obligations.





This investment was
originally accounted for under the equity method because the Company expected the investment to exceed 20%. Our initial
investment of $275,000 was increased for the equity earnings of our 14% interest from the date of initial investment to March
31, 2014, to a total of $278,265. It was originally anticipated that the investment would be 20% or possibly greater so we
had recorded the investment using the equity method but circumstances have changed. We do not have significant influence and
management has determined that the investment will not be greater than 20% so the Company will record this investment using
the cost method .



P.I.M.D International, LLC



The Company is the primary beneficiary
of P.I.M.D. International, LLC (“PIMD”), a start-up limited liability
company based in, and proposing to do business in, Florida, which is considered to be a Variable Interest Entity (VIE). Our determination
that PIMD is a variable interest entity (VIE) was based on the fact that PIMD’s equity at risk is insufficient to finance
its activities. The Company would be considered the primary beneficiary of the VIE as it has both of the following characteristics:
(a) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (b) the
obligation to absorb losses of the VIE that could potentially be significant or the right to receive benefits from the VIE that
could potentially be significant. ScripsAmerica receives a majority of PIMD’s expected profits and losses. We also will provide
the primary financing for inventory purchases through related parties.



The assets and liabilities and
revenues and expenses of PIMD have been included in the accompanying consolidated financial statements. At November 1, 2013, PIMD’s
beginning capital was $41,000 and they had accumulated deficit of $49,607. During 2014 the non-controlling interest in PIMD made
a distribution of $114,237, and in 2013 also made a distribution of $119,650 to the shareholders of PIMD. The six months period
ending June 30, 2014 loss recorded to statement of operations was $85,634 for cumulative loss of $103,944 making the total equity
attributed to non-controlling interest to be a deficit of $346,437 at June 30, 2014.







13





SCRIPSAMERICA, INC.

Condensed Notes to Consolidated Financial
Statements (Unaudited)

For the six months ended June 30, 2014





In December, 2013, the Company revised an October 2013 purchase agreement to acquire 90% of the Membership Units
in PIMD. Although founded approximately 4 years ago, PIMD has had no sales, but has the necessary licenses for operation of a drug
wholesale operation. The purchase of the Membership Units in PIMD was subject to certain conditions precedent, of which the most
important was that the Company obtain the necessary licenses from Florida (and from the DEA) for the ownership of a drug distribution
company like PIMD. However, it was determined that securing the licenses was going to require a substantially longer period of
time than the parties had anticipated. Consequently, in order to preserve the business opportunity, it was necessary to change
the structure of the relationship. Accordingly, the original purchase agreement was cancelled and voided. The funds already advanced
by ScripsAmerica to PIMD were converted to a loan and the relationship between PIMD and ScripsAmerica became a Sourcing and Marketing
Agreement. Implex Corporation, owned by the Company’s legal counsel and a shareholder, who is a Florida resident, has stepped
in to assist with any licensing issues. The Company believes that if licensing is required it will be that of Implex, based in
Florida and with a Florida owner.



Under this Sourcing and Marketing
Agreement, which the Company entered into with PIMD in December 2013, the Company will help PIMD to secure (1) advantageous sources
of drugs and (2) marketing and sales assistance in selling the drugs. For these services, the Company will receive a “Sourcing
and Marketing Fee” which is 45% of the “Calculated Basis” to be calculated under a formula in the Sourcing and
Marketing Agreement. PIMD had no significant sales for the first six months 2014.



PIMD unaudited financial information
as of June 30, 2014 and December 31, 2013 is as follows:



|                     |  | As of
June 30, 2014 |         |  | As of
December 31, 2013 |  
|-------------------- |  | ------------------- | ------- |  | ----------------------- | -
|                     |  |                     |         |  |                         |  
|Current assets       |  | $                   | 109,000 |  |                         | $
|Total assets         |  | $                   | 132,000 |  |                         | $
|Liabilities          |  | $                   | 33,000  |  |                         | $
|Stockholders' Equity |  | $                   | 99,000  |  |                         | $



Implex, a related party, borrowed $272,000 from ScripsAmerica
at an interest rate of 2% and it has re-loaned the funds to PIMD at an interest rate of 5%. Implex will keep the 3% differential.
The Company’s loan to Implex and Implex’s loan to PIMD are both for a five year period. Implex will be entering into
a “Business Development and Retention Agreement” with PIMD to assist PIMD with the development of its business.



| | 8 - | Business Combination and Intangible Assets
| | --- | ------------------------------------------



On January 29, 2014, Implex
Corporation, which is owned by our legal counsel and related party, Richard C. Fox, entered into a stock purchase agreement to
acquire from its owner the specialty pharmacy Main Avenue Pharmacy, Inc.(“MAvP”), located in Clifton, New Jersey, for
$550,000. The purchase price was paid in installments and paid in full as of June 30, 2014. Since ScripsAmerica will have significant
controlling interest via related party relationships and will be the primary beneficiary, the Company consolidated financial
activities of Main Avenue Pharmacy, Inc.



Under the purchase agreement with
the owner of Main Avenue Pharmacy, Implex acquired the workforce (3 employees) and the applicable state pharmacy licenses but the
purchase did not include cash, receivables or any existing customer lists of the owner. It also excluded any existing liabilities
prior to January 29, 2014. The total purchase price of $550,000 was preliminary allocated to MAvP’s net tangible and intangible
assets based on the estimated fair value as of January 29, 2014. Excess purchase consideration, if any, was allocated to goodwill.
All other tangible assets acquired had no significant fair value. This preliminary valuation determined that
the only intangible assets acquired were the licenses with an estimated value of $12,000 and a one year life. As a result, $538,000
was allocated to goodwill for the excess of the purchase price. The Company amortized the intangible assets for the licenses beginning
in March 2014 and has recorded an amortization expense of $4,000 as of June 30, 2014. Intangible assets with indefinite lives are
not amortized (Goodwill); however, they are tested annually for impairment and when events or circumstances indicate change in
fair value.



14







SCRIPSAMERICA, INC.

Condensed Notes to Consolidated Financial
Statements (Unaudited)

For the six months ended June 30, 2014





The
payment of the purchase price of $550,000 is as follows: The initial installment payment of $475,000 was made via a
$175,000 payment directly from ScripsAmerica on Implex’s behalf and $300,000 in borrowings obtained by Implex, 250,000
from a current stockholder and $50,000 from a related party (See note 10 for note details). A $60,000 installment payment was
made in April 2014 and the final payments were made by June 30, 2014. MAvP is a specialty
pharmacy which is licensed to prepare and fill prescriptions via a topical cream format versus pill format. MAvP was
basically a dormant business and had no significant sales prior to the acquisition in 2014, and MAvP was acquired for
its Pharmacist and license. Since ScripsAmerica will have significant controlling interest via related party relationships
and will be the primary beneficiary, the Company will consolidate financial activities of Main Avenue Pharmacy.



The Company’s condensed
consolidated financial statements for the six months ended June 30, 2014 include the results of Main Avenue Pharmacy since the
date of acquisition. The entire product revenue and product cost of sales in the June 30, 2014 statement of operations is related
to Main Avenue Pharmacy. Unaudited proforma results for the six months period ended June 30, 2014 is as follows



|                     |  | As of 
June 30, 2014 |          
|-------------------- |  | -------------------- | ---------
|                     |  |                      |          
|Current assets       |  | $                    | 1,339,000
|Total assets         |  | $                    | 1,339,000
|Liabilities          |  | $                    | 884,000  
|Stockholders' Equity |  | $                    | 455,000  



The December 31, 2013, amounts
were not presented because the amounts were immaterial and unavailable because the business was dormant for the past twelve months.



On February 20, 2014, Implex
Corporation and Main Avenue Pharmacy, Inc., the specialty pharmacy being acquired by Implex, entered into a Business Management
Agreement with ScripsAmerica, effective as of February 7, 2014. Under this agreement, Implex has engaged the Company to manage
the day to day business operations of Main Avenue Pharmacy, subject to the directives of Implex. The Company’s day to day
management responsibilities includes financial management but excludes any matters related to licensing and those responsibilities
which require Federal or state licensure (“Licensing Matters”). Implex will be responsible for managing Licensing Matters.
The Company will also provide funding (as a loan or advance), to the extent not covered by the funds of the pharmacy, to pay all
costs and expenses incurred in the operation of Main Avenue Pharmacy.



The original agreement date
February 20, 2014 has been amended so that Scrips for its management services provided by the amended Business Management Agreement,
effective April 1, 2014, ScripsAmerican will receive 100% of the profits and losses of Main Ave Pharmacy as defined by GAAP for
profits and losses.and since ScripsAmeica has controlling interest in Implex, management has consolidated the activities of Main
Avenue Pharmacy into our financial statements in 2014.







15





SCRIPSAMERICA, INC.

Condensed Notes to Consolidated Financial
Statements (Unaudited)

For the six months ended June 30, 2014







|9 - | Joint Ventures Agreement
|--- | ------------------------





In January 2014, the Company
formed Global Pharma Hub, Inc. with Forbes Investments, Ltd. (and its assigns) and Sterling, LLC (and its assigns) for the purpose
of marketing, supplying and distributing OTC products as RapiMed® orally dissolving tablets in foreign markets. The initial
market is in China, where Global Pharma Hub began marketing and distributing our RapiMed® children’s acetaminophen in
China. The ownership of Global Pharma Hub, Inc. is as follows: (a) the Company owns 37%, (b) Forbes Investments, Ltd. owns 37%
and (c) Sterling, LLC owns 26%. Forbes Investment, Ltd. is based in Shenzhen, China. The parties have a written understanding of
this joint venture although a final, binding contract is in process of being prepared for signature.



In January 2014, we entered
into an exclusive world-wide licensing agreement with Global Pharma Hub for the marketing and distribution of our children’s
pain reliever and fever reducer OTC product called RapiMed® in all countries except the United States. The license will allow
Global Pharma Hub to market and distribute the children’s acetaminophen orally dissolving tablets under our registered trademark,
RapiMed® as well as our registered trade mark “MELTS IN YOUR CHILD'S MOUTH”.
In order to keep the license agreement, Global Pharma Hub must meet minimum sales quotas terms which are as follows:



| | 1. | $500,000 in purchase orders during first 12 months of License Agreement;
| | -- | ------------------------------------------------------------------------

| | 2. | $1,400,000 in purchase orders during second 12 months; and
| | -- | ----------------------------------------------------------

| | 3. | $2,400,000 in purchase orders during the third 12 months.
| | -- | ---------------------------------------------------------



Global Pharma Hub signed an exclusive sub-licensing agreement
for RapiMed® in the territory of Hong Kong on January 28, 2014, with NYJJ Hong Kong Ltd.to generate initial and ongoing orders for the product following its registration approval by the Hong Kong government.
The minimum sales quotas terms of the exclusive Hong
Kong sub-licensing agreement are as follows:



| | 1. | $550,000 in purchase orders during first 12 months;
| | -- | ---------------------------------------------------

| | 2. | $1,500,000 in purchase orders during the second 12 months; and
| | -- | --------------------------------------------------------------

| | 3. | $2,500,000 in purchase orders during the third12 months.
| | -- | --------------------------------------------------------



On February 22, 2014, Global Pharma Hub
signed an exclusive sub-licensing agreement with Jetsaw Pharmaceutical, Inc. the marketing and distribution of RapiMed® pediatric
acetaminophen in the territory of Canada for an initial term of three years. The minimum sales quotas terms of the exclusive Canadian sub-licensing agreement are as follows:



| | 1. | $120,000 in purchase orders during first 12 months;
| | -- | ---------------------------------------------------

| | 2. | $220,000 in purchase orders during the second 12 months; and
| | -- | ------------------------------------------------------------

| | 3. | $320,000 in purchase orders during the third12 months.
| | -- | ------------------------------------------------------



As of June 30, 2014, no funds have been
provided by either partner, no losses or income generated and this joint venture is still in the development stage.











16





SCRIPSAMERICA, INC.

Condensed Notes to Consolidated Financial
Statements (Unaudited)

For the six months ended June 30, 2014







|10 - | Accounts Payable and accrued expenses
|---- | -------------------------------------







|Accounts payable and accrued expenses consist of the following: |  |                      |          
|--------------------------------------------------------------- |  | -------------------- | ---------
|                                                                |  | As of 
June 30, 2014 |          
|Accounts payable and general accruals                           |  | $                    | 139,187  
|Accrued commission expense                                      |  |                      | 818,653  
|Accrued Ironridge expense (see note 17)                         |  |                      | 164,655  
|Deferred rent payable - PIMD                                    |  |                      | 9,638    
|Total                                                           |  | $                    | 1,132,133





|11 - | Debt
|---- | ----



Debt consists of the following
as of June 30, 2014 and December 31, 2014



|                                                       |  | June 30, 2014 |           |  | December 31, 2013 | 
|------------------------------------------------------ |  | ------------- | --------- |  | ----------------- | 
|Line of credit                                         |  |               | 12        |  |                   | 
|Debt with related party                                |  |               | 292,925   |  |                   | 
|12% Fixed rate Convertible notes payable               |  |               | 594,048   |  |                   | 
|12% Fixed rate Convertible notes payable-related party |  |               | 108,776   |  |                   | 
|8% variable convertible notes payable                  |  |               | –         |  |                   | 
|10% variable convertible notes payable                 |  |               | 22,418    |  |                   | 
|12% variable convertible notes payable                 |  |               | –         |  |                   | 
|12% 1 year term loan                                   |  |               | 190,270   |  |                   | 
|12% 1 year term loan – related party                   |  |               | 38,054    |  |                   | 
|24% 1 year term loan                                   |  |               | 250,000   |  |                   | 
|24% 1 year term loan – related party                   |  |               | 75,000    |  |                   | 
|QuarterSpot – Term loan                                |  |               | 61,981    |  |                   | 
|Total notes payable                                    |  |               | 1,633,484 |  |                   | 
|Less current maturities                                |  |               | 765,884   |  |                   | 
|Long-term debt                                         |  |               | 867,600   |  |                   | 
|                                                       |  |               |           |  |                   | 
|Debt discounts consist of the following:               |  |               |           |  |                   | 
|8% variable convertible notes payable                  |  |               | –         |  |                   | 
|10% variable convertible notes payable                 |  |               | 3,207     |  |                   | 
|12% variable convertible notes payable                 |  |               | –         |  |                   | 
|                                                       |  |               | 3,207     |  |                   | 



17





SCRIPSAMERICA, INC.

Condensed Notes to Consolidated Financial
Statements (Unaudited)

For the six months ended June 30, 2014





Line of Credit



In October 2013, the Company’s
line of credit from Wells Fargo Bank was renewed. This line of credit will allow the Company to borrow up to a maximum of $100,000,
at an interest rate of prime plus 6.25% (9% at June 30, 2014). The line is secured by a personal guarantee by the Company’s
CEO. The outstanding borrowings under this line of credit at June 30, 2014 and December 31, 2013 were $12 and $99,222, respectively.
The Company incurred interest expense under this line of credit of approximately $12 and $437 and $146 and $2,406 for the three
and six months ended June 30, 2014 and 2013, respectively.



Debt with related party



On August 15, 2012, the Company
entered into a four year term loan agreement in the amount of $500,001 with Development 72, LLC (a related party) for the purpose
of funding the inventory purchases of RapiMed® rapid orally disintegrating formulation products. This loan bears interest at
the rate of 9% per annum, with 48 equal monthly installments of interest and principal payments of $12,443 and matures on August
15, 2016. The Company may prepay the loan, in full or in part, subject to a prepayment penalty equal to 5% of the amount of principal
being prepaid. The loan is secured by the assets of the Company.



In addition to the monthly
loan repayments, during the 48 month period ending August 15, 2016, and regardless if the loan is prepaid in full, the Company
will pay to Development 72 a royalty equal to one percent (1%) of all revenues that the Company receives from the Company’s
sale or distribution of its RapiMed® rapid orally disintegrating formulation products. The royalty payments will be made quarterly
and are subject to a fee for late payment or underpayment. Development 72 is a related party because the manager of Development
72, Andrius Pranskevicius, is a member of the Company’s board of directors. There were no sales during the first quarter
and second quarter of 2014 and 2013 related to this and therefore no royalties were expensed or owed.



In the event of a default on
our loan from Development 72, the interest rate on the loan will increase to 13% for as long as the default continues. A default
will occur upon (i) non-payment of a monthly installment or non-performance under the note or loan agreement, which is not cured
within ten (10) days of written notice of such non-payment or nonperformance from Development 72, (ii) a materially false representation
or warranty made to Development 72 in connection with the loan, (iii) a bankruptcy or dissolution of the Company or (iv) a change
of control of the Company or an acquisition of an entity or business by the Company without the affirmative vote of Andrius Pranskevicius
as a member of the Company’s board of directors.



The Company is subject to various
negative covenants in its loan agreement with Development 72, including but not limited to (i) restrictions on secured loans (subject
to certain exceptions), (ii) judgments against the Company in excess of $25,000, (iii) prepayment of any long-term debt of the
Company other than promissory notes held by certain investors in the Company and (iv) repurchases by the Company of outstanding
shares of its common stock. The loan agreement also provides certain financial covenants which limit the amount of indebtedness
the Company may incur until the loan is repaid and restricts the payment of any dividends on its capital stock except for dividends
payable with respect to the Company’s outstanding shares of its Series A Preferred Stock.



Interest expense associated
with this note for the three month and six month periods ended June 30, 2014 and 2013, was $7,046 and $9,436, $14,763 and $19,000,
respectively. The outstanding balance at June 30, 2014 and December 31, 2013 was $292,925 and $352,816, respectively, with a current
liability balance of $128,149 and $122,529, respectively.



12% Fixed rate Convertible
notes payable



The Company has obtained
loans in various amounts beginning in 2011. These notes currently have terms of no required
principal payments until maturity which currently are April 1, 2016. In June of 2014 the owners of these notes agreed to extend
the maturity dates to April 1, 2016from January 30, 2015 and November 30, 2015. The principal
portion of these notes can be converted into common stock at any time during the term of the loan at the rate of $0.17 per share
at the option of the lender. These notes provides for interest only payments of 3%, payable quarterly (12% annually), in cash,
or in shares of common stock of the Company at $0.17 per share, at the option of the lender.





18







SCRIPSAMERICA, INC.

Condensed Notes to Consolidated Financial
Statements (Unaudited)

For the six months ended June 30, 2014





During the six month period
ended June 30, 2014 the following activity occurred relating to various notes in this category: the Company received $114,750 in
cash for several new convertible promissory notes; the Company made $95,480 in principal payments. The outstanding balance at June
30, 2014 and December 31, 2013, was $594,048 and $574,778, respectively, with the current liability balance $0 and $574,778, respectively.
The Company recorded interest expense for the three months and six months period ended June 30, 2014, of $18,249 and $42,268, respectively,
and for the three and six months period ended June 30, 2013, $12,900 and $24,800, respectively.



12% Fixed rate Convertible
notes payable-related party



The
Company obtained loans in the amount of $80,000 in 2011 from a company owned by ScripsAmerica Company’s Chief Executive Officer.
There is no required principal payment on the note until maturity which is April 1, 2016. The owner of this note agreed in June
of 2014 to extend the maturity date to April 1, 2016 from January 30, 2015. The principal portion of the note can be converted
into common stock at any time during the term of the loan at the rate of $0.17 per share at the option of the lender. These notes
provides for interest only payments of 3%, payable quarterly (12% annually), in cash, or in shares of common stock of the Company
at $0.17 per share, at the option of the lender.



As of June 30, 2014 and December
31, 2013 the principal balance of this note with our Chief Executive Officer was $80,000. The Company recorded interest expense
for the three months and six month period ended June 30, 2014 and 2013, of $2,400 and $4,800 and $2,400 and $4,800, respectively.



