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,
2012



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.)



77 McCullough Drive, Suite 7, New Castle,
Delaware 19720

(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 S    No £



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 S    No £



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 £    No S



As of August 13, 2012, the registrant had
56,024,972 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, 2012



TABLE OF CONTENTS



PART I.   FINANCIAL INFORMATION



|Item 1  - | Financial Statements (unaudited)                                                                                     |   
|--------- | -------------------------------------------------------------------------------------------------------------------- | --
|          | Condensed Balance Sheets (Unaudited) as of June 30, 2012 and December 31, 2011                                       | 1 
|          | Condensed Statements of Operations (Unaudited) for the three and six months ended June 30, 2012 and 2011             | 2 
|          | Condensed Statements of Changes in Stockholders’ Equity (Deficit) (Unaudited) for the six months ended June 30, 2012 | 3 
|          | Condensed Statements of Cash Flows (Unaudited) for the six months ended June 30, 2012 and 2011                       | 4 
|          | Condensed Notes to Financial Statements                                                                              | 5 
|Item 2 -  | Management’s Discussion and Analysis of Financial Condition and Results of Operations                                | 11
|Item 4 -  | Controls and Procedures                                                                                              | 21





PART II.  OTHER INFORMATION



|Item 1 -       | Legal Proceedings                                           | 22
|-------------- | ----------------------------------------------------------- | --
|Item 2 -       | Unregistered Sales of Equity Securities and Use of Proceeds | 22
|Item 3 -       | Defaults Upon Senior Securities                             | 22
|Item 4 -       | Mine Safety Disclosures                                     | 22
|Item 5 -       | Other Information                                           | 22
|Item 6 -       | Exhibits                                                    | 23
|               |                                                             |   
|SIGNATURES     | 24                                                         
|               |                                                             |   
|CERTIFICATIONS |                                                            















PART I - FINANCIAL INFORMATION



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



SCRIPSAMERICA, INC.

Condensed Balance Sheets

(Unaudited)



|                                                                                                                                                                                        |  | June 30, |           |   | December 31, |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------- | --------- | - | ------------ | -
|                                                                                                                                                                                        |  | 2012     |           |   | 2011         |  
|                                                                                                                                                                                        |  |          |           |   |              |  
|ASSETS                                                                                                                                                                                  |  |          |           |   |              |  
|Current Assets                                                                                                                                                                          |  |          |           |   |              |  
|Cash and cash equivalents                                                                                                                                                               |  | $        | 67,948    |   |              | $
|Receivable, net due from factor                                                                                                                                                         |  |          | 576,399   |   |              |  
|Loan receivable - vendor                                                                                                                                                                |  |          | 1,397,759 |   |              |  
|Prepaid expenses and other current assets                                                                                                                                               |  |          | 224,610   |   |              |  
|Deferred tax asset                                                                                                                                                                      |  |          | 60,800    |   |              |  
|Total Current Assets                                                                                                                                                                    |  |          | 2,327,516 |   |              |  
|Property and Equipment                                                                                                                                                                  |  |          | 66,184    |   |              |  
|Other Assets                                                                                                                                                                            |  |          |           |   |              |  
|Notes receivable - related party - net                                                                                                                                                  |  |          | 1,013     |   |              |  
|Deposits                                                                                                                                                                                |  |          | 200,000   |   |              |  
|Total Other Assets                                                                                                                                                                      |  |          | 201,013   |   |              |  
|TOTAL ASSETS                                                                                                                                                                            |  | $        | 2,594,713 |   |              | $
|                                                                                                                                                                                        |  |          |           |   |              |  
|LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)                                                                                                                                          |  |          |           |   |              |  
|Current Liabilities                                                                                                                                                                     |  |          |           |   |              |  
|Accounts payable and accrued expenses                                                                                                                                                   |  | $        | 29,771    |   |              | $
|Purchase order financing – related party                                                                                                                                                |  |          | 77,952    |   |              |  
|Royalty payable                                                                                                                                                                         |  |          | –         |   |              |  
|Preferred stock dividends payable                                                                                                                                                       |  |          | 62,580    |   |              |  
|Convertible notes payable - net of discount of $0 and $0, respectively                                                                                                                  |  |          | –         |   |              |  
|Total Current Liabilities                                                                                                                                                               |  |          | 170,303   |   |              |  
|Non-Current Liabilities                                                                                                                                                                 |  |          |           |   |              |  
|Convertible notes payable - related parties                                                                                                                                             |  |          | 130,000   |   |              |  
|Convertible notes payable - net of discount of $0 and $55,269, respectively                                                                                                             |  |          | 749,400   |   |              |  
|Total Non-Current Liabilities                                                                                                                                                           |  |          | 879,400   |   |              |  
|Total Liabilities                                                                                                                                                                       |  |          | 1,049,703 |   |              |  
|Commitments and Contingencies                                                                                                                                                           |  |          | –         |   |              |  
|Convertible preferred stock - $.001 par value; 10,000,000 shares authorized, 2,990,252 issued
    and outstanding                                                                       |  |          | 1,043,000 |   |              |  
|Stockholders' Equity (Deficit)                                                                                                                                                          |  |          |           |   |              |  
|Common stock - $0.001 par value; 150,000,000 shares authorized; 55,942,972 and 52,521,684 shares issued and outstanding
    as of June 30, 2012 and December 31, 2011,     respectively |  |          | 55,943    |   |              |  
|Subscription Receivable                                                                                                                                                                 |  |          | –         |   |              |  
|Additional paid-in capital                                                                                                                                                              |  |          | 891,766   |   |              |  
|Accumulated deficit                                                                                                                                                                     |  |          | (445,699  | ) |              |  
|Total Stockholders' Equity (Deficit)                                                                                                                                                    |  |          | 502,010   |   |              |  
|TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)                                                                                                                                    |  | $        | 2,594,713 |   |              | $