In 2012, the Company received
$50,000 in cash for one convertible promissory note from a related party. The note provides for interest only payments of 3%, payable
quarterly (12% annually), in cash, or in shares of common stock of the Company at $0.17 per share, at the option of the lender.
There is no required principal payment on the note until maturity which is April 1, 2016. The owner of this note agreed to change
the maturity date from January 30, 2015. The principal portion of the note can be converted into common stock at any time during
the term of the loan at the rate of $0.17 per share at the option of the lender. The note can be extended by mutual consent of
the lender and the Company. Our Contact Packager also co-signed this note.



Additionally, the Company shall
pay to the lender under the 2012 $50,000 note a royalty of 0.9% on the first $25 million of sales of a generic prescription drug
under distribution contracts with Federal government agencies. Payments for royalty will be paid quarterly. During the six month
period ended June 30, 2014, the Company made cash payment of $11,962 in principal and as of June 30, 2014 and December 31, 2013,
the principal balance was $28,776 and $40,738, respectively. The Company recorded interest expense for three and six months period
ended June 30, 2014 of $1,523 and $2,876, respectively. For the three and six months period ended June 30, 2013, it recorded interest
expense on this note of $1,500 and $3,000, respectively. During the three months and six months period ended June 30, 2014 the
Company, made cash payments for royalty expense in the amount of $16,800 and $37,898, respectively, and issued 63,000 and 121,427,
shares of its common stock, respectively, for payment of royalty expense, and recorded a royalty expense, of 31,000 and $64,000,
for the three and six months period ended June 30, 2014 respectively.



8% Variable Convertible
notes payable



In fiscal year 2013 the Company entered into six new
securities purchase agreements (as of June 30, 2014 no notes were outstanding and as of December 31, 2013 only four were still
outstanding) with various lenders pursuant to which the lenders purchased an 8% convertible note. The Company received $462,000
in cash for these 8% convertible notes payable with the aggregate principal amount equaling $547,500. Some of these notes included
(i) a 10% discount in the aggregate amount of $27,500, and (ii) fees totaling $58,000 paid directly to third parties for legal
and finder fees. The maturity dates for these notes range from six months to nineteen months from date of issuance. The conversion
price for these notes is equal to a 40% to 65% discount to the lowest closing trading prices or an average of trading prices of
the Company’s common stock at the close of trading during a 5 to 10 trading day period prior the date of the notice of conversion.
For some of these note, there is a prepayment charge ranging from 125% to 150% of the principal amount and accrued interest thereon
if made prepayment is made before a set period of time.







19





SCRIPSAMERICA, INC.

Condensed Notes to Consolidated Financial
Statements (Unaudited)

For the six months ended June 30, 2014





Since these notes have a convertible
features with a significant discount and could result in the note principal being converted to a variable number of the Company’s
common stock, the instrument includes an embedded derivative. The fair value of the derivative associated with these note was determined
by using the Black-Scholes pricing model with the following assumptions: no dividend yield, expected volatility ranges between161.6%
to 200.7%, risk-free interest rate ranges between 0.07% to 0.12% and expected life of 12 to 11 months. The fair value of the derivative
at the date issued amounted to $1,329,815 and was revalued at December 31, 2013 to be $606,112. The debt discount associated with
these derivatives is being amortized over the life of the notes.



During the six month period
ended June 30, 2014 the following activity occurred relating to the various notes in this category: No new borrowings occurred.
The Company paid the sum of $66,732 to a holder of one of these notes for the principal of $50,000. This cash payment of $66,732
included the accrued interest and a prepayment penalty charge. The Company extinguished the debt and the embedded derivative which
resulted in a gain on extinguishment of $81,792. Two lenders converted $125,000 of principal into 1,890,699 shares of our common
stock valued at $368,606. The Company extinguished the debt and the embedded derivative which resulted in a gain on extinguishment
of $68,521. The Company also partially paid down the principal of a loan by making cash payments of $127,260 and issuing 2,039,864
of our common stock valued at $224,230. The Company recognized a gain for this extinguishment in the amount of $82,450.



As of June 30, 2014, and December
31, 2013 the principal balance was $0 and $402,500, respectively, and the unamortized debt discount was $0 and $286,166, respectively.
The Company recorded interest expense for first quarter of 2014 and 2013 of $61,493 and $13,036, respectively. The Company would
have been required to issue 0 and 6,044,978 of common stock if the lenders converted on June 30, 2014 and December 31, 2013, respectively.
The fair value of the derivative liability at June 30, 2014 and December 31, 2013 was $0 and $606,112, respectively



10% Variable Convertible
notes payable



During the fiscal year 2013 the Company entered into
twelve new securities purchase agreements (as of June 30, 2014 only one note was still outstanding and as of December 31, 2013
only seven were still outstanding) with various lenders pursuant to which the lenders purchased a 10% convertible note. The Company
received $371,167 in cash for these 10% convertible notes payable with the aggregate principal amount equaling $405,000. Some of
these notes included (i) a 10% discount in the aggregate amount of $11,250 and (ii) fees totaling $22,583 paid directly to third
parties for legal and finder fees. The maturity dates for these notes range from six months to twelve months from date of issuance.
The conversion price for these notes are equal to a 35% to 65% discount to the lowest closing trading prices or an average of trading
prices of the Company’s common stock at the close of trading during a 5 to 20 trading day period prior the date of the notice
of conversion. For some of these note there is a prepayment charge ranging from 125% to 150% of the principal amount and accrued
interest thereon if made prepayment is made before a set period of time.



Since these notes have a convertible
feature with a significant discount and could result in the note principal being converted to a variable number of the Company’s
common stock, the instrument includes an embedded derivative. The fair value of the derivative associated with this note was determined
by using the Black-Scholes pricing model with the following assumptions: no dividend yield, expected volatility ranges between
161.6% to 200, 7%, risk-free interest rate ranges between 0.07% to 0.12% and expected life of 12 to 11 months. The fair value of
the derivative at the date issued amounted to $631,361 and was revalued at December 31, 2013 to be $383,337. The debt discount
associated with this derivative is being amortized over the life of the notes.



During the six month
period ended June 30, 2014 the following activity occurred relating various notes in this category: No new borrowing
occurred. The Company paid the sum of $70,000 to a holder of one of these notes for the principal of $50,000. This cash
payment of $70,000 included the accrued interest and prepayment penalty charge. The Company extinguished the debt and the
embedded derivative which resulted in a gain on extinguishment of $98,390. Five lenders converted $178,750 of principal into
3,146,367 shares of our common stock valued at $408,028, and the Company extinguished the debt and the embedded derivative
which resulted in a gain on extinguishment of $169,323. One lender partially convert a note with a principal a $51,250 into
457,099 shares of our common stock value at $54,852, with a remaining principal balance of $25,625.







20





SCRIPSAMERICA, INC.

Condensed Notes to Consolidated Financial
Statements (Unaudited)

For the six months ended June 30, 2014





As of June 30, 2014 (only one
note is still outstanding) and December 31, 2013, the principal balance was $22,418 and $280,000, respectively, and the unamortized
debt discount was $3,202 and $100,709, respectively. The Company recorded interest expense for the three and six months period
ended June 30, 2014, of $463 and $33,540 respectively. For the three and six months period ended June 30, 2013, the Company recorded
interest expense of $4,800 and $9,588, respectively. The Company would have been required to issue 366,071 and 4,484,138 shares
of common stock if the lenders converted on June 30, 2014 and December 31, 2013, respectively. The fair value of the derivative
liability at June 30, 2014 and December 31, 2013 was $15,763 and $383,337, respectively.



12% Variable Convertible
notes payable



During fiscal year 2013 the
Company entered into seven new securities purchase agreements (as of June 30, 2014 no notes were outstanding and as of December
31, 2013 only three were still outstanding) with various lenders pursuant to which the lenders purchased a 12% convertible note.
The Company received $233,200 in cash for these 12% convertible notes payable with the aggregate principal amount of $263,000.
Some of these notes included (i) a 10% discount in the aggregate amount of $15,000 and (ii) fees totaling $14,800 paid directly
to third parties for legal and finder fees. The maturity dates for these notes range from three months to twelve months from date
of issuance. The conversion price for these notes are equal to a range of 42.5% to 60% discount to the lowest closing trading prices
or an average of trading prices of the Company’s common stock at the close of trading during a 5 to 20 trading day period
prior the date of the notice of conversion. For some of these notes there is a prepayment charge ranging from 125% to 150% of the
principal amount and accrued interest thereon if the payment is made before a set period of time. We did not incur any penalty
costs during 2013 for conversion of 12% variable notes payable.



Since these notes have a convertible
feature with a significant discount and could result in the note principal being converted to a variable number of the Company’s
common stock, the instrument includes an embedded derivative. The fair value of the derivative associated with this note was determined
by using the Black-Scholes pricing model with the following assumptions: no dividend yield, expected volatility ranges used were
between 161.6% to 187.9%, risk-free interest rate ranges between 0.07% to 0.12% and expected life of 11 to 12 months. The fair
value of the derivative at the date issued amounted to $407,104 and was revalued at December 31, 2013 to be $143,944. The debt
discount associated with this derivative is being amortized over the life of the notes.



During six month period ended
March 31, 2014 the following activity occurred relating various notes in this category: No new borrowing occurred. The Company
paid the sum of $57,089 to a holder of one of these notes for the principal of $40,000. This cash payment of $57,089 included the
accrued interest and prepayment penalty charge. The Company extinguished the debt and the embedded derivative which resulted in
a gain on extinguishment of $57,249. A lender converted $25,000 of principal into 569,801 shares of our common stock valued at
$68,376. The Company extinguished the debt and the embedded derivative which resulted in a gain on extinguishment of $26,220.



As of June 30, 2014 and December
31, 2013, the principal balance of these notes was $0 and $89,025, respectively, and the unamortized debt discount was $0 and $40,795,
respectively. The Company recorded interest expense for three and six months period ended June 30, 2014 of $1,790 and $15,594,
respectively. For the three and six month period ended June 30, 2013, the Company recorded interest expense of $11,500 and $23,059,
respectively. The Company would have been required to issue 0 and 1,512,736 of common stock if the lenders converted on June 30,
2014 and December 31, 2013, respectively. The fair value of the derivative liability at June 30, 2014 and December 31, 2013, is
$0 and $143,944 respectively.



12% one year Term loan



To finance the purchase of
Main Avenue Pharmacy, Implex Corporation, borrowed $250,000 from a stockholder of the Company. This loan bears interest at the
rate of 12% per annum, with 12 equal monthly installments of interest and principal payments of $22,214 beginning April 1, 2014
and matures on May 1, 2015. Additionally, the Company shall pay to the lender a royalty of $25 on the first 10,000 prescription
processed by Main Avenue Pharmacy during the preceding month (except that the first such payment shall include prescriptions processed
since the initial closing on February 7, 2014) and $8 for all prescription thereafter. The Company has recorded a royalty expense
of $19,890 for the six month period ended June 30, 2014, to the Scrips statement of operations. The Company on Implex’s behalf,
paid $59,730 in principal payments and recorded interest expense of $6,914 and the balance as of June 30, 2014 is $190,270.





21





SCRIPSAMERICA, INC.

Condensed Notes to Consolidated Financial
Statements (Unaudited)

For the six months ended June 30, 2014





12% one year Term loan
– Related party



To finance the purchase of
Main Avenue Pharmacy, Implex Corporation, borrowed $50,000 from the wife of the Company’s Chief Executive Officer. This loan
bears interest at the rate of 12% per annum, with 12 equal monthly installments of interest and principal payments of $4,412 beginning
April 1, 2014 and matures on May 1, 2015. Additionally, the Company shall pay to the lender a royalty of $5 on the first 10,000
prescription processed by Main Avenue Pharmacy during the preceding month (except that the first such payment shall include prescriptions
processed since the initial closing on February 7, 2014) and $2 for all prescription thereafter. The Company has recorded a royalty
expense of $2,710 for the six month period ended June 30, 2014. The Company on Implex’s behalf paid $11,946 in principal
payments and recorded interest expense of $1,262 and the balance as of June 30, 2014 is $38,054.



24% one year Term loan



On May 19, 2014, Main Ave Pharmacy
borrowed $250,000 from a stockholder of the Company in order to provide funding for inventory and payment of commission expenses.
This loan bears interest at the rate of 24% per annum, interest payments are due monthly beginning July 1, 2014, and the principal
payment is due at the maturity date of May 18, 2015, along with any outstanding interest payments. Additionally, the Company shall
pay to the lender a royalty of $2 for each prescription processed by Main Avenue Pharmacy upon the commencement of the $8.00 royalty
under the investment contract dated January 17, 2014, with the Implex Corporation. The Company recorded a royalty expense to the
statement of operation in the second quarter of 2014 in the amount of $23,940. The balance as of June 30, 2014 is $190,270.



24% one year Term loan
– Related party



On May 19, 2014, Main Ave Pharmacy
borrowed $75,000 from the wife of the Company’s Chief Executive Officer in order to provide funding for inventory and payment
of commission expenses. This loan bears interest at the rate of 24% per annum, interest payments are due monthly beginning July
1, 2014, and the principal payment is due at the maturity date of May 18, 2015 along with any outstanding interest payments. Additionally,
the Company shall pay to the lender a royalty of $2 for each prescription processed by Main Avenue Pharmacy upon the commencement
of the $8.00 royalty under the investment contract dated January 17, 2014, with the Implex Corporation. The Company recorded
a royalty expense to the statement of operation in the second quarter of 2014 in the amount of $4,788. The balance as of June 30,
2014 is $75,000.



QuarterSpot Term loan



On March 17, 2014, the Company
received $92,000 in cash for an 8.9% note payable with a principal amount of $100,000, and incurred fees totaling $8,000 which
were paid directly to third parties for legal and broker fees. Beginning March 19, 2014 daily payments of $520.83 began and will
continue until this loan is paid in full on or about December 17, 2014. As of June 30, 2014, the principal balance is $61,981 and
the Company recorded interest expense for the three and six months period ended June 30, 2014 of $2,895 and $6,559, respectively.





|12 - | Derivative Financial Instruments
|---- | --------------------------------



Derivative liabilities consist
of convertible notes with features that could result in the note principal being converted to a variable number of the Company’s
common shares. The fair value of the embedded derivative associated with these notes was determined by using the Black-Scholes
pricing model with the following assumptions:



|As of :                  |  | June 30, 2014 |  | March 31, 2014  |  | December 31, 2013
|------------------------ |  | ------------- |  | --------------- |  | -----------------
|Volatility               |  | 133.6%        |  | 132.9% - 198.9% |  | 110.4% - 228.5%  
|Expected life (in years) |  | 0.11          |  | 0.4 – 0.9       |  | 0.03 – 0.6       
|Risk-free interest rate  |  | 0.10%         |  | 0.10% - 0.13%   |  | 0.07% - 0.12%    
|Dividend yield           |  | 0.00%         |  | 0.00%           |  | 0.00%            



These derivative financial instruments
are indexed to an aggregate of 366,071 shares and 13,176,251 shares of the Company’s common stock as of June 30, 2014
and December 31, 2013, respectively, and are carried at fair value using level 2 inputs. The balance at June 30, 2014 and
December 31, 2013 was $15,660 and $1,133,393, respectively.





22





SCRIPSAMERICA, INC.

Condensed Notes to Consolidated Financial
Statements (Unaudited)

For the six months ended June 30, 2014





Activity during the current period
is as follows:



|Derivative liabilities at December 31, 2013              |  | $ | 1,133,393  |  
|-------------------------------------------------------- |  | - | ---------- | -
|                                                         |  |   |            |  
|New derivative liabilities issued in first quarter 2014  |  |   | –          |  
|Extinguishment                                           |  |   | (1,318,853 | )
|Revalue at reporting period                              |  |   | 512,790    |  
|Derivative liabilities at March 31, 2014                 |  |   | 327,330    |  
|                                                         |  |   |            |  
|New derivative liabilities issued in second quarter 2014 |  |   | –          |  
|Extinguishment                                           |  |   | (310,791   | )
|Revalue at reporting period                              |  |   | (879       | )
|Derivative liabilities at June 30, 2014                  |  | $ | 15,660     |  





|13 - | Stockholders’ Deficit
|---- | ---------------------



Common
Stock



General



The preferred shares have a
par value of $.001 per share, and the Company is authorized to issue 10,000,000 shares. The preferred stock of the Company shall
be issued by the board of directors of the Company in one or more classes or one or more series within any class, and such classes
or series shall have such voting powers, full or limited, or no voting powers, and such designations, preferences, limitations
or restrictions as the board of directors of the Company may determine, from time to time.



The common stock shares have a
par value of $.001 per share and the Company is authorized to issue 250,000,000 shares as of June 30, 2014, each share shall be
entitled to cast one vote for each share held at all stockholders’ meeting for all purposes, including the election of directors.
The common stock does not have cumulative voting rights.



On March 26, 2014 the Board
adopted a resolution to amend the Certificate of Incorporation of the Company to change the capital structure of the
corporation by increasing the authorized shares of common stock of the Company from 150,000,000 to 250,000,000. On April 16,
2014, the increase in the authorized shares of common stock was approved by the written consent of shareholders holding a
majority of the voting power of the Company’s outstanding capital stock (“Shareholder Consent”). On June 2,
2014, the Company filed its Certificate of Amendment to the Certificate of Incorporation to effect the increase in the number
of shares authorized common stock.



On March 26, 2014, the Company’s
board of directors approved the ScripsAmerica, Inc., Incentive Stock Plan (“SOP”) and on April 16, 2016, it was approved
by Shareholder Consent. The SOP was designed to serve as incentive for retaining qualified and competent employees, officers
and directors, and certain consultants and advisors. There are 6,000,000 shares authorized for issuance under the SOP.



The
purchase price per share of a Common Stock option under theSOP plan shall not be less than
100 percent of the fair market value at the time the options are granted. The purchase price per share of Common Stock option underthe SOP plan to a person who owns more than 10 percent of the voting power of the Corporation's
voting stock shall not be less than 110 percent of the fair market value of such shares, at the time the options are granted.
The total value of options granted, under this Plan, to any one person, shall not exceed any limit
imposed by Section 422 or the rules and regulations promulgated by the Internal Revenue Service thereunder. Currently, the limitation
is One Hundred Thousand Dollars ($100,000) in value in any one corporate fiscal year.



As of June 30, 2014 no options
have been issued under this plan.





23





SCRIPSAMERICA, INC.

Condensed Notes to Consolidated Financial
Statements (Unaudited)

For the six months ended June 30, 2014





Issuances during 2014



During the six months period ended
June 30, 2014, the Company issued 24,917,066 restricted shares of common stock for cash proceeds of $1,425,325 in various private
subscription agreements. Subscription price issued in a range from $0.05 to $.0633



During the six months period ended
June 30, 2014, the Company issued 4,329,334 restricted shares of its common stock to non-employees for services rendered during
2014. These services were valued at $497,520 and the Company charged its operations in 2014.



During the six months period ended
June 30, 2014, the Company issued 68,000 restricted shares of its common stock in connection with payments provided to members
of the board of directors during 2014. The Company charged its operations $6,840 in 2014.



During the six months period ended
June 30, 2014, the Company issued 1,740,550 restricted shares of its common stock in connection with financing costs during 2014.
The Company charged to financing cost in the statement of operations $224,022 in 2014.



Pursuant to its the settlement
agreement with GEM Global Yield Fund Limited (as described below), (a) the Company sold 887,280 shares of its common stock to GEM
for a purchase price of $125,381, and (b) GEM concurrently assigned to Steve Urbanski the right to receive the 887,280 shares of
the Company's common stock upon the receipt by the Company of the purchase price (net of $15,211 which was paid to GEM's legal
counsel).   The Company issued the 887,280 shares to Mr. Urbanski on January 22, 2014.



During the six months
period ended June 30, 2014, the Company issued 756,400 restricted shares of its common stock
to non-employees for payment of stock to be issued for cash received in 2013.



During the six months period ended June 30, 2014, the
Company issued 705,703 restricted shares of its common stock to non-employees for payment of royalties. The payment of royalties
was valued at $86,793.



During the six months period ended June 30, 2014, the
Company issued 8,563,213 shares of its common stock for the conversion of approximately $597,821 of principal of our convertible
notes payable. These shares have a fair value of $1,182,278.



On April 21, 2014, 250,000
common stock shares were returned to the Company by Sean R. Fitzgibbons and were cancelled by the Company. These shares were issued
in 2013 and were valued at $32,500. The Company reversed the expense that was recorded to the statement of operation in 2013 and
the second quarter of 2014.



Warrants



Cancellation
of GEM Agreement



On October 11, 2013, the Company
entered into a financing agreement with GEM Global Yield Fund Limited ("GEM Global") and a related party to provide funding
to the Company of up to $2 million. Under the terms of the financing agreement, the Company may sell restricted shares of its common
stock to GEM Global, subject to the satisfaction of certain conditions, at a purchase price to be negotiated between the Company
and GEM Global pursuant to section 4(a)(2) and/or rule 506 of Regulation D. The Registrant was expecting to use the capital raised
from the financing agreement primarily to fund the manufacturing and marketing of its RapiMed® children's pain reliever domestically
and internationally, as well as for working capital. As of November 14, 2013 there were no shares issued for funding.



On January 14, 2014, the Company
entered into a settlement agreement with GEM Global, 590 Partners, LLC and the GEM Group, pursuant to which, among other things,
the parties agreed to declare null and void and of no further effect the financing agreement entered into on October 11, 2013 as
well as any other negotiated but unsigned documents between and/or among the parties. In addition, in connection with such voiding,
the GEM Warrants were cancelled and the Company issued to each of GEM Global and 590 Partners, LLC (i) a warrant exercisable to
purchase 1,000,000 shares of common stock at an exercise price of $0.41, (ii) a warrant exercisable to purchase 750,000 shares
of common stock at an exercise price of $0.55 and (iii) a





24





SCRIPSAMERICA, INC.

Condensed Notes to Consolidated Financial
Statements (Unaudited)

For the six months ended June 30, 2014





warrant exercisable to purchase
750,000 shares of common stock at an exercise price of $0.75 (collectively, the “New GEM Warrants”). All of the New
GEM Warrants expire on January 14, 2019 and are only exercisable on a cash basis (they do not contain any cashless exercise provisions).
Additionally, the Company granted registration rights to 590 Partners and GEM Global to register the resale of the shares underlying
the New GEM Warrants. Additionally, in the event that the closing price
of the Company’s common stock is equal to or greater than 160% of the exercise price of the applicable New GEM Warrant for
22 consecutive trading days, then such New GEM Warrant will automatically be cancelled 30 days after the Company delivers notice
of such cancellation to GEM Global and 590 Partners. However, each of GEM Global and 590 Partners may exercise their New GEM Warrant
in full after the notice from the Company but prior to the cancellation date.



The fair value of these 5.0
million warrants on January 14, 2014, was $552,318 using the Black-Sholes model with the following assumptions: Volatility 182.9%,
5 year life, risk free rate of 1.65% and zero dividend rate. This fair value of $552,318 has been expensed in our first quarter
earnings in 2014.



Pursuant to its the settlement
agreement with GEM, (a) the Company sold 887,280 shares of its common stock to GEM for a purchase price of $125,381, and (b) GEM
concurrently assigned to Steve Urbanski the right to receive the 887,280 shares of the Company's common stock upon the receipt
by the Company of the purchase price (net of $15,211 which was paid to GEM's legal counsel).   The Company issued the 887,280
shares to Mr. Urbanski on January 22, 2014.



Warrants



Summary of our warrant activity and related information
as of June 30, 2014



|                                        |  | Number of shares under warrants |  | Weighted Average Exercise price |      |  | Weighted Average Remaining Contractual term in Years |     | Aggregate Intrinsic Value |  
|--------------------------------------- |  | ------------------------------- |  | ------------------------------- | ---- |  | ---------------------------------------------------- | --- | ------------------------- | -
|Outstanding at December 31, 2013        |  | 228,572                         |  | $                               | 0.39 |  |                                                      | 3.1 |                           | $
|                                        |  |                                 |  |                                 |      |  |                                                      |     |                           |  
|Granted                                 |  | 5,000,000                       |  | $                               | 0.55 |  |                                                      | 4.5 |                           |  
|Exercised                               |  | –                               |  |                                 |      |  |                                                      |     |                           |  
|Cancelled/expired                       |  | –                               |  |                                 |      |  |                                                      |     |                           |  
|                                        |  |                                 |  |                                 |      |  |                                                      |     |                           |  
|Outstanding at June 30, 2014            |  | 5,228,572                       |  | $                               | 0.55 |  |                                                      | 4.5 |                           | $
|                                        |  |                                 |  |                                 |      |  |                                                      |     |                           |  
|                                        |  |                                 |  |                                 |      |  |                                                      |     |                           |  
|Vested and exercisable at June 30, 2014 |  | 5,228,572                       |  |                                 |      |  |                                                      |     |                           |  
|                                        |  |                                 |  |                                 |      |  |                                                      |     |                           |  
|                                        |  | 2014                            |  |                                 |      |  |                                                      |     |                           |  
|Fair value per warrant                  |  | $0.11                           |  |                                 |      |  |                                                      |     |                           |  
|Risk-free interest rate                 |  | 1.65%                           |  |                                 |      |  |                                                      |     |                           |  
|Volatility                              |  | 183%                            |  |                                 |      |  |                                                      |     |                           |  
|Terms in years                          |  | 5                               |  |                                 |      |  |                                                      |     |                           |  
|Dividend yield                          |  | 0%                              |  |                                 |      |  |                                                      |     |                           |  







25





SCRIPSAMERICA, INC.

Condensed Notes to Consolidated Financial
Statements (Unaudited)

For the six months ended June 30, 2014





Options



On March 27, 2014, the Company
issued 75,000 options to members of the Board of directors for services provided. These options vested immediately and will expire
3 years from date of issuance. The option price is $.099 and the fair value of these warrants is $3,971 which was expensed to selling,
general and administrative.



On April 25, 2014, Company issued
50,000 options to members of the Board of directors for services provided. These options vested immediately and will expire 3 years
from date of issuance. The option price is $.121 and the fair value of these options is $4,841 which was expensed to selling, general
and administrative in the second quarter of 2014.



On April 25, 2014, the Company
issued 5,010,000 employee options which have an excise price of $0.118, are exercisable immediately and expire on April 25, 2017.
The Company’s Chief Executive officer received 2,510,000 options and the Chief Financial Officer received 2,500,000. The
fair value of these options are $437,620 and were expensed in our second quarter of 2014. The fair value was determined by using
the Black-Scholes pricing model with the following assumptions: no dividend yield, expected volatility of 181.27% risk-free interest
rate of .88% and an expected life of three years.



On June 23, 2014, the Company
issued 250,000 employee options to an employee for services. These options have an excise price of $0.143, are exercisable immediately
and expire on June 23, 2017, with a fair value of these options is $28,296 and were expensed to selling, general and administrative
expenses in the second quarter of 2014.



Summary of our options activity and related information
as of June 30, 2014



|                                        |  | Number of shares under warrants |  | Weighted Average Exercise price |                 |  | Weighted Average Remaining Contractual term in Years |     | Aggregate Intrinsic Value |  
|--------------------------------------- |  | ------------------------------- |  | ------------------------------- | --------------- |  | ---------------------------------------------------- | --- | ------------------------- | -
|                                        |  |                                 |  |                                 |                 |  |                                                      |     |                           |  
|Outstanding at December 31, 2013        |  | 5,015,000                       |  | $                               | 0.16            |  |                                                      | 2.3 |                           | $
|                                        |  |                                 |  |                                 |                 |  |                                                      |     |                           |  
|Granted                                 |  | 5,385,000                       |  | $                               | 0.12            |  |                                                      | 2.8 |                           |  
|Exercised                               |  | -                               |  |                                 |                 |  |                                                      |     |                           |  
|Cancelled/expired                       |  | -                               |  |                                 |                 |  |                                                      |     |                           |  
|                                        |  |                                 |  |                                 |                 |  |                                                      |     |                           |  
|Outstanding at June 30, 2013            |  | 10,400,000                      |  | $                               | 0.14            |  |                                                      | 2.6 |                           | $
|                                        |  |                                 |  |                                 |                 |  |                                                      |     |                           |  
|Vested and exercisable at June 30, 2014 |  | 10,400,000                      |  |                                 |                 |  |                                                      |     |                           |  
|                                        |  |                                 |  |                                 |                 |  |                                                      |     |                           |  
|                                        |  | 2014                            |  |                                 | 2013            |  |                                                      |     |                           |  
|Option fair value                       |  | $0.079 - $.113                  |  |                                 | $ 0.10 - $ 0.19 |  |                                                      |     |                           |  
|Risk-free interest rate                 |  | .82 - .88%                      |  |                                 | .34% - .78%     |  |                                                      |     |                           |  
|Volatility                              |  | 177 - 183%                      |  |                                 | 186% - 195%     |  |                                                      |     |                           |  
|Terms in years                          |  | 3                               |  |                                 | 3               |  |                                                      |     |                           |  
|Dividend yield                          |  | 0%                              |  |                                 | 0%              |  |                                                      |     |                           |  







26





SCRIPSAMERICA, INC.

Condensed Notes to Consolidated Financial
Statements (Unaudited)

For the six months ended June 30, 2014







|14 - | Commitments
|---- | -----------





The holders of a $250,000 convertible
note which was converted into 2,000,000 shares of our common stock on March 12, 2012 are entitled to a 4% royalty from the sales
of our orally disintegrating rapidly dissolving 80mg and 160mg pain relief tablets. The royalty payments associated with this agreement
have no minimum guarantee amounts and royalty payments will end only if the product line of Acetaminophen rapidly dissolving 80mg
and 160mg tablets is sold to a third party. There have been no shipments through June 30, 2014 applicable to this royalty payment.



The holder of a $320,000 note
payable are entitled to a to 1.8% royalty payment on the first $10 million of sales of a generic prescription drug under distribution
contracts with Federal government agencies and 0.09% on the next $15 million of such sales. Payments for royalties will be paid
quarterly. During fiscal year 2013 the Company issued the holder of this note 1,114,672 shares of its common stock for payment
of royalty expense. In addition, a holder of a $50,000 note payable, a related party, is entitled to a 0.9% on the first $25 million
of sales of a generic prescription drug under distribution contracts with Federal government agencies. During the six months ended
June 30, 2014, the Company also made cash payments for royalty expense associated with one of the notes in the amount of $133,572,
and issued 584,276 shares of its common stock which have a fair value of $72,030 for payment of royalty expense and recorded a
royalty expense of $213,000 to the statement of operation for the six months period ended June 30, 2014. For the six months ended
June 30, 2013 the Company issued 513,834 shares of common stock as payment for the royalty expense and the Company recorded an
expense of $132,730.



On October 15, 2013 the Board
of Directors approved a revised compensation plan for our CEO, Robert Schneiderman and our CFO, Jeffrey Andrews, contingent on
the Company raising $4 million via equity, debt or a combination of both. Contingent on raising the $4 million compensation would
be as follows: CEO annual salary $200,000, CFO annual salary $192,000, and both would receive 50,000 options quarterly at 120%
of our market price on the date granted with a one year vesting period. As of August 13, 2014, the $4 million raise has not been
reached and consequently these conditions are not effective.



On October 15, 2013, the Board
of Directors approved additional compensation to Board members in the form of issuance of stock options. Board members were granted
100,000 stock options for each year served commencing in 2012. The chairman of the Board was granted 135,000 stock options for
each year served. The effective date of the grants was October 7, 2013. The options vest immediately and the option exercise price
was 110% of the market price on the grant date. Additionally, directors will also receive 10,000 options for each board meeting
attended and 5,000 options for each committee meeting attended. For the six months ended June 30, 2014, the Company issued 100,000
options that had a fair value of $8,812 which were recorded in the statement of operations for the six months ended June 30, 2014.



On June 23, 2014, the Company
entered into a two year employee contract with an employee, the contract has an annual salary of $115,000, a signing bonus of $4,000,
the Employee shall be reimbursed for monthly medical and dental insurance costs and the employee was granted 250,000 options that
vest immediately at an excise price of $0.143 per share.



Operating Lease -In November,
2013 PIMD entered into a 25 month operating lease for a distribution facility in Doral Florida. The lease begins January 1, 2014
and expires January 31, 2016, monthly rent is $4,585 for the first thirteen months and $4,724 for the last twelve months. Payments
did not begin until April 2014, and the minimum lease payments as of June 30, 2014 are as follows:



| | 2014  |  |  | $ | 27,514 | 
| | ----- |  |  | - | ------ | 
| | 2015  |  |  | $ | 56,272 | 
| | 2016  |  |  | $ | 14,172 | 
| | Total |  |  | $ | 97,958 | 





|15 - | Purchase Order Financing with related party
|---- | -------------------------------------------





In June 2012, the Company entered
into a purchase order finance agreement with Development 72, a major stockholder of the Company which is controlled by a member
of the Board of Directors. The agreement will allow the Company to borrow up to $1.2 million on a case by case basis, at an interest
rate of 0.6% per 10 day period, 1.8% monthly and 21.6% annually. During the six months period ended June 30, 2014 and 2013, the
Company financed $6,200,000 and $2,311,600, respectively of its purchase orders and incurred an interest expense of $46,752 and
$59,767, respectively. As of June 30, 2014 and December 31, 2013, the unpaid purchase order finance balance was $1,028,192 and
$1,037,494 respectively, and accrued fees and interest are $20,192 and $0, respectively





27





SCRIPSAMERICA, INC.

Condensed Notes to Consolidated Financial
Statements (Unaudited)

For the six months ended June 30, 2014







|16 - | Concentrations
|---- | --------------





During the six month period ended
June 30, 2014, the Company purchased product from three suppliers, and during the first and second quarters of 2013 the Company
purchased 100% of its product packaging from its Contract Packager. A disruption in the availability of product packaging from
the Company’s suppliers could cause a possible loss of sales, which could affect operating results adversely.



For the three and six months
period ended June 30, 2014, no customer accounted for more than 10% of revenue. For the three month period ended June 30, 2013,
the Company derived approximately $91,600 or 100% of its revenue from one customer. For the six month period ended June 30, 2013,
the Company derived revenue from two customers with one customer accounting for 60% of the revenue.



As of June 30, 2014, the Company
had one customer representing 100% of our accounts receivable-related party, and numerous customers with no more than 10% for
accounts receivable-trade. As of December 31, 2013, the Company had one customer representing 100% of our accounts receivable-related
party, and no customers in our accounts receivable-trade.





|17 - | Contingencies
|---- | -------------





The
Company issued to Ironridge Global IV, Ltd. (“Ironridge”) 8,690,000 shares of its common stock in settlement of bona
fide claims against the Company which were purchased by Ironridge from various creditors of the Company (the “Claim Amount”).
The shares issued to Ironridge were freely tradable and exempt from registration under the
Securities Act of 1933, as amended (the “Securities Act”)pursuant to Section 3(a)(10) of the Securities Act.
Pursuant to the court order issued by the  California Superior Court for the County
of Los Angeles (“California State Court”) on November 8, 2013, the shares of the Company’s common stock were
deemed issued in settlement of the claims (subject to certain adjustments based on the future trading value of the stock) when
delivered to Ironridge. The number of shares issued to Ironridge is subject to an
adjustment based on the trading price of our stock such that the value of the shares is sufficient to cover the Claim Amount, a
10% agent fee amount and Ironridge’s reasonable legal fees and expenses (the “Final Amount”), which was determined
to be $766,238.29.



On February
10, 2014, Ironridge made a request for, and we issued, an additional 1,615,550 shares of the Registrant’s common stock as
a result of the adjustment provisions under the Stipulation in the court order issued by the California State Court.



On April
4, 2014, Ironridge requested even more shares pursuant to the adjustment provision under the Stipulation in the court order issued
by the California State Court. This time their request was for an additional 1,646,550 shares of the Company’s common stock.
We declined to issue these additional shares because Ironridge had already received, to that date, approximately 10,305,550 shares
of free trading stock with a market value of approximately $1.2 million (based on the closing stock price on May 6, 2012), in settlement
of a Final Amount of $766,238.29. The shares issued to Ironridge represent a premium of 48%
to the Final Amount.



On
May 6, 2014, Ironridge submitted an ex parte application to the California State Court to compel the issuance of the 1,646,550
shares requested from the Company on April 4, 2014, and the California State Court without a hearing entered an order to compel
the Company to issue the additional shares. On the same day, wefiled a notice of appeal with
the California State Court’s order. The appeal automatically stays enforcement of the California State Court’s May
6 order.



We believes that Ironridge is
not entitled to additional shares as it has received a significant premium on the Final Amount which Ironridge itself had declared
to the California State Court served as the basis of the adjustment mechanism for the number of shares issued based on the Company’s
stock price. We will vigorously pursue the appeal, and reversal, of the California State Court order.



The Company accrued the potential
issuance of these shares and have expensed $164,655 to financing costs in the financial statement as of June 30, 2014, as well
as reversing 1,646,550 shares of the Company’s common stock.





28





SCRIPSAMERICA, INC.

Condensed Notes to Consolidated Financial
Statements (Unaudited)

For the six months ended June 30, 2014







|18 - | Subsequent Events
|---- | -----------------





From July 1, 2014 to August
4 2014, the Company issued 3,147,210 shares of common stock for the following transactions: We issued a) 1,010,350 shares of common
stock in a private subscription sale , for $58,260 in cash, stock issued at a price range between $0.05 and $0.06 b) 38,350 shares
for payment of royalty expense valued at $3,835 c) 446,724 shares for conversion of $25,625 of principal for various convertible
notes payable, of which the fair value of stock issued was $67,009, d) 20,000 shares were issued to members of the Board of Directors
for services provided, valued at $2,600, e) 121,786 shares for our liability of stock to be issued and f) 1,510,000 restricted
shares of common stock to a consultant under a consulting agreement with regard to investor relations services,
which were valued at $211,000.





29









|ITEM 2. | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------



Caution Regarding Forward-Looking Information



Certain statements contained herein, including,
without limitation, statements containing the words “believes”, “anticipates”, “expects” and
words of similar import, constitute forward-looking statements. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause the actual results, performance or achievements of the Company, or industry results,
to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.



Such factors include, among others, the
following: international, national and local general economic and market conditions: demographic changes; the ability of the Company
to sustain, manage or forecast its growth; the ability of the Company to successfully make and integrate acquisitions; raw material
costs and availability; new product development and introduction; existing government regulations and changes in, or the failure
to comply with, government regulations; adverse publicity; competition; the loss of significant customers or suppliers; fluctuations
and difficulty in forecasting operating results; changes in business strategy or development plans; business disruptions; the ability
to attract and retain qualified personnel; the ability to protect technology; the ability to raise adequate capital on reasonable
terms, if at all, to execute the Company’s business plan and other factors referenced in this and previous filings.



Given these uncertainties, readers are
cautioned not to place undue reliance on such forward looking statements.



The following discussion of the financial
condition and results of operations of the Company should be read in conjunction with the financial statements and the related
notes thereto included in this document.



Overview



ScripsAmerica, Inc.
was incorporated in the State of Delaware on May 12, 2008. Since our inception, ScripsAmerica’s business model has evolved
significantly. Through March 2013, and to a lesser extent into early 2014, the Company primarily provided pharmaceutical distribution
services to a wide range of end users across the health care industry through major pharmaceutical distributors in North America,
such as McKesson Corporation and Cardinal Health. The end users included retail, hospitals, long-term care facilities and government
and home care agencies. The majority of the Company’s revenue from this model came from orders facilitated by McKesson, the
largest pharmaceutical distributor in North America, and a few other major pharmaceutical distributor clients.