See accompanying notes to condensed financial
statements.





1







SCRIPSAMERICA, INC.

Condensed Statements of Operations

(Unaudited)



|                                                |  | For the three months ended June 30, |            |   | For the six months ended June 30, |  
|----------------------------------------------- |  | ----------------------------------- | ---------- | - | --------------------------------- | -
|                                                |  | 2012                                |            |   | 2011                              |  
|Product Sales- net                              |  | $                                   | 1,510,952  |   |                                   | $
|                                                |  |                                     |            |   |                                   |  
|Cost of Goods Sold                              |  |                                     | 1,213,186  |   |                                   |  
|                                                |  |                                     |            |   |                                   |  
|Gross Profit                                    |  |                                     | 297,766    |   |                                   |  
|                                                |  |                                     |            |   |                                   |  
|General and Administrative Expenses             |  |                                     | 197,914    |   |                                   |  
|Research  and Development                       |  |                                     | 16,370     |   |                                   |  
|                                                |  |                                     |            |   |                                   |  
|                                                |  |                                     | 214,284    |   |                                   |  
|                                                |  |                                     |            |   |                                   |  
|Income from Operations                          |  |                                     | 83,482     |   |                                   |  
|                                                |  |                                     |            |   |                                   |  
|Other Expenses                                  |  |                                     |            |   |                                   |  
|Interest expense                                |  |                                     | (41,922    | ) |                                   |  
|                                                |  |                                     |            |   |                                   |  
|Income (Loss) Before Provision for Income taxes |  |                                     | 41,560     |   |                                   |  
|                                                |  |                                     |            |   |                                   |  
|Provision for Income Taxes                      |  |                                     | 21,200     |   |                                   |  
|                                                |  |                                     |            |   |                                   |  
|Net Income (Loss)                               |  | $                                   | 20,360     |   |                                   | $
|                                                |  |                                     |            |   |                                   |  
|Preferred Stock Dividend                        |  |                                     | (20,860    | ) |                                   |  
|                                                |  |                                     |            |   |                                   |  
|Net Loss Available to Common Shareholders       |  | $                                   | (500       | ) |                                   | $
|                                                |  |                                     |            |   |                                   |  
|Earnings Per Common Share                       |  |                                     |            |   |                                   |  
|Basic and Diluted                               |  | $                                   | (0.00      | ) |                                   | $
|                                                |  |                                     |            |   |                                   |  
|Weighted Average Number of Common Shares        |  |                                     |            |   |                                   |  
|Basic and Diluted                               |  |                                     | 55,350,744 |   |                                   |  



See accompanying notes to condensed financial
statements.





2









SCRIPSAMERICA, INC.