However, we had no
exclusive contract with McKesson and the Company’s other pharmaceutical distributor clients to utilize our services and our
margins became compressed. As a result, in 2013 the business of providing these pharmaceutical distribution services was curtailed
and we are now primarily focused on generating revenue through (1) the marketing, sale and distribution of our RapiMed® products,
(2) our services to the independent pharmacy distribution business and (3) our entry into the specialty pharmacy market. Specifically,
we have developed a branded OTC product called “RapiMed” (www.rapimeds.com), which is a children’s pain reliever
and fever reducer currently launched in China though our joint venture entity Global Pharma Hub, and which we hope to launch in
retail outlets in North America sometime in 2014. We have also entered into agreements with third parties pursuant to which we
receive fees based on a formula tied to the gross profit on sales of pharmaceutical products to independent pharmacies by such
third parties. Lastly, on February 20, 2014 we entered into an agreement with a New Jersey pharmacy that specializes in topical
pain creams, pursuant to which we manage their business operations in exchange for a percentage of the pharmacy’s total income.



Evolving Business Model



Since its inception,
ScripsAmerica’s business model has evolved significantly. Initially, we primarily provided pharmaceutical distribution services
to a wide range of end users across the health care industry through pharmaceutical distributors in North America. These end users
included retail, hospitals, long-term care facilities and government and home care agencies. The majority of our revenue from this
model came from orders facilitated by McKesson, the largest pharmaceutical distributor in North America, and a few other major
pharmaceutical distributor clients.



However, because
we had no exclusive contract with McKesson and our other pharmaceutical distributor clients to utilize our services and the margins
began to shrink, we have moved away from providing these pharmaceutical distribution services as our main source of income, and
we are now primarily focused on generating revenue through our RapiMed® products, our specialty pharmacy business and our independent
pharmacy distribution model.



30









On September 6, 2013,
the Company and its former Contract Packager, pursuant to which the Company and its former Contract Packager resolved various disagreements
that had arisen between the parties on various projects covered by written agreements between the Company and its former Contract
Packager, namely (i) the Contract Packager’s agreement with the U.S. government, (ii) the parties agreement with respect
to the production and packaging of the Company’s RapiMed® products and (iii) shares of the Company’s stock issued
to the principals of the Contract Packager for consulting services, entered into a settlement agreement. The settlement agreement
provided mutual releases, continued the U.S. government arrangement under modified terms, as well as a partial reimbursement over
fifteen months for previous amounts due the Company.



This new agreement
stipulates that the Company will provide financing through a related party, Development 72 LLC, for the continuance of its pharmaceutical
distribution contract with the U.S. government and for the Contract Packager to make 15 monthly payments to the Company, totaling
$408,154.95, with respect to prior shipments under U.S. government contract (which had had stopped in May 2013 due to a dispute
but have resumed in September 2013) which we previously reserved for or written off in 2013. The Company’s percentage of
the profits under the U.S. government contract had been revised in terms of the rate and the number of bottles of product sold
to the U.S. government for which the Company would receive payments.



RapiMed® Children’s Pain
Reliever and Fever Reducer



Our target market
for RapiMed® is 2-11 year olds and we anticipate that the formula for our orally disintegrating tablets will be more effective
than existing products due to its ability to melt faster, taste better and provide more accurate dosing.



Unlike other products
available, ScripsAmerica’s is much smaller and dissolves in the child’s mouth in 25 seconds, therefore entering their
system faster. RapiMed® contains Acetaminophen (main ingredient in Tylenol®), however the bitter taste of this active ingredient
is masked by a patented technology. The cherry and wild grape flavors that our RapiMed® children’s pain reliever product
will come in are most appealing to children. Additionally, the dosage of RapiMed® is controlled, not like the syringe based
competing products. We offer the 80 mg for 2-6 year olds, and 160 mg for the 6-11 year olds.



The RapiMed®
packaging is convenient, portable, child resistant and easy to use as well as eye-catching. The product will be labeled in both
English and Spanish to serve the expanding Hispanic markets in America. The contents are aspirin free, ibuprofen free, sugar free
and gluten free as well. Since the numerous Tylenol® recalls in the recent past, there is a clear need for a better controlled,
more efficient product to fill the void. We believe our RapiMed® is that product.



ScripsAmerica presented
RapiMed® to retail buyers in February of 2013 at the ECRM Cough and Cold show in Florida and we received very positive feedback.
We have engaged DPG to roll out the product to retailers nationwide once we secure adequate funding. Depending on the retailer,
the product will be promoted through in-store temporary price reductions, coupons, store circulars, buy-two-and save packs, as
a clip-strip program, radio and print advertising.



In January 2014,
we entered into an exclusive world-wide licensing agreement with Global Pharma Hub for the marketing and distribution of our children’s
pain reliever and fever reducer OTC product called RapiMed® in all countries except the United States. The license will allow
Global Pharma Hub to market and distribute the children’s acetaminophen orally dissolving tablets under our registered trademark,
RapiMed® as well as our registered trade mark “MELTS IN YOUR CHILD'S MOUTH”. In order to keep the license agreement,
Global Pharma Hub must meet minimum sales quotas terms which are as follows:



| | 1. | $500,000 in purchase orders during first 12 months of License Agreement;
| | -- | ------------------------------------------------------------------------

| | 2. | $1,400,000 in purchase orders during second 12 months; and
| | -- | ----------------------------------------------------------

| | 3. | $2,400,000 in purchase orders during the third 12 months.
| | -- | ---------------------------------------------------------



Global Pharma Hub signed
an exclusive sub-licensing agreement for RapiMed® in the territory of Hong Kong on January 28, 2014, with NYJJ Hong Kong Ltd.
to generate initial and ongoing orders for the product following its registration approval by the Hong Kong government. The minimum
sales quotas terms of the exclusive Hong Kong sub-licensing agreement are as follows:



| | 1. | $550,000 in purchase orders during first 12 months;
| | -- | ---------------------------------------------------

| | 2. | $1,500,000 in purchase orders during the second 12 months; and
| | -- | --------------------------------------------------------------

| | 3. | $2,500,000 in purchase orders during the third12 months.
| | -- | --------------------------------------------------------



On February 22, 2014,
Global Pharma Hub signed an exclusive sub-licensing agreement with Jetsaw Pharmaceutical, Inc. for the marketing and distribution
of RapiMed® pediatric acetaminophen in the territory of Canada for an initial term of three years. The minimum sales quotas
terms of the exclusive Canadian sub-licensing agreement are as follows:



| | 1. | $120,000 in purchase orders during first 12 months;
| | -- | ---------------------------------------------------

| | 2. | $220,000 in purchase orders during the second 12 months; and
| | -- | ------------------------------------------------------------

| | 3. | $320,000 in purchase orders during the third12 months.
| | -- | ------------------------------------------------------



31







As of November 14, 2014 no sales or shipment have been made
on the above agreements



IndependentPharmacy
Distribution



In addition to our
RapiMed® products, we are also implementing our plan to generate significant revenue by entering the Independent Pharmacy distribution
market.



This market will
allow us to provide a much-needed solution to a problem experienced by small retail chains and individual pharmacies, which problem
is their inability to fill prescriptions for their clients when the prescription calls for controlled substances. The reason for
this problem is that in order to secure these controlled substances the manufacturers of these products impose minimum order quantities
that are far beyond the size of orders typically made by small, independent pharmacies.



In 2013, we entered
into an agreement with WholesaleRx, Inc., which represents over 700 such independent pharmacy operations and is a DEA and State-licensed
to store and distribute controlled substances (which are drugs that have the potential for abuse or dependence and are regulated
under thefederal Controlled Substances Act). WholesaleRxorders
the goods from the manufacturers and has them shipped to its warehouse facility. WholesaleRx then ships
thegoods to the pharmacies in the bottles as received by the manufacturer. Upon receiving orders from the pharmacies, goods
will be sent to them COD which will eliminate any accounts receivable issues.



Under the November
1, 2013 Agreement, ScripsAmerica agreed to provide purchase order financing to WholesaleRx and purchased a 20% equity stake in
WholesaleRx. In consideration for providing financing for WholesaleRx’s purchase orders, and to cover the Company’s
costs in administering the purchase order financing, WholesaleRx has agreed to pay the Company on or before the 15th
calendar day of each month 14% of the gross profit (as described above) for the prior calendar month. If WholesaleRx is late paying
such 14% fee, then the amount owed will accrue interest at the rate of 18% per annum until paid.



Subsequently, the Company Registrant and WholesaleRx made certain
changes to the November 1, 2013 agreement, whereby the Company’s investment was reduced to $275,000, the Company’s
ownership interest was reduced to 14%, and the Company’s monthly fee was reduced to 14% of the gross profit for the preceding
month if the credit line was used during such prior month but only 8% if the credit line was not used in such prior month. The
subsequent amendments to the arrangement have not been reduced to a formal, written agreement and some of the arrangements are
oral amendments. The parties are operating under their understanding of the current arrangement and Wholesale Rx is current in
its obligations.



In December, 2013,
the Company revised an October 2013 purchase agreement to acquire 90% of the Membership Units in P.I.M.D. International, LLC (“PIMD”),
a start-up limited liability company based in, and proposing to do business in, Florida. Although founded approximately four years
ago, PIMD has had no sales, but has the necessary licenses for operation of a drug wholesale operation. The purchase of the Membership
Units in PIMD was subject to certain conditions precedent, of which the most important was that the Company obtain the necessary
licenses from Florida (and the DEA) for the ownership of a drug distribution company like PIMD. However, it was determined that
securing the licenses was going to require a substantially longer period of time than the parties had anticipated. Consequently,
in order to preserve the business opportunity, it was necessary to change the structure of the relationship. Accordingly, the original
purchase agreement was cancelled and voided. The funds already advanced by ScripsAmerica to PIMD were converted into a loan and
the relationship between PIMD and ScripsAmerica became a Sourcing and Marketing Agreement



Under this Sourcing
and Marketing Agreement, which the Company entered into with PIMD in December 2013, the Company will assist PIMD by helping PIMD
to (1) secure advantageous sources of drugs and (2) secure marketing and sales assistance in selling the drugs. For these services,
the Company will receive a “Sourcing and Marketing Fee” which is 45% of the “Calculated Basis” to be calculated
under a formula in the Sourcing and Marketing Agreement. PIMD had no material sales in fiscal 2013 and no sales as of the six months
ended June 30, 2014, but should be operational commencing in the third quarter of 2014. Under our agreement with PIMD, we have
no authority or control with respect to PIMD’s business – including the purchase of the drugs and the sale of the drugs.
Additionally, we do not have any authority to bind PIMD for any transaction relating to the purchase, sale or transfer of pharmaceutical
products.



On February 20, 2014,
Implex Corporation and Main Avenue Pharmacy, Inc., the specialty pharmacy being acquired by Implex, entered into a Business Management
Agreement with ScripsAmerica, effective as of February 7, 2014. Under this agreement, Implex has engaged the Company to manage
the day to day business operations of Main Avenue Pharmacy, subject to the directives of Implex. The Company’s day to day
management responsibilities includes financial management but excludes any matters related to licensing and those responsibilities
which require Federal or state licensure (“Licensing Matters”). Prior to the final closing, the Licensing Matters will
be handled by Main Avenue Pharmacy’s owner and after the final closing Implex will be responsible for managing Licensing
Matters. The Company will also provide funding (as a loan or advance), to the extent not covered by the funds of the pharmacy,
to pay all costs and expenses incurred in the operation of Main Avenue Pharmacy.





32







Implex will be entitled to make monthly
draws on the first day of each month, as owner of Main Avenue Pharmacy, as follows: (i) commencing on April 1, 2014 and continuing
to, and including, March 1, 2015, $47,003 plus $30 for each prescription processed by Main Avenue Pharmacy during the preceding
month (except that the first such payment shall include prescriptions processed since the initial closing on February 7, 2014);
(ii) commencing on April 1, 2015 and continuing to, and including, March 1, 2016, $8,827 plus $30 for each prescription processed
by Main Avenue Pharmacy during the preceding month; (iii) commencing on April 1, 2016 and continuing thereafter plus $30 for each
prescription processed by Main Avenue Pharmacy during the preceding month and (iv) commencing on the 10,001 prescription processed
by Main Avenue Pharmacy the rate will be reduced to $10 for each prescription processed by Main Avenue Pharmacy during the preceding
month.



For the management
services provided by the ScripsAmerica under this Business Management Agreement, Implex will pay us a combined monthly Management
and Financing Fee. This combined fee will be equal to 97% of the Calculation Basis (receipts from paid invoices less Implex’s
monthly draw and various expenses of Main Avenue Pharmacy). Since ScripsAmerica will have significant controlling interest via
related party relationships and will be the primary beneficiary, the Company will consolidate financial activities of Main Avenue
Pharmacy.



Description of Revenues



ScripsAmerica offers
fulfillment of prescription and over the counter (“OTC”) orders. To fulfill purchase orders from customers, ScripsAmerica
processes orders to the end user’s desired specifications. Capabilities range from unit of use packaging for in-patient nursing
homes and hospitals to bulk packaging for government and international organizations.



In 2013 we had product
revenue associated with our curtailed pharmaceutical distribution services is recognized when product is shipped from a contract
packager to our customers’ warehouses and is adjusted for anticipated charge backs from our customers which include inventory
credits, discounts or volume incentives. These charge back costs are received monthly from our customers’ and the sales revenue
and accounts receivables are reduced accordingly based on historical experience, customer contract programs, product pricing trends
and the mix of products shipped.



Purchase orders from
our customers generate our shipments, provide persuasive evidence that an arrangement exists and that the pricing is determinable.
The credit worthiness of our customers assures that collectability is reasonably assured.



Beginning in February
2014, we began recognizing revenue for prescriptions shipped directly to patients from our specialty pharmacy business, Main Avenue
Pharmacy Inc., which only ships prescription products to patients upon payment approval by the patients’ insurance company,
payments are usually received with 30 days of product being shipped. Consequently, no sales allowance has been recorded as of June
30, 2014.



We also recognize
revenue from our contract packager on a net basis according to ASC 605-45, Revenue Recognition: Principal Agent Considerations.Since we are not deemed to be the principal in these sales transactions we do not report the transaction on a gross basis in
our statement of operations. These sales transactions relate to a contract that our Contract Packager has obtained with a government
agency. The revenue is reported in a separate line in the statement of operations as “Product revenues net from Contract
Packager”, and the gross sales are reduced by the cost of sales fees from our Contract Packager.



In addition, commission
fees are recognized when earned on shipments of generic pharmaceutical and OTC products by WholesaleRx, which is a DEA and State-licensed
to store and distribute controlled substances, pursuant to an agreement entered into in 2013. Under this agreement with WholesaleRx,
the Company will earn a 14% commission fees on the gross margin of products shipped to independent pharmacies by WholesaleRx.





33







Results of Operations

THREE MONTHS ENDED JUNE 30, 2014 COMPARED TO THE THREE MONTHS
ENDED JUNE 30, 2013



|                                                                  |  |                                     |           |   |  |  |      |        |  |   |            |   |  | (  ) = unfavorable |       
|----------------------------------------------------------------- |  | ----------------------------------- | --------- | - |  |  | ---- | ------ |  | - | ---------- | - |  | ------------------ | ------
|                                                                  |  | For the three months ended June 30, |           |   |  |  |      | Change | 
|                                                                  |  | 2014                                |           |   |  |  |      | 2013   |  |   |            |   |  | $ change           |       
|Product revenue-net                                               |  | $                                   | 3,507,000 |   |  |  | 95%  |        |  | $ | –          |   |  |                    | 0%    
|Revenue net, from contract packager                               |  |                                     | 119,000   |   |  |  | 3%   |        |  |   | 92,000     |   |  |                    | 100%  
|Commission fees - WholeSaleRx                                     |  |                                     | 75,000    |   |  |  | 2%   |        |  |   | –          |   |  |                    | 0%    
|Net Sales                                                         |  |                                     | 3,701,000 |   |  |  | 100% |        |  |   | 92,000     |   |  |                    | 100%  
|Cost of Goods Sold                                                |  |                                     | 378,000   |   |  |  | 10%  |        |  |   | 96,000     |   |  |                    | 104%  
|Gross Profit                                                      |  |                                     | 3,323,000 |   |  |  | 90%  |        |  |   | (4,000     | ) |  |                    | -4%   
|Operating Costs and Expenses:                                     |  |                                     |           |   |  |  |      |        |  |   |            |   |  |                    |       
|Selling and Marketing                                             |  |                                     | 2,842,000 |   |  |  | 77%  |        |  |   | 160,000    |   |  |                    | 174%  
|General and Administrative                                        |  |                                     | 522,000   |   |  |  | 14%  |        |  |   | 526,000    |   |  |                    | 572%  
|Recovery of bad debt / reserve for bad debt                       |  |                                     | (54,000   | ) |  |  | -1%  |        |  |   | 1,211,000  |   |  |                    | 1316% 
|Share-base Comp issued for payment of services                    |  |                                     | 735,000   |   |  |  | 20%  |        |  |   | 944,000    |   |  |                    | 1026% 
|                                                                  |  |                                     |           |   |  |  |      |        |  |   |            |   |  |                    |       
|Total Operating expenses                                          |  |                                     | 4,045,000 |   |  |  | 109% |        |  |   | 2,841,000  |   |  |                    | 3088% 
|Operating Loss                                                    |  |                                     | (722,000  | ) |  |  | -20% |        |  |   | (2,845,000 | ) |  |                    | -3092%
|Other Income (expenses) :                                         |  |                                     |           |   |  |  |      |        |  |   |            |   |  |                    |       
|Interest expense                                                  |  |                                     | (33,000   | ) |  |  | -1%  |        |  |   | (143,000   | ) |  |                    | -155% 
|Gain (Loss) on revaluation of derivatives                         |  |                                     | 1,000     |   |  |  | 0%   |        |  |   | (1,462,000 | ) |  |                    | -1589%
|Loss from derivative issued with debt greater than carrying value |  |                                     | –         |   |  |  | 0%   |        |  |   | (343,000   | ) |  |                    | -373% 
|Financing costs                                                   |  |                                     | (10,000   | ) |  |  | 0%   |        |  |   | –          |   |  |                    | 0%    
|Amortization of debt discount                                     |  |                                     | (18,000   | ) |  |  | 0%   |        |  |   | (173,000   | ) |  |                    | -188% 
|Gain on extinguishment                                            |  |                                     | 127,000   |   |  |  | 3%   |        |  |   | 66,000     |   |  |                    | 72%   
|Total Other Income / (expenses)                                   |  |                                     | 67,000    |   |  |  | 2%   |        |  |   | (2,055,000 | ) |  |                    | -2234%
|Income (Loss) before taxes                                        |  |                                     | (655,000  | ) |  |  | -18% |        |  |   | (4,900,000 | ) |  |                    | -5326%
|Tax Expense                                                       |  |                                     | –         |   |  |  | 0%   |        |  |   | –          |   |  |                    | 0%    
|Net loss                                                          |  | $                                   | (655,000  | ) |  |  | -18% |        |  | $ | (4,900,000 | ) |  |                    | -5326%





34







Revenue Net: The following table sets forth selected
statement of operations data as data as a percentage of total revenue for the three months period ended June 30, 2014 and 2013



|Products sold                                                        |  | 2014 |            |   | % to total |  |      | 2013 |  |   | % to total |   |  | Change |     
|-------------------------------------------------------------------- |  | ---- | ---------- | - | ---------- |  | ---- | ---- |  | - | ---------- | - |  | ------ | ----
|Prescription drug products                                           |  | $    | 3,507,000  |   |            |  | 44%  |      |  |   | –          |   |  |        | 0%  
|Revenue, from contract packager                                      |  |      | 3,520,000  |   |            |  | 44%  |      |  |   | 1,294,000  |   |  |        | 100%
|Revenue, from pharmaceutical partner                                 |  |      | 1,010,000  |   |            |  | 13%  |      |  |   | –          |   |  |        | 0%  
|Gross Sales                                                          |  |      | 8,037,000  |   |            |  | 100% |      |  |   | 1,294,000  |   |  |        | 100%
|Discounts / Charge backs                                             |  |      | –          |   |            |  | 0%   |      |  |   | –          |   |  |        | 0%  
|Adjustment to sales for contract packager and pharmaceutical partner |  |      | (4,336,000 | ) |            |  | -54% |      |  |   | (1,202,000 | ) |  |        |     
|Net revenue                                                          |  | $    | 3,701,000  |   |            |  |      |      |  | $ | 92,000     |   |  |        |     



Net Revenues



For the three month period ended June 30,
2014, the Company generated net revenue of approximately $3,701,000 as compared to net revenue of approximately $92,000 for same
period in 2013, an increase of approximately $3,609,000. This increase in revenue versus the same three month period a year ago
is mainly due to prescription sales from our specialty pharmacy business for topical pain creams. The topical pain creams prescription
business accounted for approximately $3,507,000 of the sales increase. In February 2014 we entered into a Business Management Agreement
with Implex Corporation which had acquired Main Avenue Pharmacy Inc. for $550,000. Main Avenue Pharmacy is a specialty pharmacy
which ships the topical pain creams. Sales from the U.S. government contract through a contract packager which are recorded net
of costs, increased approximately $27,000. Sales commission earned from WholesaleRx, a pharmaceutical distributor, under which
we earn a 14% commission on the gross margin of generic pharmaceutical sales, was approximately $75,000 in second quarter
2014; there were no commissions earned in 2013 from sales by WholesaleRx.



Gross Profit:Gross profit for three
month period end June 30, 2014 was approximately $3,323,000, which was 90% of our net revenues as compared to a gross profit loss
of approximately $4,000 for the same period in 2013, an increase of approximately $3,327,000. The increase in our gross profit
from three months ended June 30, 2014 compared to the same period in 2013 can be attributed to our management of the specialty
pharmacy business and its topical pain cream prescriptions, which generated significant sales in second quarter of 2014 and also
has a gross margin percentage that ranges from 75% to 90%.



35







Operating Expenses



Our second quarter
2014 operating expenses consist of Selling, General and Administrative expenses, excluding share-based compensation issued for
services in the amount of approximately $735,000. Selling expenses were approximately $2,842,000, and General and Administrative
costs were approximately $1,203,000 for the three month period ended June 30, 2014.



|                                                   |  |      |           |   |  |  |      |      |  |   |           |  |  | (  ) = unfavorable |     
|-------------------------------------------------- |  | ---- | --------- | - |  |  | ---- | ---- |  | - | --------- |  |  | ------------------ | ----
|Principal operating cost consist of :              |  | 2014 |           |   |  |  |      | 2013 |  |   |           |  |  | $  Change          |     
|Employee costs                                     |  | $    | 593,000   |   |  |  | 15%  |      |  | $ | 74,000    |  |  |                    | 3%  
|Sales Marketing                                    |  |      | 2,842,000 |   |  |  | 70%  |      |  |   | 160,000   |  |  |                    | 6%  
|Professional fees: Legal & accounting              |  |      | 146,000   |   |  |  | 4%   |      |  |   | 65,000    |  |  |                    | 2%  
|Consulting                                         |  |      | 123,000   |   |  |  | 3%   |      |  |   | 407,000   |  |  |                    | 14% 
|Investor relations and Marketing                   |  |      | 289,000   |   |  |  | 7%   |      |  |   | 827,000   |  |  |                    | 29% 
|Recovery of bad debt                               |  |      | (54,000   | ) |  |  | -1%  |      |  |   | 1,211,000 |  |  |                    | 43% 
|General expense                                    |  |      | 106,000   |   |  |  | 3%   |      |  |   | 97,000    |  |  |                    | 3%  
|Total Selling, General & Administrative            |  |      | 4,045,000 |   |  |  | 100% |      |  |   | 2,841,000 |  |  |                    | 100%
|Share-based compensation included in S,G & A above |  |      | 735,000   |   |  |  |      |      |  |   | 944,000   |  |  |                    |     
|Adjusted total Selling, General & Administrative   |  | $    | 3,310,000 |   |  |  |      |      |  | $ | 1,897,000 |  |  |                    |     



Selling.For
the three months ended June 3, 2014, selling costs increased approximately $2.7 million compared to the same period in 2013. A
significant portion of this increase is due to sales commission paid on sales from our management of the specialty pharmacy business
and its prescription topical creams business, which commission costs were approximately $2.1 million. We pay a commission fee of
approximately 30% to 50% on the sales revenue on prescriptions shipped in the quarter to our outside third party sales forces.The other $600,000 of selling costs increase were for a special billing services, provided by a third party provider, which
assist in getting insurance prescriptions approved and costs related to RapiMed® marketing.



General and Administrative.For the three month period ended June 30, 2014, general and administrative expenses (“G&A”) decreased approximately
$1,478,000 to approximately $1,203,000 as compared to approximately $2,681,000 for the same three month period in 2013. Included
in G&A totals in the three months period ended June 30, 2014 are (i) non-cash stock compensation payments for services in the
amount of $735,000 and (ii) recovery of bad debt previously written off in 2013 in the amount of $54,000. The changes in G&A
expenses were mainly a result of (a) increases in professional fees of approximately $97,000, (b) a decline of $1,211,000 in prior
write-off costs for a bad debt associated with receivable and deposit from our contract packager (c) a decrease of approximately
$814,000 in investor relations and public relations costs which include costs associated with market awareness of the Company’s
stock, press releases, assistance in capital raising and fees for obtaining funding, (d) an increase of $505,000 in employee costs,
which included salary and benefits, employee options costs and board of directors costs, (e) an increase in all other general expense
of approximately $11,000 which includes D&O insurance, telephone, computer expenses, and general overhead and other office-related
expenses and (f) recovery of $54,000 for bad debt previously written off in 2013.



Share-based compensation
issued for services:Due to our cash flow issues for the three months ended June 30, 2014 and 2013, we issued common stock
for payment of service to various vendors. The following table lists what area of General and Administrative expenses for which
we issue our common stock:





36







|                                 |  |      |         |  |      |   |         | (  ) = unfavorable | 
|-------------------------------- |  | ---- | ------- |  | ---- | - | ------- | ------------------ | 
|                                 |  | 2014 |         |  | 2013 |   |         | $  Change          | 
|Employee costs                   |  | $    | 481,000 |  |      | $ | –       |                    | 
|Consulting                       |  |      | –       |  |      |   | 144,000 |                    | 
|Investor relations and Marketing |  |      | 254,000 |  |      |   | 800,000 |                    | 
|Total General & Administrative   |  | $    | 735,000 |  |      |   | 944,000 |                    | 



Total Other Expenses.Other expenses
for the three month period ended June 30, 2014 decreased by approximately $2,122,000 to income of approximately $67,000 as compared
to expense of approximately $2,055,000 for the same period in 2013.



The dollar changes for three months ended
June 30, 2014 versus 2013 for other expenses consists of the following:



|                                                                   |  |   |         |   |  |   |            | (  ) = unfavorable | 
|------------------------------------------------------------------ |  | - | ------- | - |  | - | ---------- | ------------------ | 
|                                                                   |  |   |         |   |  |   |            | Change             | 
|Other Income (expenses) :                                          |  |   | 2014    |   |  |   | 2013       |                    | 
|Interest expense                                                   |  | $ | (33,000 | ) |  | $ | (143,000   | )                  | 
|Gain (Loss) on revaluation of derivatives                          |  |   | 1,000   |   |  |   | (1,462,000 | )                  | 
|Loss from derivatives issued with debt greater than carrying value |  |   | –       |   |  |   | (344,000   | )                  | 
|Financing costs                                                    |  |   | (10,000 | ) |  |   | –          |                    | 
|Amortization of debt discount                                      |  |   | (18,000 | ) |  |   | (173,000   | )                  | 
|Gain on extinguishment                                             |  |   | 127,000 |   |  |   | 67,000     |                    | 
|Income from equity investments                                     |  |   | –       |   |  |   | –          |                    | 
|Total Other Income / (expenses)                                    |  | $ | 67,000  |   |  | $ | 2,055,000  | )                  | 



Interest expense
in for the three month period ended June 30, 2014 consisted of the following: a) interest on our convertible debt, which was approximately
$26,000 and of this amount we made cash payments of $25,000 as compared to interest cash payments of approximately $113,000 in
the same period in 2013, b) interest cost associated with a term loan of $500,001 which was approximately $7,700, as compared to
approximately $10,000 in the same period in 2013, c) interest costs associated with the Company’s line of credit with a bank
was approximately $12, as compared to $900 in the same period in 2013 and d) interest cost associated with our purchase order financing
from a related party was approximately ($4,040), as compared to approximately $20,000 for the same period in 2013. Our total interest
expense for the second quarter of 2014 was approximately $33,000 as compared to approximately $143,000 for the second quarter of
2013.



The revaluation change
on derivative liability in second quarter of 2014 was a gain of approximately $1,000 as compared to a loss of approximately $1,462,
000 for the same period in 2013. The change is a result of decreased amount of variable convertible debt in second quarter 2014
as compare to the second quarter of 2013 when we increased our borrowing as result of using variable convertible debt.



With an extinguishment
of debt from paying off convertible notes early, we incurred gains of approximately $127,000 in the second quarter of 2014, as
compared to a gain of approximately $67,000 for the same period in 2013.



Income taxes (benefit).Total income taxes expense for the three month period ended June 30, 2014 and 2013 was none. For 2014 and 2013 the Company
incurred losses that increased the current deferred tax benefit. However, because the high likelihood that the Company will not
be able to recover the deferred tax benefit, we recorded a valuation allowance of 100%.





37





Net Loss Applicable
to Common Shares.The Company recorded a net loss of approximately $655,000 in for the three month period ended June 30, 2014,
compared to a net loss of approximately $4,900,000 for the same period of 2013, which is a decrease in our net loss of approximately
$4,245,000 for the second quarter of 2014 as compared to the second quarter of 2013. This decrease in net loss is due to a) increased
revenue due to our infusion of new businesses which increased our gross profit by approximately $3,282,000, as described above
and b) significant cost decreases in other expenses of approximately $2,122,000 as described above. The Company accrued a preferred
stock dividend of $20,860 in both 2014 and 2013, resulting in a loss of income available to common shareholders of $712,000 and
$4,921,000 for the second quarter 2014 and 2013, respectively. Basic and diluted loss per common share were $0.01 and $0.08 for
the second quarter 2014, and 2013, respectively.



SIX MONTHS ENDED JUNE 30, 2014 COMPARED TO THE SIX MONTHS
ENDED JUNE 30, 2013



|                                                                      |  |                                   |            |   |  |  |      |        |  |   |            |   |  | (  ) = unfavorable |       
|--------------------------------------------------------------------- |  | --------------------------------- | ---------- | - |  |  | ---- | ------ |  | - | ---------- | - |  | ------------------ | ------
|                                                                      |  | For the six months ended June 30, |            |   |  |  |      | Change | 
|                                                                      |  | 2014                              |            |   |  |  |      | 2013   |  |   |            |   |  | $ change           |       
|Product revenue-net                                                   |  | $                                 | 4,124,000  |   |  |  | 91%  |        |  | $ | 151,000    |   |  |                    | 40%   
|Revenue net, from contract packager                                   |  |                                   | 243,000    |   |  |  | 5%   |        |  |   | 228,000    |   |  |                    | 60%   
|Commission fees - WholeSaleRx                                         |  |                                   | 158,000    |   |  |  | 3%   |        |  |   | –          |   |  |                    | 0%    
|Net Revenues                                                          |  |                                   | 4,525,000  |   |  |  | 100% |        |  |   | 379,000    |   |  |                    | 100%  
|Cost of Goods Sold                                                    |  |                                   | 604,000    |   |  |  | 13%  |        |  |   | 394,000    |   |  |                    | 104%  
|Gross Profit                                                          |  |                                   | 3,921,000  |   |  |  | 87%  |        |  |   | (15,000    | ) |  |                    | -4%   
|Operating Costs and Expenses:                                         |  |                                   |            |   |  |  |      |        |  |   |            |   |  |                    |       
|Selling and Marketing                                                 |  |                                   | 3,268,000  |   |  |  | 72%  |        |  |   | 204,000    |   |  |                    | 54%   
|General and Administrative                                            |  |                                   | 804,000    |   |  |  | 18%  |        |  |   | 916,000    |   |  |                    | 242%  
|Recovery of bad debt / reserve for bad debt                           |  |                                   | (163,000   | ) |  |  | -4%  |        |  |   | 1,211,000  |   |  |                    | 320%  
|Share-base Comp issued for payment of services                        |  |                                   | 947,000    |   |  |  | 21%  |        |  |   | 1,140,000  |   |  |                    | 301%  
|                                                                      |  |                                   |            |   |  |  |      |        |  |   |            |   |  |                    |       
|Total Operating expenses                                              |  |                                   | 4,856,000  |   |  |  | 107% |        |  |   | 3,471,000  |   |  |                    | -916% 
|Operating Loss                                                        |  |                                   | (935,000   | ) |  |  | -21% |        |  |   | (3,486,000 | ) |  |                    | -920% 
|Other Income (expenses) :                                             |  |                                   |            |   |  |  |      |        |  |   |            |   |  |                    |       
|Interest expense                                                      |  |                                   | (115,000   | ) |  |  | -3%  |        |  |   | (227,000   | ) |  |                    | -60%  
|Gain (Loss) on revaluation of derivatives                             |  |                                   | (512,000   | ) |  |  | -11% |        |  |   | (1,468,000 | ) |  |                    | -387% 
|Loss from derivative issued with debt greater than
    carrying value |  |                                   | –          |   |  |  | 0%   |        |  |   | (343,000   | ) |  |                    | -91%  
|Financing costs                                                       |  |                                   | (824,000   | ) |  |  | -18% |        |  |   | –          |   |  |                    | 0%    
|Amortization of debt discount                                         |  |                                   | (111,000   | ) |  |  | -2%  |        |  |   | (214,000   | ) |  |                    | -56%  
|Gain on extinguishment                                                |  |                                   | 584,000    |   |  |  | 13%  |        |  |   | 118,000    |   |  |                    | 31%   
|Income from equity investments                                        |  |                                   | 1,000      |   |  |  | 0%   |        |  |   | –          |   |  |                    | 0%    
|Total Other Income / (expenses)                                       |  |                                   | (977,000   | ) |  |  | -22% |        |  |   | (2,134,000 | ) |  |                    | -563% 
|Income (Loss) before taxes                                            |  |                                   | (1,912,000 | ) |  |  | -42% |        |  |   | (5,620,000 | ) |  |                    | -1483%
|Tax Expense                                                           |  |                                   | –          |   |  |  | 0%   |        |  |   | –          |   |  |                    | 0%    
|Net loss                                                              |  | $                                 | (1,912,000 | ) |  |  | -42% |        |  | $ | (5,620,000 | ) |  |                    | -1483%





38







Revenue
Net: The following table sets forth selected statement of operations data as data as a percentage of total revenue for
the six months period ended June 30, 2014 and 2013:



|Products sold                                                        |  | 2014 |            |   | % to total |  |       | 2013 |  |   | % to total |   |  | Change |      
|-------------------------------------------------------------------- |  | ---- | ---------- | - | ---------- |  | ----- | ---- |  | - | ---------- | - |  | ------ | -----
|Prescription drug products                                           |  | $    | 4,124,000  |   |            |  | 51%   |      |  | $ | 184,000    |   |  |        | 5%   
|OTC & non prescription products                                      |  |      | –          |   |            |  | 0%    |      |  |   | 3,249,000  |   |  |        | 92%  
|Revenue, from contract packager                                      |  |      | 7,207,000  |   |            |  | 90%   |      |  |   | 117,000    |   |  |        | 3%   
|Revenue, from pharmaceutical partner                                 |  |      | 1,489,000  |   |            |  | 19%   |      |  |   | –          |   |  |        | 0%   
|Gross Sales                                                          |  |      | 12,820,000 |   |            |  | 160%  |      |  |   | 3,550,000  |   |  |        | 100% 
|Discounts / Charge backs                                             |  |      | –          |   |            |  | 0%    |      |  |   | (150,000   | ) |  |        | -4%  
|Adjustment to sales for contract packager and pharmaceutical partner |  |      | (8,295,000 | ) |            |  | -103% |      |  |   | (3,021,000 | ) |  |        | -233%
|Net Revenues                                                         |  | $    | 4,525,000  |   |            |  |       |      |  | $ | 379,000    |   |  |        |      



Net Revenues



For the six month period ended June 30,
2014, the Company generated net revenue of approximately $4,525,000 as compared to net revenue of approximately $379,000 for same
six month period in 2013, an increase of approximately $4,146,000. This increase in revenues versus the same six month period a
year ago is mainly due to prescription sales from our specialty pharmacy business for topical pain creams. The topical pain creams
prescription business accounted for approximately $3,940,000 of the sales increase. In February 2014 we entered into a Business
Management Agreement with Implex Corporation which had acquired Main Avenue Pharmacy Inc. for $550,000. Main Avenue Pharmacy is
a specialty pharmacy which ships the topical pain creams. Sales from the U.S. government contract through a contract packager which
are recorded net of costs, increased approximately $14,000. Sales commission earned from WholesaleRx, a pharmaceutical distributor,
under which we earn an 8% or a 14% commission on the gross margin of generic pharmaceutical sales, was approximately $158,000 in
2014; there were no commissions earned in 2013.



In 2013 we had net sales of approximately
$151,000, mainly to McKesson, but in the second quarter of 2013 we made a strategic business decision to exit sales to McKesson
due to increase charge back costs. Consequently we have no sales in this area in 2014.



Gross Profit:Gross profit for the
six month period end June 30, 2014 was approximately $3,921,000, which was 87% of our net sales as compared to a gross profit loss
of approximately $15,000 for the same period in 2013, an increase of approximately $3,936,000. The increase in our gross profit
from 2014 to 2013 can be attributed to our management of the specialty pharmacy business and its topical pain creams prescriptions,
which generated significant sales in the first six months of 2014 and also has a gross margin percentage that ranges from 75% to
90%.



Operating Expenses



For the six month period ended June 30,
2014, our operating expenses consisted of Selling, General and Administrative expenses, excluding share-based compensation issued
for services in the amount of approximately $947,000. Selling expense were approximately $3,268,000, and General and Administrative
costs were approximately $1,588,000 for the six months period ended June 30, 2014.





39





|                                                   |  |   |           |   |  |  |      |  |  |   |           |  |  | (  ) = unfavorable |     
|-------------------------------------------------- |  | - | --------- | - |  |  | ---- |  |  | - | --------- |  |  | ------------------ | ----
|Principal operating cost consist of :              |  |   | 2014      |   |  |  |      |  |  |   | 2013      |  |  |                    |     
|Employee costs                                     |  | $ | 693,000   |   |  |  | 14%  |  |  | $ | 149,000   |  |  |                    | 4%  
|Sales Marketing                                    |  |   | 3,268,000 |   |  |  | 66%  |  |  |   | 204,000   |  |  |                    | 6%  
|Professional fees: Legal & accounting              |  |   | 227,000   |   |  |  | 5%   |  |  |   | 153,000   |  |  |                    | 4%  
|Consulting                                         |  |   | 134,000   |   |  |  | 3%   |  |  |   | 479,000   |  |  |                    | 14% 
|Investor relations and Marketing                   |  |   | 517,000   |   |  |  | 11%  |  |  |   | 972,000   |  |  |                    | 28% 
|Recovery of bad debt                               |  |   | (163,000  | ) |  |  | -3%  |  |  |   | 1,211,000 |  |  |                    | 35% 
|General expense                                    |  |   | 210,000   |   |  |  | 4%   |  |  |   | 303,000   |  |  |                    | 9%  
|Total Selling, General & Administrative            |  |   | 4,856,000 |   |  |  | 100% |  |  |   | 3,471,000 |  |  |                    | 100%
|Share-based compensation included in S,G & A above |  |   | 947,000   |   |  |  |      |  |  |   | 1,140,000 |  |  |                    |     
|Adjusted total Selling, General & Administrative   |  | $ | 3,909,000 |   |  |  |      |  |  | $ | 2,331,000 |  |  |                    |     



Selling.For
the six months ended June 30, 2014, selling costs increased approximately $3,064,000 compared to the same period in 2013. A significant
portion of this increase is due to sales commission paid on sales from our management of the specialty pharmacy business and its
prescription topical pain creams business, which commission costs were approximately $2,712,000 year to date. We pay a commission
fee of approximately 30% to 50% on the sales revenue on prescriptions shipped in the quarter to our outside third party sales force.
The other $351,000 selling costs increase were for a special billing services, provided by a third party provider, which assist
in getting insurance prescriptions approved and costs related to RapiMed® marketing.



General and Administrative.For the six month period ended June 30, 2014, general and administrative expenses (“G&A”) decreased approximately
$1,588,000 to approximately $1,679,000 as compared to approximately $3,267,000 for the same six months period in 2013. Included
in G&A totals for the six months ended June 30, 2014 are (i) non-cash stock compensation payments for services in the amount
of $481,000 and (ii) recovery of bad debt previously written off in 2013 in the amount of $163,000. The changes in G&A expenses
were mainly a result of (a) increases in professional fees of approximately $74,000, (b) a decline of $1,211,000 for write-off
of a receivable and a deposit from our contract packager which occurred in 2013, (c) a decrease of approximately $706,000 in investor
relations and public relations costs which include costs associated with market awareness of the Company’s stock, press releases,
assistance in capital raising and fees for obtaining funding, (d) an increase of approximately $522,000 in employee costs expenses
which included salary, options granted and benefits and board of directors costs, the majority of this increase due to non-cash
value for options granted to the Company’s CFO and CEO which were valued at approximately $437,000 (e) an increase in all
other general expense of $170,000 which includes D&O insurance, telephone, computer expenses, and general overhead and other
office-related expenses and (f) recovery of $163,000 for bad debt previously written off in 2013.



Share-based compensation
issued for services:Due to our cash flow issues in 2014 and 2013, we issued common stock for payment of service to various
vendors. The following table lists what area of General and Administrative expenses for which we issue our common stock:



|                                 |  | Six Months Ended June 30, |         |  | ( ) = unfavorable |  
|-------------------------------- |  | ------------------------- | ------- |  | ----------------- | -
|                                 |  | 2014                      |         |  | 2013              |  
|Employee costs                   |  | $                         | 481,000 |  |                   | $
|Consulting                       |  |                           | 187,000 |  |                   |  
|Investor relations and Marketing |  |                           | 279,000 |  |                   |  
|Total General & Administrative   |  | $                         | 947,000 |  |                   | $





40







Total Other Expenses.Other expenses
for the six months ended June 30, 2014 decreased by approximately $1,157,000 to approximately $977,000 from approximately $2,134,000
for the same period in 2013.



The dollar changes for the six month period ended
June 30, 2014 versus the same period in 2013 for other expenses consists of the following:



|                                                                   |  | Six Months Ended June 30, |          |   | ( ) = unfavorable change |  
|------------------------------------------------------------------ |  | ------------------------- | -------- | - | ------------------------ | -
|Other Income (expenses) :                                          |  |                           | 2014     |   |                          |  
|Interest expense                                                   |  | $                         | (115,000 | ) |                          | $
|Gain (Loss) on revaluation of derivatives                          |  |                           | (512,000 | ) |                          |  
|Loss from derivatives issued with debt greater than carrying value |  |                           | –        |   |                          |  
|Financing costs                                                    |  |                           | (824,000 | ) |                          |  
|Amortization of debt discount                                      |  |                           | (111,000 | ) |                          |  
|Gain on extinguishment                                             |  |                           | 584,000  |   |                          |  
|Income from equity investments                                     |  |                           | 1,000    |   |                          |  
|Total Other Income / (expenses)                                    |  | $                         | (977,000 | ) |                          | $



Interest expense
in for first six months of 2014 consist of the following: a) interest on our convertible debts, which was approximately $77,000,
and of this amount we made cash payments of $70,000 as compared to interest cash payments of approximately $141,000 in the same
period in 2013, b) interest cost associated with a term loan of $500,001 which was approximately $15,000, as compared to approximately
$20,000 in the same period in 2013, c) interest costs associated with the Company’s line of credit with a bank was approximately
$146, as compared to $2,406 in the same period in 2013 and d) interest cost associated with our purchase order financing from a
related party was approximately $21,000, as compared to approximately $60,000 for the same period in 2013. Our total interest expense
for the six month period ended June 30, 2014 was approximately $110,000 as compared to approximately $226,000 for the six month
period ended June 30, 2013.



A significant portion of our other expense
for the six month period ended June 30, 2014 was due to financing costs which were mainly the issuance of warrants for a settlement
with GEM which was valued at $552,000 and accrued expense to financing fee of $165,000 for Ironridge and the issuance of common
stock for payment of fees valued at $106,000.



The loss on derivative
liability for the six month period ended June 30, 2014 was approximately $512,000 as compared to $1,468,000 for the same period
in 2013. The change is a result of decreased amount of variable convertible debt during the six month period ended June 30, 2014
as compared to the same period in 2013 when we increased our borrowings using variable convertible debt.



With an extinguishment
of debt from paying off convertible notes early, we incurred gains of approximately $584,000 for the six month period ended June
30, 2014, as compared $118,000 for the same period in 2013.



For the six month
period ended June 30, 2013 we incurred a loss of approximately $343,000 because we issued common stock with a value greater than
the value associated with debt, but in the same period of 2014 we had no loss from such debt issues.



Income taxes (benefit).Total income taxes expense for the six month periods ended June 30, 2014 and 2013 was none. For 2014 and 2013 the Company incurred
losses that increased the current deferred tax benefit. However, because the high likelihood that the Company will not be able
to recover the deferred tax benefit, we recorded a valuation allowance of 100%.





41





Net
Loss Applicable to Common Shares.The Company recorded a net loss of approximately $1,912,000 for the six month period ended
June 30, 2014, compared to a net loss of approximately $5,620,000 for the same period in 2013, which is a decrease in our net loss
of approximately $3,708,000 for the six month period ended June 30, 2014 as compared to the six month period ended June 30, 2013.
This decrease in net loss is due to a) increased sales due to our infusion of new businesses which increased our gross profit by
approximately $3,891,000, as described above and b) significant cost decreases in other expenses of approximately $978,000 as described
above. The Company accrued a preferred stock dividend of $ 41,720 for the six month period
ended June 30, 2014 and 2013, resulting in a loss of income available to common shareholders of approximately $1,946,000 and $5,662,000
for the six month period ended June 30, 2014 and 2013, respectively. Basic and diluted loss per common share were $0.02 and $0.09
for the six month period ended June 30, 2014 and 2013, respectively.



Liquidity and Capital Resources



Summary



Since our inception
in 2008, we have generated significant losses from operations and we anticipate that we will continue to generate significant losses
from operations for the foreseeable future. We have funded our operations primarily through the private placement of equity and
debt securities. At June 30, 2014, the Company had approximately $346,000 in cash and incurred a loss from operations of approximately
$15.5 million, of which approximately $9 million of the loss was due to non-cash charges. The Company’s cash expenditures
are projected to be approximately $135,000 a month on a continuing operating basis. Included in these cash expenditures are approximately
$13,000 a month in interest costs. After taking into consideration our 2014 interim results to date and current projections for
the remainder of 2014, management believes that the Company’s cash flow from operations, coupled with recent financings are
not sufficient to support the working capital requirements, debt service, applicable debt maturity requirements, and operating
expenses through the twelve month period ending June 30, 2015.



The Company’s
ability to continue as a going concern is highly dependent upon (i) management’s ability to equal or exceed its planned operating
cash flows, (ii) maintain continued availability on its line of credit and (iii) the ability to obtain alternative financing to
fund capital requirements and/or debt obligations coming due and operating expenses. The accompanying financial statements do not
include any adjustments that may result from the outcome of this uncertainty. Although the Company has successfully obtained various
funding and financing in the past, future financing and funding options may be challenging in the current environment.



We completed the
development of a pediatric pain relief rapid orally disintegrating 80 mg and 160 mg tablets. In the second quarter of 2014, we
signed a manufacturing and supply agreement with a generic manufacturer for the production of these rapid orally disintegrating
products for marketing, sale and distribution outside of the United States. In January 2014, the Company formed a joint venture
entity, Global Pharma Hub, Inc., for the licensing, marketing and distribution of our pediatric RapiMed® acetaminophen outside
of the United States. Our initial market is in China. On March 10, 2014, we received a $200,000 purchase order for our children’s
pain relief rapid orally disintegrating 80mg tablets from Global Pharma Hub for the China market and,
as of August 14, 2014, no shipments have been made and we do not expect to make any shipments until sometime in the third quarter
of 2014. Weestimate that we will need approximately $1.5 million of incremental funding to launch RapiMed® products
in the United States. The funding for launching the rapid orally disintegrating products in the U.S. is expected to come from the
sale of equity securities, and/or debt financing. However, such financing has not yet been secured.



At June 30,
2014, the Company had total current assets of approximately $3.2 million and total current liabilities of approximately $3.1
million resulting in working capital of approximately $0.1 million. The Company's current assets consisted of approximately
$346,000 in cash, approximately $2,283,000 in receivables, approximately $159,000 in prepaid expenses approximately
$363,000 in inventory and $48,000 for intangible assets. Current liabilities at June 30, 2014 consist of current portion of
long term debt from related party of approximately $128,000, convertible notes payable of approximately $22,000, term
notes payable of approximately $615,000, purchase order financing of approximately $1,028,000, accounts payable
of approximately $1,132,000, stock to be issued of approximately $55,000, royalty payable of approximately $19,000 and
a derivative liability of approximately $16,000.



During the three
month and six month periods ended June 30, 2014 we supplemented our liquidity needs primarily from financing activities. Our revenue
did not cover our operational costs and our debt requirements. The Company raised approximately $1,785,000 in cash through the
following: we raised approximately $1,278,000 from sale of common stock and we received approximately $392,000 and $115,000 from
proceeds from the sale of notes payable and convertible notes payable, respectively. Approximately $657,000 of these funds were
used for payments on convertible notes payable, payments on our purchase order financing, and payments on note payable to a related
party.





42





The following table summarizes our cash flows from operating
investing and financing activities for the six month period ended June 30, 2014 and 2013:



|                                                 |  | 2014 |           |   | 2013 |  |         | Change | 
|------------------------------------------------ |  | ---- | --------- | - | ---- |  | ------- | ------ | 
|Total cash provided by (used in):                |  |      |           |   |      |  |         |        | 
|Operating activities                             |  |      | (687,000  | ) |      |  | (62,000 | )      | 
|Investing activities                             |  |      | (269,000  | ) |      |  | –       |        | 
|Financing activities                             |  |      | 1,254,000 |   |      |  | 61,000  |        | 
|Increase (decrease) in cash and cash equivalents |  |      | 298,000   |   |      |  | (1,000  | )      | 



After taking into
consideration our interim results and current projections, management believes that the Company’s cash flow from operations,
coupled with recent financings may not be sufficient to support the working capital requirements, debt service and applicable debt
maturity requirements for the twelve month period ending June 30, 2015. This raises substantial doubt regarding the Company’s
ability to continue as a going concern. The Company’s ability to continue as a going concern is highly dependent upon (i)
management’s ability to achieve its planned operating cash flows, (ii) maintain continued availability on its line of credit
and (iii) the ability to obtain alternative financing to fund capital requirements and/or debt obligations coming due. The accompanying
financial statements do not include any adjustments that may result from the outcome of this uncertainty. Although the Company
has successfully obtained various funding and financing in the past, future financing and funding options may be challenging in
the current environment and cannot be expected just based on past results.



Since our inception,
ScripsAmerica’s business model has evolved significantly. Initially, the Company primarily provided pharmaceutical distribution
services to a wide range of end users across the health care industry through the pharmaceutical distributors in North America.
End users included retail, hospitals, long-term care facilities and government and home care agencies. The majority of our revenue
from this model came from orders facilitated by McKesson, the largest pharmaceutical distributor in North America, and a few other
clients. However, because we had no exclusive contract with McKesson to utilize our services and the margins began to shrink, we
have moved away from providing these pharmaceutical distribution services as our main source of income and are now primarily focused
on generating revenue through our RapiMed® products and our independent pharmacy distribution model.



ScripsAmerica has
already commenced the sales and marketing of its RapiMed® pediatric acetaminophen product in China and, subject to securing
financing, we hope to roll out this product in the United States during 2014. Our target market for this RapiMed® product is
2-11 year olds and we anticipate that the formula for our orally disintegrating tablets will be more effective than existing products
due to its ability to melt faster, taste better and provide more accurate dosing.



ScripsAmerica presented
RapiMed® to retail buyers in February of 2013 at the ECRM Cough and Cold show in Florida and we received very positive feedback.
We have engaged DPG Inc. to roll out the product to retailers nationwide once we secure adequate funding. Depending on the retailer,
the product will be promoted through in-store temporary price reductions, coupons, store circulars, buy-two-and save packs, as
a clip-strip program, radio and print advertising.



We completed the
development of these rapid disintegrating table products in the first quarter of 2012, with production and sales pending manufacturing
and process qualification and marketing execution. However, we estimate that we will need approximately $1.5 million of incremental
funding for expenses required to launch these RapiMed® products in the United States. The funding for launching the rapid melt
products is to come from the sale of equity securities, preferred and/or common stock securities and debt financing.



In addition to RapiMed®,
we are also implementing our plan to generate significant revenue by entering the Independent Pharmacy distribution market. This
market will allow us to provide a much-needed solution to a problem experienced by small retail chains and individual pharmacies
which is their inability to fill prescriptions for their clients when the Rx calls for controlled substances. The reason for this
problem is that in order to secure these controlled substances the manufacturers of these products impose minimum order quantities
that are far beyond the need of smaller operations.







43





In 2013 we entered
into an agreement with a pharmaceutical distributor, WholesaleRx,that represents over 700
such independent operations, and which also is DEA and State-licensed to store and distribute controlled substances (which are
drugs that have the potential for abuse or dependence and are regulated under thefederal Controlled
Substances Act). WholesaleRxorders the goods from the manufacturers and has them shipped
to its warehouse facility. WholesaleRx then ships thegoods to the pharmacies in the bottles
as received by the manufacturer. Upon receiving orders from the pharmacies, goods will be sent to them COD which will eliminate
any accounts receivable issues. Under this agreement, ScripsAmerica agreed to provide purchase order financing to WholesaleRx and
purchased a 20% equity stake in WholesaleRx. In consideration for providing financing for WholesaleRx’s purchaser orders,
and to cover the Company’s costs in administering the purchase order financing,



Subsequently to November
1, 2013, the Company and Wholesale Rx made certain changes to the November 1, 2013 agreement, whereby the Company’s investment
was reduced to $275,000, the Company’s ownership interest was reduced to 14%, and the Company’s monthly fee was reduced
to 14% of the gross profit for the preceding month if the credit line was used during such prior month but only 8% if the credit
line was not used in such prior month. The subsequent amendments to the arrangement have not been reduced to a formal, written
agreement and some of the arrangements are oral amendments. The parties are operating under their understanding of the current
arrangement and Wholesale Rx is current in its obligations.



On January 29, 2014,
Implex Corporation, which is owned by our legal counsel and related party, Richard C. Fox, entered into a stock purchase agreement
to acquire from the owner of the specialty pharmacy Main Avenue Pharmacy, Inc., located in Clifton, New Jersey, for $550,000. The
purchase price will be paid in installments and the shares will be held by an escrow agent until the final payment is made. Under
the purchase agreement, the final agreement was made in July 11, 2014. The Company will also provide funding (as a loan or advance),
to the extent not covered by the funds of the pharmacy, to pay all costs and expenses incurred in the operation of Main Avenue
Pharmacy. Since ScripsAmerica will have significant controlling interest via related party relationships and will be the primary
beneficiary, the Company will consolidate financial activities of Main Avenue Pharmacy, Inc.



Main Avenue Pharmacy,
Inc. is a specialty pharmacy which is license to prepare and fulfill prescription orders via a topical cream format versus pill
format. A prescription comes from a doctor for their patient to be applied via a topical cream, the cream format is use because
the patient may have some restrictions taking pills for a variety of reasons, and a patient may require allergen-free medication
and some patients may absorb or excrete mediation abnormally. Another benefit of a prescription cream is there is less chance of
overdose or adverse reaction to drugs in the cream format. Each prescription is individually mixed with the prescribed drugs into
a topical cream format which can be applied directly to a particular area on the body.



Operating Activities



Net cash used by operating
activities was approximately $687,000 for the first six months of 2014 as compared to cash used by operating activities of approximately
$62,000 for the same period in 2013, an increase in cash used by operations of approximately $625,000. The increase in the use
of cash for the first six months of 2014 as compared to the same period in 2013 resulted primarily from our net loss adjusted for
non-cash charges and changes in components of working capital. Our use of issuing common stock for services had a significant impact
the Company reducing use of cash from operating activities in both years.



Investing Activities



In six month period ended June 30, 2014,
the Company made the following investments:



The payment of the
purchase price of $550,000 for the acquisition of MAvP was made as follows: The initial installment payment of $475,000 was made
via a $175,000 payment directly from ScripsAmerica on Implex’s behalf and $300,000 in borrowings obtained by Implex (which
consisted of a, $250,000 loan from a current stockholder and $50,000 loan from a related party). This $300,000 loan is considered
non-cash transaction since the loan payment was paid on Implex’s Corporation’s behalf. The $75,000 installment payment
was in second quarter 2014. MAvP is specialty pharmacy which is license to prepare and fill prescription via a topical cream format
versus pill format. MAvP was basically a dormant business and had no significant sales in 2014, but we acquired the Company for
its Pharmacist and license. Since ScripsAmerica will have significant controlling interest via related party relationships and
will be the primary beneficiary, the Company will consolidate financial activities of Main Avenue Pharmacy.



Our PIMD subsidiary has made a $70,000
deposit for a 100% ownership in a start-up limited liability company based in Florida named Pharma-Net America LLC (“Pharma-Net”).
Pharma-Net business purpose is to provide doctor’s offices with special software that would act as a platform/link/network
with the PBMs and doctors. It will provide 3rd party access for doctors, payers (insurance companies) and pharmacies.
The agreement and final terms have not been signed or finalized by either party as of August 14, 2014. The Company’s interest
in Pharma-Net is currently in other assets in our June 30, 2014 condensed consolidated balance sheet





44





Financing Activities



Net cash provided
by financing activities was approximately $1,254,000 for first six months of fiscal year 2014 compared to approximately $61,000
for the same period in 2013. Financing activities for six month period ended June 30, 2014 consisted of the following: the Company
(a) sold shares of common stock for gross proceeds of $1,500,000, (b) sold convertible notes payables for gross proceeds of $115,000,
(c) received $92,000 for a $100,000, nine month note payable which is being paid daily, (d) paid down the balance on convertible
notes in the amount of $321,000, (e) paid down $60,000 on a four year term loan, (f) paid off the year-end balance under our line
of credit in the amount of $99,000 and (g) a distribution of equity in our PIMD subsidiary of approximately $114,000 and h) new
one year note borrowings of $325,000 (of which $75,000 from related party). Non-cash transaction include the borrowing by Implex
of $250,000 and $50,000 for a term of one year from a stockholder and a related party, respectively, which are included in the
condensed consolidated balance sheet as of June 30, 2014.



Recent Financial Events



During the six months period ended
June 30, 2014, the Company issued 24,917,066 restricted shares of common stock for cash proceeds of $1,425,325 in various private
subscription agreements. Subscription price issued in a range from $0.05 to $.0633



During the six months period ended
June 30, 2014, the Company issued 4,329,334 restricted shares of its common stock to non-employees for services rendered during
2014. These services were valued at $497,520 and the Company charged its operations in 2014.



During the six months period ended
June 30, 2014, the Company issued 68,000 restricted shares of its common stock in connection with payments provided to members
of the board of directors during 2014. The Company charged its operations $6,840 in 2014.



During the six months period ended
June 30, 2014, the Company issued 1,740,550 restricted shares of its common stock in connection with financing costs during 2014.
The Company charged to financing cost in the statement of operations $224,022 in 2014.



Pursuant to its the settlement
agreement with GEM Global Yield Fund Limited (as described below), (a) the Company sold 887,280 shares of its common stock to GEM
for a purchase price of $125,381, and (b) GEM concurrently assigned to Steve Urbanski the right to receive the 887,280 shares of
the Company's common stock upon the receipt by the Company of the purchase price (net of $15,211 which was paid to GEM's legal
counsel).   The Company issued the 887,280 shares to Mr. Urbanski on January 22, 2014.



During the six months
period ended June 30, 2014, the Company issued 756,400 restricted shares of its common stock
to non-employees for payment of stock to be issued for cash received in 2013.



During the six months period ended June 30, 2014, the
Company issued 705,703 restricted shares of its common stock to non-employees for payment of royalties. The payment of royalties
was valued at $86,793.



During the six months period ended June 30, 2014, the
Company issued 8,563,213 shares of its common stock for the conversion of approximately $597,821 of principal of our convertible
notes payable. These shares have a fair value of $1,182,278.



On April 21, 2014, 250,000
common stock shares were returned to the Company by Sean R. Fitzgibbons and were cancelled by the Company. These shares were issued
in 2013 and were valued at $32,500. The Company reversed the expense that was recorded to the statement of operation in 2013 and
the second quarter of 2014.



From July 1, 2014 until August
13, 2014, we received $58,260 in cash in a private subscription sale in which we issued 1,010,350 shares of common stock. The private
subscription purchase price had a range of $0.5 per share to $.06 per share



Commitments



The holders of a
$250,000 convertible note which was converted into 2,000,000 shares of our common stock on March 12, 2012, are entitled to a 4%
royalty from the sales of our orally disintegrating rapidly dissolving 80mg and 160mg pain relief tablets. The royalty payments
associated with this agreement have no minimum guarantee amounts and royalty payments will end only if the product line of Acetaminophen
rapidly dissolving 80mg and 160mg tablets is sold to a third party. There have been no shipments through June 30, 2014 applicable
to this royalty.



45







The holder of a $320,000
note payable are entitled to a to 1.8% royalty payment on the first $10 million of sales of a generic prescription drug under distribution
contracts with Federal government agencies and 0.09% on the next $15 million of such sales. Payments for royalties will be paid
quarterly. During fiscal year 2013 the Company issued the holder of this note 1,114,672 shares of its common stock for payment
of royalty expense. In addition a holder of a $50,000 note payable, a related party, is entitled to a 0.9% on the first $25 million
of sales of a generic prescription drug under distribution contracts with Federal government agencies. During the six months ended
June 30, 2014, the Company also made cash payments for royalty expense associated with one of the notes in the amount of $133,572,
and issued 584,276 shares of its common stock which have a fair value of $72,030 for payment of royalty expense and recorded a
royalty expense of $213,000. For the six months ended June 30, 2013 the Company issued 513,834 shares of common stock as payment
for the royalty expense and the Company recorded an expense of $132,730.



On November 4, 2013,
the Company entered into a securities purchase agreement with Seaside 88, L.P. ("Seaside") pursuant to which the Company
agreed to sell, and Seaside agreed to purchase, up to seven million (7,000,000) restricted shares of the Company’s common
stock in one or more closings. The number of shares to be purchased at each closing will be equal to ten percent (10%) of the aggregate
trading volume of shares of the Company’s common stock during normal trading hours for the 20 consecutive trading days prior
to each closing. The purchase price for the shares to be purchased by Seaside at each closing will be equal to sixty percent (60%)
of the average of “daily average stock price” for the five (5) trading days preceding the date of the closing. The
“daily average stock price” for a trading day is equal to the quotient of (a) the sum of the highest and lowest sale
price for the trading day divided by (b) two.



The Company had an
initial closing under the securities purchase agreement on November 4, 2013, at which the Company sold to Seaside 1,152,514 restricted
shares of its common stock for gross proceeds of $200,537, of which $7,500 was used to pay the legal fees for Seaside and $19,303
was paid for a finder’s fee. The Company also had closings on (i) December 4, 2013, at which the Company sold to Seaside
841,426 restricted shares of common stock for gross proceeds of $90,926 of which $2,500 was used to pay the legal fees for Seaside,
(ii) January 6, 2014, at which the Company sold to Seaside 928,670 restricted shares of common stock for gross proceeds of $69,093
of which $2,500 was used to pay the legal fees for Seaside, (iii) February 4, 2014, at which the Company sold to Seaside 1,342,070
restricted shares of common stock for gross proceeds of $142,527, (iv) April 8, 2014, at which the Company sold to Seaside 925,153
restricted shares of common stock for gross proceeds of $61,060 and (v) May 5, 2014, at which the Company sold to Seaside 781,840
restricted shares of common stock for gross proceeds of $48,317.



On February 24, 2014,
the Company issued 1,615,550 restricted shares of common stock to Ironridge Global Partners LLC pursuant to an adjustment provision based
on the trading price of the Company’s common stock which provision was contained in a stipulation contained in the court
order issued by the California Superior Court for the County of Los Angeles (“California State Court”) on November
8, 2013. These shares were issued as part of the settlement ofbona fide claims against the Company which were purchased
by Ironridge from various creditors of the Company.







46





On October 15, 2013
the Board of Directors approved revise compensation for the CEO, Robert Schneiderman and the CFO, Jeffrey Andrews, contingent on
the Company raising $4 million via equity, debt or a combination of both. Contingent on raising the $4 million compensation would
be as follows: CEO annual salary $200,000, CFO annual salary $192,000, both would receive 50,000 options quarterly at 120% of market
price on the date granted with a one year vesting period. As of August 13, 2014, the $4 million raise has not been reached and
consequently these conditions are not effective.



On October 15, 2013
the Board of Directors approved additional compensation to Board members in the form of issuance of stock options. Board members
shall be granted 100,000 stock options for each year served commencing in 2012. The chairman of the Board shall be granted 135,000
for each year served. Effective date is October 7, 2013, options vest immediately and option price will be 110% of the market price
on the grant date. Additionally for each board meeting 10,000 options will be granted and for each committee meeting 5,000 options
will be granted.



In November our subsidiary
PIMD entered into a 25 month operating lease for a distribution facility in Doral Florida. The lease begins January 1, 2014 and
expires January 31, 2016, monthly rent is $4,585 for the first thirteen months with the first month free and $4,724 for the last
twelve months. The total minimum lease payments are $111,714, and for 2014 they are $50,441, for 2015 they are $56,548, and for
2016 they are $4,724.



In January 2013,
the Company entered into consulting agreement with Implex Corporation, a consulting firm owned by the Company’s legal counsel.
The initial agreement terms are for six months and the agreement shall automatically be renewed for a successive month period(s)
until one party gives written notice to terminate the agreement thirty days prior to the next termination date. Fees are $25,000
per month and such fees shall be paid in shares of the Company’s common stock rather than cash so as to permit the Company
to conserve cash.



During the six month period ended June
30, 2014, the Company purchased product from three suppliers, and in first and second quarters 2013 the Company purchased 100%
of its product packaging from its Contract Packager. A disruption in the availability of product packaging from the Company’s
suppliers could cause a possible loss of sales, which could affect operating results adversely.



For the three month and six months period
ended June 30, 2014, no customer accounted for more than 10% of revenue. For the three month period ended June 30, 2013, the Company
derived approximately $91,600 or 100% of its revenue from one customers. For the six month period ended June 30, 2014, the Company
derived revenue from two customers with one customer accounting for 60% of the revenue.



As of June 30, 2014, the Company had one
customer representing 100% of our accounts receivable-related party, and numerous customers with none more than 10% for accounts
receivable-trade. As of December 31, 2013, the Company had one customer representing 100% of our accounts receivable-related party,
and no customers in our accounts receivable-trade.



Ironridge
Global IV, Ltd – legal action



As
previously disclosed by the Company in Form 8-K filed on November 19, 2013, the we issued to Ironridge Global IV, Ltd. (“Ironridge”)
8,690,000 shares of its common stock in settlement of bona fide claims against the Company which were purchased by Ironridge from
various creditors of the Company (the “Claim Amount”). The shares issued to Ironridge
were freely tradable and exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”)pursuant to Section 3(a)(10) of the Securities Act. Pursuant to the court order issued
by the  California Superior Court for the County of Los Angeles (“California State Court”) on November 8, 2013,
the shares of the Company’s common stock were deemed issued in settlement of the claims (subject to certain adjustments based
on the future trading value of the stock) when delivered to Ironridge. The number
of shares issued to Ironridge is subject to an adjustment based on the trading price of our stock such that the value of the shares
is sufficient to cover the Claim

Amount,
a 10% agent fee amount and Ironridge’s reasonable legal fees and expenses ( the “Final Amount”), which Final
Amount is equal to $766,238.29.



On
February 10, 2014, Ironridge made a request for, and we issued, an additional 1,615,550 shares of the Registrant’s common
stock as a result of the adjustment provisions under the Stipulation in the court order issued by the California State Court.



On
April 4, 2014, Ironridge requested even more shares pursuant to the adjustment provision under the Stipulation in the court
order issued by the California State Court. This time their request was for an additional 1,646,550 shares of the
Company’s common stock. We declined to issue these additional shares because Ironridge had already received, to that
date, approximately 10,305,550 shares of free trading stock with a market value of approximately $1.2 million (based on the
closing stock price on May 6, 2012), in settlement of a Final Amount of $766,238.29.
The shares issued to Ironridge represent a premium of 48% to the Final Amount.





47







On
May 6, 2014, Ironridge submitted an ex parte application to the California State Court to compel the issuance of the 1,646,550
shares requested from the Company on April 4, 2014, and the California State Court without a hearing entered an order to compel
the Company to issue the additional shares. On the same day, the wefiled a notice of appeal
of the California State Court’s order. The appeal automatically stays enforcement of the California State Court’s May
6 order.



We believes that Ironridge
is not entitled to additional shares as it has received a significant premium on the Final Amount which Ironridge itself had declared
to the California State Court served as the basis of the adjustment mechanism for the number of shares issued based on the Company’s
stock price. We will vigorously pursue the appeal, and reversal, of the California State Court order.



The Company accrued
the potential issuance of these shares and have expensed $164,655 to financing cost in the financial statement as of June 30, 2014,
as well as, reserving 1,646,550 shares of the Company’s common stock.



INVESTMENTS



WholesaleRx



As of June 30, 2014, the Company
has a 14% non-controlling ownership interest in WholesaleRx, Inc., which represents over 700 such independent pharmacy operations
and is DEA and State-licensed to store and distribute controlled substances (which are drugs that have the potential for abuse
or dependence and are regulated under thefederal Controlled Substances Act).
WholesaleRxorders the goods from the manufacturers and has them shipped
to its warehouse facility. WholesaleRx thenships thegoods to the
pharmacies in the bottles as received by the manufacturer. Upon receiving orders from the pharmacies, goods will be sent to them
COD which will eliminate any accounts receivable realization issues. Prior to November 1, 2013, the Company and WholesaleRx had
an oral agreement to pursuant to which the Company secured third party financing to fund WholesaleRx’s purchase orders and
the Company would receive 12.5% of the WholesaleRx’s “gross profit” for the prior month (which gross profit would
consist of (i) sales to all customers minus (ii) cost of goods sold, freight in (to WholesaleRx), credits and allowances).



Per the November 1, 2013 agreement
the Company agreed to make an equity investment of $400,000 for 12,000 shares, which will represent a 20% ownership interest in
WholesaleRx. and to provide purchase order financing. WholesaleRx will pay the Company, on or before the 15th calendar day of each
month, 14% of the gross profit (as described above) for the prior calendar month. If WholesaleRx is late in paying such 14% fee,
then the amount owed will accrue interest at the rate of 18% per annum until paid. The subscription amount was to be paid in three
installments, $150,000 upon execution of the agreement, $125,000 on December 31, 2013 which was paid in January 2014 and $125,000
on February 15, 2014, which has not been made as of August 14, 2014.



Subsequent to November 1, 2013,
the Company and Wholesale Rx made certain changes to the agreement, whereby the Company’s investment was reduced to $275,000,
and the Company’s ownership interest was reduced to 14%, and the Company’s monthly fee was reduced to 14% of the gross
profit for the preceding month if the purchase order financing was used during such prior month but only 8% if the purchase order
financing was not used in such prior month. The subsequent amendments to the arrangement have not been reduced to a formal, written
agreement and some of the arrangements are oral amendments. The parties are operating under their understanding of the current
arrangement and Wholesale Rx is current in its obligations.



This investment was
originally accounted for under the equity method because the Company expected the investment to exceed 20%. Our initial
investment of $275,000 was increased for the equity earnings of our 14% interest from the date of initial investment to March
31, 2014, to a total of $278,265. It was originally anticipated that the investment would be 20% or possibly greater so we
had recorded the investment using the equity method but circumstances have changed. We do not have significant influence and
management has determine that the investment will not be greater than 20% so the Company will record this investment using
the cost method .





48





VARIABLE INTEREST ENTITIES (VIE)



P.I.M.D International, LLC



The Company is the primary beneficiary
of P.I.M.D. International, LLC (“PIMD”), a start-up limited liability
company based in, and proposing to do business in, Florida, which is considered to be a Variable Interest Entity (VIE). Our determination
that PIMD is a variable interest entity (VIE) was based on the fact that PIMD’s equity at risk is insufficient to finance
its activities. The Company would be considered the primary beneficiary of the VIE as it has both of the following characteristics:
(a) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (b) the
obligation to absorb losses of the VIE that could potentially be significant or the right to receive benefits from the VIE that
could potentially be significant. ScripsAmerica receives a majority of PIMD’s expected profits and losses. We also will provide
the primary financing for inventory purchases through related parties.



The assets and liabilities and
revenues and expenses of PIMD have been included in the accompanying consolidated financial statements. At November 1, 2013, PIMD’s
beginning capital was $41,000 and they had accumulated deficit of $49,607. During 2014 the non-controlling interest in PIMD made
a distribution of $114,237, and in 2013 made a distribution of $119,650 to the shareholders of PIMD making the total equity attributed
to non-controlling interest to be a deficit of $305,203.



Details of the loan agreement
are as follows: In December, 2013, the Company revised an October 2013 purchase agreement to acquire 90% of the Membership Units
in PIMD. Although founded approximately four (4) years ago, PIMD has had no sales, but has the necessary licenses for operation
of a drug wholesale operation. The purchase of the Membership Units in PIMD was subject to certain conditions precedent, of which
the most important was that the Company obtain the necessary licenses from Florida (and from the DEA) for the ownership of a drug
distribution company like PIMD. However, it was determined that securing the licenses was going to require a substantially longer
period of time than the parties had anticipated. Consequently, in order to preserve the business opportunity, it was necessary
to change the structure of the relationship. Accordingly, the original purchase agreement was cancelled and voided. The funds already
advanced by ScripsAmerica to PIMD were converted to a loan and the relationship between PIMD and ScripsAmerica became a Sourcing
and Marketing Agreement. Implex Corporation, owned by the Company’s legal counsel, who is a Florida resident, has stepped
in to assist with any licensing issues. The Company believes that if licensing is required it will be that of Implex, based in
Florida and with a Florida owner.



Under this Sourcing and Marketing
Agreement, which the Company entered into with PIMD in December 2013, the Company will help PIMD to secure (1) advantageous sources
of drugs and (2) marketing and sales assistance in selling the drugs. For these services, the Company will receive a “Sourcing
and Marketing Fee” which is 45% of the “Calculated Basis” to be calculated under a formula in the Sourcing and
Marketing Agreement. PIMD had no significant sales for the first six month period ended June 30, 2014.



PIMD unaudited financial information
as of June 30, 2014 and December 31, 2013 is as follows:



|                     |  | As of 
June 30, 2014 |         |  | As of 
December 31, 2013 |  
|-------------------- |  | -------------------- | ------- |  | ------------------------ | -
|                     |  |                      |         |  |                          |  
|Current assets       |  | $                    | 109,000 |  |                          | $
|Total assets         |  | $                    | 132,000 |  |                          | $
|Liabililties         |  | $                    | 33,000  |  |                          | $
|Stockholders' Equity |  | $                    | 99,000  |  |                          | $



Implex, a related party, borrowed
$272,000 from ScripsAmerica at an interest rate of 2% and it has re-loaned the funds to PIMD at an interest rate of 5%. Implex
will keep the 3% differential. The Company’s loan to Implex and Implex’s loan to PIMD are both for a 5-year period.
Implex will be entering into a “Business Development and Retention Agreement” with PIMD to assist PIMD with the development
of its business.





49





Business
Combination and Intangible Asset



On January 29, 2014, Implex
Corporation, which is owned by our legal counsel and related party, Richard C. Fox, entered into a stock purchase agreement to
acquire from its owner the specialty pharmacy Main Avenue Pharmacy, Inc.(“MAvP”), located in Clifton, New Jersey, for
$550,000. The purchase price was paid in installments and paid in full as of June 30, 2014. Since ScripsAmerica will have significant
controlling interest via related party relationships and will be the primary beneficiary, the Company consolidated financial
activities of Main Avenue Pharmacy, Inc.



Under the purchase agreement with
the owner of Main Avenue Pharmacy, Implex acquired the workforce (3 employees) and the applicable state pharmacy licenses but the
purchase did not include cash, receivables or any existing customer lists of the owner. It also excluded any existing liabilities
prior to January 29, 2014. The total purchase price of $550,000 was preliminary allocated to MAvP’s net tangible and intangible
assets based on the estimated fair value as of January 29, 2014. Excess purchase consideration, if any, was allocated to goodwill.
All other tangible assets acquired had no significant fair value. This preliminary valuation determined that the only intangible assets acquired were the licenses with an estimated value of $12,000
and a one year life. As a result, $538,000 was allocated to goodwill for the excess of the purchase price. The Company amortized
the intangible assets for the licenses beginning in March 2014 and has recorded an amortization expense of $4,000 as of June 30,
2014. Intangible assets with indefinite lives are not amortized (Goodwill); however, they are tested annually for impairment and
when events or circumstances indicate change in fair value.



The
payment of the purchase price of $550,000 is as follows: The initial installment payment of $475,000 was made via a
$175,000 payment directly from ScripsAmerica on Implex’s behalf and $300,000 in borrowings obtained by Implex, 250,000
from a current stockholder and $50,000 from a related party (See note 10 for note details). A $60,000 installment payment was
made in April 2014 and the final payments were made by June 30, 2014. MAvP is a specialty
pharmacy which is licensed to prepare and fill prescriptions via a topical cream format versus pill format. MAvP was
basically a dormant business and had no significant sales prior to the acquisition in 2014, and MAvP was acquired for
its Pharmacist and license. Since ScripsAmerica will have significant controlling interest via related party relationships
and will be the primary beneficiary, the Company will consolidate financial activities of Main Avenue Pharmacy.



The Company’s condensed
consolidated financial statements for the six months ended June 30, 2014 include the results of Main Avenue Pharmacy since the
date of acquisition. The entire product revenue and product cost of sales in the June 30, 2014 statement of operations is related
to Main Avenue Pharmacy. Unaudited proforma results for the six months period ended June 30, 2014 is as follows



|                     |  | As of 
June 30, 2014 |          
|-------------------- |  | -------------------- | ---------
|                     |  |                      |          
|Current assets       |  | $                    | 1,339,000
|Total assets         |  | $                    | 1,339,000
|Liabilities          |  | $                    | 884,000  
|Stockholders' Equity |  | $                    | 455,000  



The December 31, 2013, amounts
were not presented because the amounts were immaterial and unavailable because the business was dormant for the past twelve months.



The original agreement
date February 20, 2014 has been amended so that Scrips for its management services provided by the amended
Business Management Agreement, effective April 1, 2014. ScripsAmerica will receive 100% of the profits and losses of Main Ave
Pharmacy as defined by GAAP for profits and losses, and since ScripsAmerica has controlling interest in Implex, management
has consolidated the activities of Main Avenue Pharmacy into our financial statements in 2014.



50







Off-Balance Sheet Arrangements



We currently have no off-balance sheet
arrangements.



Critical Accounting Policies and estimates



Principles
of Consolidation - The condensed consolidated financial statements include the accounts
of the Company and all of its subsidiaries in which a controlling interest is maintained. All significant inter-company accounts
and transactions have been eliminated in consolidation. Investments which is considered to be a Variable Interest Entity (VIE)
the Company would be considered the primary beneficiary of the VIE as it has both of the following characteristics: (a) the power
to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (b) the obligation
to absorb losses of the VIE that could potentially be significant or the right to receive benefits from the VIE that could potentially
be significant. Company ownership is less than 100%, the outside stockholders’ interests are shown as non-controlling interest.
Investments in entities in which the Company does not have a controlling financial interest, but over which we have significant
influence are accounted for using the equity method. Investments in which we do not have the ability to exercise significant influence
are accounted for using the cost method. For those consolidated subsidiaries where Our equity investment is classified in “Equity
Investments” on the balance sheet.



Use of Estimates - The preparation
of financial statements in conformity with accounting principles generally accepted in the United States requires management to
make estimates and assumptions that affect the amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the balance sheet and reported amounts of revenues and expenses during the reporting period. Actual results could
differ from those estimates.



Revenue Recognition– Product revenue associated with our pharmaceutical
distribution services and our specialty pharmacy business is recognized when product is shipped from a contract packager or our
pharmacy to our customers’ warehouses or directly to a patient, and is adjusted for anticipated charge backs from our customers
which include inventory credits, discounts or volume incentives. These charge back costs are received monthly from our customers’
and the sales revenue and accounts receivables are reduced accordingly based on historical experience, customer contract programs,
product pricing trends and the mix of products shipped.



Purchase
orders from our customers generate our shipments, provide persuasive evidence that an arrangement exists and that the pricing is
determinable. The credit worthiness of our customers assures that collectability is reasonably assured.



We also
recognize revenue from our contract packager on a net basis according to ASC 605-45, Revenue Recognition: Principal Agent Considerations.Since we are not deemed to be theprincipal in these sales transactions we do not report the transaction on a gross
basis in our statement of operations. These sales transactions relate to a contract that a Contract Packager has obtained with
a government agency. The revenue is reported in a separate line in the statement of operations as “Product revenues net from
Contract Packager”, and the gross sales are reduced by the cost of sales fees from our Contract Packager.



Commission
fees are recognized when earned on shipments of generic pharmaceutical and OTC products by our pharmaceutical partner, which is
DEA and State-licensed to store and distribute controlled substances. Per our agreement with our pharmaceutical partner, the Company
will earn a 14% commission on the gross profit (sales less cost of goods sold, freight in and credits and allowances) of products
shipped to independent pharmacies



Accounts Receivable Trade, net-Accounts
receivable are stated at estimated net realizable value.  These receivable are from Main Avenue Pharmacy, which we manage
under an agreement with the sole shareholder, Implex Corporation, and we only ship prescription products to patients upon payment
approval by the patients’ insurance company, payments are usually received with 30 days of product being shipped. As of June
30, 2014, a $10,000 reserve for doubtful accounts was recorded and December 31, 2013, no allowance for doubtful accounts was deemed
necessary.



Intangible assets - The Company
amortizes the cost of other intangibles over their useful lives unless such lives are deemed indefinite. Amortizable intangible
assets are tested for impairment based on undiscounted cash flows and, if impaired, written down to fair value based on either
discounted cash flows or appraised values. We review intangible assets for impairment annually or when events or circumstances
indicate that their carrying amount may not be recoverable. Intangible assets with indefinite lives are not amortized; however,
they are tested annually for impairment and written down to fair value as required.



Impairment of Long-Lived Assets



We review the carrying values of property and equipment and
long-lived intangible assets for impairment whenever events or changes in circumstances indicate that their carrying values may
not be recoverable. Such events or circumstances include the following:



| | o | significant declines in an asset’s market price;
| | - | ------------------------------------------------

| | o | significant deterioration in an asset’s physical condition;
| | - | -----------------------------------------------------------



51







| | o | significant changes in the nature or extent of an asset’s use or operation;
| | - | ---------------------------------------------------------------------------

| | o | significant adverse changes in the business climate that could impact an asset’s value, including adverse actions or
assessments by regulators;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------

| | o | accumulation of costs significantly in excess of original expectations related to the acquisition or construction of an asset;
| | - | ------------------------------------------------------------------------------------------------------------------------------

| | o | current-period operating or cash flow losses combined with a history of such losses or a forecast that demonstrates continuing
losses associated with an asset’s use; and
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | o | expectations that it is more likely than not that an asset will be sold or otherwise disposed of significantly before the end
of its previously estimated useful life.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



If impairment indicators are present, we
determine whether an impairment loss should be recognized by testing the applicable asset or asset group’s carrying value
for recoverability. This test requires long-lived assets to be grouped at the lowest level for which identifiable cash flows are
largely independent of the cash flows of other assets and liabilities, the determination of which requires judgment. We estimate
the undiscounted future cash flows expected to be generated from the use and eventual disposal of the assets and compare that estimate
to the respective carrying values in order to determine if such carrying values are recoverable. This assessment requires the exercise
of judgment in assessing the future use of and projected value to be derived from the eventual disposal of the assets to be held
and used. If the carrying value of the assets is not recoverable, then we record a loss for the difference between the assets’
fair value and respective carrying value. We believe our current assumptions and estimates are reasonable and appropriate. Unanticipated
events and changes in market conditions, however, could affect such estimates, resulting in the need for an impairment charge in
future periods



Receivable – Contract Packager- The Company has receivables from Marlex Pharmaceuticals, Inc. (“Contract Packager”), in the amount of $1,157,926
and $1,088,598 at June 30, 2014 and December 31, 2013, respectively. This receivable consists of purchase order (PO) financing,
revenue earned for U.S. government sales and monthly payments due under the settlement agreement entered into on September 6, 2013.
Under the September 6, 2013 settlement agreement, the Company is entitled to recover $408,150 of these receivables of which $244,893
has been recovered as of June 30, 2014. Consequently, the reserved amount has been offset for this recovery. Since collectability
is still not certain on the remaining receivable, we have fully reserved it as of June 30, 2014 and December 31, 2013.



Receivable – related party
–WholesaleRx, our pharmaceutical partner in which we have a 14% investment, is an entity from which we
recognize Commission fees when earned on shipments of generic pharmaceutical and OTC products by our pharmaceutical partner, which
is DEA and State-licensed to store and distribute controlled substances. The receivable consists of PO financing, and revenue earned
for commission sales agreement entered into in November 1, 2013 (as subsequently amended by oral agreements). No reserve for un-collectability
due to short history and no prior bad debts.



Derivative Financial Instruments-Derivative financial instruments consist of financial instruments or other contracts that contain a notional amount and
one or more underlying values (e.g. interest rate, security price or other variable) that require no initial net investment and
permit net settlement. Derivative financial instruments may be free-standing or embedded in other financial instruments. Further,
derivative financial instruments are, initially, and subsequently, measured at fair value and recorded as liabilities or, in rare
instances, assets. The Company generally does not use derivative financial instruments to hedge exposures to cash-flow, market
or foreign-currency risks. However, the Company has entered into various types of financing arrangements to fund its business capital
requirements, including convertible debt and other financial instruments. These contracts require evaluation to determine whether
derivative features embedded in host contracts require bifurcation and fair value measurement or, in the case of freestanding derivatives
(principally warrants) whether certain conditions for equity classification have been achieved. In instances where derivative financial
instruments require liability classification, the Company is required to initially and subsequently measure such instruments at
fair value. Accordingly, the Company adjusts the fair value of these derivative components at each reporting period through a charge
to income until such time as the instruments acquire classification in stockholders’ deficit.



Derivative financial instruments are initially
recorded at fair value and subsequently adjusted to fair value at the close of each reporting period. The Company estimates fair
values of derivative financial instruments using various techniques (and combinations thereof) that are considered to be consistent
with the objective measuring fair values. In selecting the appropriate technique, management considers, among other factors, the
nature of the instrument, the market risks that it embodies and the expected means of settlement. For less complex derivative instruments,
such as free-standing warrants, the Company generally uses the Black-Scholes-Merton option valuation technique because it embodies
all of the requisite assumptions (including trading volatility, dividend yield, estimated terms and risk free rates) necessary
to fair value these instruments. Estimating fair values of derivative financial instruments requires the development of significant
and subjective estimates that may, and are likely to, change over the duration of the instrument with related changes in internal
and external market factors. In addition, option-based techniques are highly volatile and sensitive to changes in the trading market
price of our common stock, which has a high-historical volatility. Since derivative financial instruments are initially and subsequently
carried at fair values, our income (loss) will reflect the volatility in these estimate and assumption changes.



52







Fair Value Measurements-The
Company follows the provision of ASC No. 820, Fair Value Measurements and Disclosures(“ASC 820”).  ASC
820 clarifies that fair value is an estimate of the exit price, representing the amount that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between market participants (i.e., the exit price at the measurement
date) and provides for use of a fair value hierarchy that prioritizes inputs to valuation techniques used to measure fair value
into three levels:



Level 1: Unadjusted quoted
prices in active markets for identical assets or liabilities.



Level 2: Input other than
quoted market prices that are observable, either directly or indirectly, and



reasonably available.  Observable
inputs reflect the assumptions market participants would use in pricing the asset or liability and are developed based on market
data obtained from sources independent of the Company.



Level 3: Unobservable inputs
reflect the assumptions that the Company develops based on available information about what market participants would use in valuing
the asset or liability.



An asset or liability’s level within
the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.  Availability
of observable inputs can vary and is affected by a variety of factors.



The Company uses judgment in determining the fair value of assets
and liabilities, and level 3 assets and liabilities involve greater judgment than level 1 and level 2 assets and liabilities.



The carrying values of accounts receivable, inventory,
accounts payable and accrued expenses, royalty payable, obligation due factor, and notes payable approximate their fair values
due to their short-term maturities. The carrying value of the Company’s investments approximate fair value because the investments
were made in 2013 and the carrying value includes the Company’s share of the investee’s earnings from the date of acquisition.
(See Note 6.) The carrying value of the Company’s long-term debt approximates fair value due to the borrowing rates currently
available to the Company for loans with similar terms. See note 13 for fair value of derivative liabilities.



Stock-Based Compensation– Compensation
expense is recognized for the fair value of all share-based payments issued to employees. As of June 30, 2014 and December 31,
2013, the Company issued 10,400,000 and 5,015,000, respectively for employee stock options that would require calculating the fair
value using a pricing model such as the Black-Scholes pricing model. .



For non-employees, stock grants issued
for services are valued at either the invoiced or contracted value of services provided, or the fair value of stock at the date
the agreement is reached, whichever is more readily determinable. For stock options and warrants granted to non-employees, the
fair value at the grant date is used to value the expense. In calculating the estimated fair value of its stock options and warrants,
the Company used a Black-Scholes pricing model which requires the consideration of the following seven variables for purposes of
estimating fair value:



·the stock option or warrant exercise price,

·the expected term of the option or warrant,

·the grant date fair value of our common stock, which is issuable upon exercise of the option or warrant,

·the expected volatility of our common stock,

·expected dividends on our common stock (although we do not anticipate paying dividends in the foreseeable future),

·the risk free interest rate for the expected option or warrant term, and

·the expected forfeiture rate.



Earnings (Loss) Per Share
- Basic net income (loss) per common share is computed using the weighted average number of common shares outstanding during the
period. Diluted earnings per share include additional dilution from common stock equivalents, such as stock issuable pursuant to
the exercise of stock warrants, options, convertible notes payable and Series A convertible preferred shares. Common stock equivalents
are not included in the computation of diluted earnings per share when the Company reports a loss because to do so would be anti-dilutive.
As of June 30, 2014, common stock equivalents consisted of preferred stock convertible into 5,980,504 shares of common stock, warrants
convertible into 5,228,572 shares, options convertible into 10,400,000 shares and notes payable convertible into 4,546,494 shares
of common stock.



|ITEM 4. | CONTROLS AND PROCEDURES
|------- | -----------------------



(a)Disclosure
Controls and Procedures.    Our management, with the participation of our principal executive officer (chief
executive officer) and principal financial officer (chief financial officer), conducted an evaluation of the effectiveness of the
design and operation of our 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”), as of June 30, 2014 (the “Evaluation Date”).  Based
on this evaluation, our chief executive officer and chief financial officer concluded that as of the Evaluation Date, our disclosure
controls and procedures are ineffective.



(b)Internal
Controls Over Financial Reporting.  There was no change in our internal control over financial reporting (as such
term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates
that has materially affected or is reasonably likely to materially affect our internal control over financial reporting.



53







PART II - OTHER INFORMATION



|ITEM 1. | LEGAL PROCEEDINGS
|------- | -----------------



None.





|ITEM 1A. | RISK FACTORS
|-------- | ------------



Not applicable.



|ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|------- | -----------------------------------------------------------



On April 1, 2014, the
Company issued 8,000 restricted shares of its common stock to two Board members for their attendance at committee meetings during
the first quarter of 2014, which shares were valued at $872.



On April 1, 2014, the Company issued an
aggregate of 1,600,000 restricted shares of its common stock to two (2) investors in a private placement of shares. The purchase
price of the shares was an aggregate of $80,000.



On April 3, 2014, the Company issued an
aggregate of 457,099 restricted shares of its common stock to Iconic Holdings, LLC for the
conversion of a note in the principal amount of $54,582.



On
April 3, 2014, the Company issued 189,000 restricted shares of common stock to a note holder as payment of royalties due under
the note.  The royalty payment was in the amount of $22,680.



On April 8, 2014, we issued 925,153 shares
of restricted common stock to Seaside 88, LP pursuant to a Stock Purchase Agreement entered into on November 4, 2013. The purchase
price of the shares was $61,060.



On April 8, 2014, the Company issued 200,000
restricted shares of common stock to an investor in a private placement of shares. The purchase price of the shares was $10,000.



On April 16, 2014, the Company issued an
aggregate of 370,000 restricted shares of common stock to an investor in a private placement of shares. The purchase price of the
shares was $18,500.



On April 25, 2014, the Company
issued 461,662 restricted shares of its common stock to Typenex Co Investment LLC for the conversion of a note in the principal
amount of $50,783.



On April 28, 2014, the
Company issued 28,000 restricted shares of its common stock to four Board members for their attendance at board and committee meetings
during the first quarter of 2014, which shares were valued at $3,080.



On May 5, 2014, we issued 781,840 shares
of restricted common stock to Seaside 88, LP pursuant to a Stock Purchase Agreement entered into on November 4, 2013. The purchase
price of the shares was $48,317.



On May 6, 2014, the Company
issued 153,374 restricted shares of its common stock to Vista Capital Investments LLC for the conversion of a note in the principal
amount of $18,543.



On May 23, 2014, the Company issued
2,000,000 restricted shares of common stock to a consultant for services to be rendered under a consulting agreement. These
services were valued at$220,000.



On May 27, 2014, the Company
issued 393,095 restricted shares of its common stock to Typenex Co. Investment LLC for the conversion of a note in the principal
amount of $39,310.



On
June 2, 2014, the Company issued 63,000 restricted shares of common stock to a note holder as payment of royalties due under the
note.  The royalty payment was in the amount of $7,560.



On June 2, 2014, the Company issued 30,000
restricted shares of common stock to a consultant for investor relations services under a consulting agreement. The services were
valued at $3,600.



54







On June 13, 2014, the Company issued 756,400
shares restricted shares of common stock to Steve Urbanski as part of the settlement agreement the Company entered into with GEM
Global Yield Fund Limited (“GEM”) in January 2014. The subscription price of the stock issued to Mr. Urbanski was $50,296,
which was paid by GEM as part of the settlement agreement.



On June 17, 2014, the Company issued 500,000
restricted shares of common stock to an investor in a private placement of shares. The purchase price of the shares was $25,000.



On June 19, 2014, the Company issued 200,000
restricted shares of common stock to an investor in a private placement of shares. The purchase price of the shares was $10,000.



On June 19, 2014, the
Company issued 306,009 restricted shares of its common stock to Vista Capital Investments, LLC for the conversion of a note in
the principal amount of $37,781.



On June 23, 2014, the Company
issued 169,470 restricted shares of its common stock to Typenex Co. Investment LLC for the conversion of a note in the principal
amount of $22,031.



On
June 30, 2014, the Company issued 600,000 restricted shares of its common stock to a consultant for consulting services.
These services were valued at $66,000.



On
June 30, 2014, the Company issued 580,000 restricted sharesof its common stock to an investor in a private placement of
shares. The purchase price of the shares was an aggregate of $29,000



On April 25, 2014, Company issued options
to purchase 50,000 shares of its common stock to members of the Board of directors for services provided. These options vested
immediately and will expire 3 years from date of issuance. The option price is $.121 and the fair value of these options is $4,841
which was expensed to selling, general and administrative in the second quarter of 2014.



On April 25, 2014, the Company issued stock
options exercisable to purchase 5,010,000 shares of its common stock to two of its executive officers. These options have an excise
price of $0.118, are exercisable immediately and expire on April 25, 2017. The Company’s Chief Executive officer received
options exercisable to purchase 2,510,000 shares of common stock and the Chief Financial Officer received options exercisable to
purchase 2,500,000 shares of common stock. The fair value of these options is $437,620 and the options were expense in our second
quarter 2014.



On June 23, 2014, the Company issued options
exercisable to purchase 250,000 shares of common stock to an employee for services. These options have an excise price of $0.143,
are exercisable immediately and expire on June 23, 2017. The fair value of these options is $28,296 and they were expensed to selling,
general and administrative expenses in second quarter 2014.



The
shares of the Company’s common stock issued and stock options granted during the three month period ended June 30, 2014 as
described above qualified for an exemption under Section 4(a)(2) of the Securities Act because the issuance of shares by the Company
did not involve a public offering. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial
number of persons involved in each of the issuances, size of the offering, manner of the offering and number of shares offered.
Based on an analysis of the above factors, the Company has met the requirements to qualify for exemption under Section 4(a)(2)
of the Securities Act for the above securities transaction.





|ITEM 3. | DEFAULTS UPON SENIOR SECURITIES
|------- | -------------------------------



None.





|ITEM 4. | MINE SAFETY DISLCOSURES
|------- | -----------------------



Not applicable.





|ITEM 5. | OTHER INFORMATION
|------- | -----------------



None.



55







|ITEM 6. | EXHIBITS
|------- | --------



|Number  |  | Description                                                                                                                                      
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------
|3.1     |  | Certificate of Amendment to the Amended and Restated Certificate of Incorporation                                                                
|31.1    |  | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                               
|31.2    |  | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                               
|32.1    |  | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|32.2    |  | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|99.1    |  | Temporary Hardship Exemption                                                                                                                     
|101.INS |  | XBRL Instance Document*                                                                                                                          
|101.SCH |  | XBRL Schema Document*                                                                                                                            
|101.CAL |  | XBRL Calculation Linkbase Document*                                                                                                              
|101.DEF |  | XBRL Definition Linkbase Document*                                                                                                               
|101.LAB |  | XBRL Label Linkbase Document*                                                                                                                    
|101.PRE |  | XBRL Presentation Linkbase Document*                                                                                                             



|* | To be furnished by amendment per Temporary Hardship Exemption under Regulation S-T.
|- | -----------------------------------------------------------------------------------



56







SIGNATURE PAGE



Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.





|                        | SCRIPSAMERICA, INC.                                                                                             
|----------------------- | ----------------------------------------------------------------------------------------------------------------
|                        |                                                                                                                 
|Dated:  August 14, 2014 |                                                                                                                 
|                        | By:  /s/ Robert Schneiderman                                                                                    
|                        | Chief Executive Officer
        (Duly Authorized Officer)                                                       
|                        |                                                                                                                 
|                        |                                                                                                                 
|                        | By:  /s/ Jeffrey Andrews                                                                                        
|                        | Chief Financial Officer
        (Principal Financial and Accounting Officer and Duly Authorized
        Officer)





57