Condensed Statements of Changes in Stockholders'
Equity (Deficit)

For the six months ended June 30, 2012 (unaudited)





|                                                                |  | Common Stock |            |  | Subscription |   |        | Additional Paid-In |  |   | Retained Earnings |   |  | Stockholders' |        
|--------------------------------------------------------------- |  | ------------ | ---------- |  | ------------ | - | ------ | ------------------ |  | - | ----------------- | - |  | ------------- | -------
|                                                                |  | Shares       |            |  | Amount       |   |        | Receivable         |  |   | Capital           |   |  | (Deficit)     |        
|Balance-December 31, 2011                                       |  |              | 52,521,684 |  |              | $ | 52,522 |                    |  | $ | (170,800          | ) |  | $             | 494,487
|                                                                |  |              |            |  |              |   |        |                    |  |   |                   |   |  |               |        
|Payment received for stock subscription                         |  |              | –          |  |              |   | –      |                    |  |   | 170,800           |   |  |               | –      
|Common stock issued for cash                                    |  |              | 300,000    |  |              |   | 300    |                    |  |   | –                 |   |  |               | 29,700 
|Common stock issued for services - BOD                          |  |              | 32,000     |  |              |   | 32     |                    |  |   | –                 |   |  |               | 3,168  
|Common stock issued for services - employees                    |  |              | 114,288    |  |              |   | 114    |                    |  |   | –                 |   |  |               | 19,886 
|Common stock issued for conversion of convertible Notes payable |  |              | 2,000,000  |  |              |   | 2,000  |                    |  |   | –                 |   |  |               | 248,000
|Common stock issued for services - non employees                |  |              | 975,000    |  |              |   | 975    |                    |  |   | –                 |   |  |               | 96,525 
|Dividends for convertible preferred stock                       |  |              | –          |  |              |   | –      |                    |  |   | –                 |   |  |               | –      
|Net Loss                                                        |  |              | –          |  |              |   | –      |                    |  |   | –                 |   |  |               | –      
|                                                                |  |              |            |  |              |   |        |                    |  |   |                   |   |  |               |        
|Balance-June 30, 2012                                           |  |              | 55,942,972 |  |              | $ | 55,943 |                    |  | $ | –                 |   |  | $             | 891,766





See accompanying notes to condensed
financial statements.



3











SCRIPSAMERICA,
INC.

Condensed Statements
of Cash Flows (unaudited)





|                                                                                |  | For the Six Months Ended June 30, |         
|------------------------------------------------------------------------------- |  | --------------------------------- | --------
|                                                                                |  | 2012                              |         
|Cash Flows from Operating Activities                                            |  |                                   |         
|Net Loss                                                                        |  | $                                 | (18,709 
|Adjustments to reconcile net loss to net cash used by operating activities:     |  |                                   |         
|Amortization of discount on convertible notes payable                           |  |                                   | 2,083   
|Common stock issued for services                                                |  |                                   | 31,950  
|Common stock warrants issued for services                                       |  |                                   |         
|Deferred Income tax                                                             |  |                                   | (19,600 
|Change in operating assets and liabilities                                      |  |                                   |         
|(Increase) decrease in:                                                         |  |                                   |         
|Receivable due from factor                                                      |  |                                   | (371,759
|Prepaid expenses and other current assets                                       |  |                                   | (89,560 
|Increase (decrease) in:                                                         |  |                                   |         
|Accounts payable and accrued expenses                                           |  |                                   | (5,849  
|Cash used in operating activities                                               |  |                                   | (471,444
|Cash Flows from Investing Activities                                            |  |                                   |         
|Payment received from note receivable                                           |  |                                   | 5,042   
|Purchase of  equipment                                                          |  |                                   | (66,184 
|Issuance of loan to vendor                                                      |  |                                   | (345,123
|Cash used in investing activities                                               |  |                                   | (406,265
|                                                                                |  |                                   |         
|Cash Flows from Financing Activities                                            |  |                                   |         
|Proceeds from Issuance of common stock                                          |  |                                   | 30,000  
|Proceeds from issuance of convertible preferred stock - net                     |  |                                   |         
|Proceeds from convertible notes payable                                         |  |                                   | 320,000 
|Proceeds from convertible notes payable - related party                         |  |                                   | 50,000  
|Proceeds from purchase order financing - net                                    |  |                                   | 77,952  
|Payment for convertible notes payable                                           |  |                                   | (170,600
|Collection of stock subscription receivable                                     |  |                                   | 170,800 
|Cash provided by financing activities                                           |  |                                   | 478,152 
|                                                                                |  |                                   |         
|Net Increase (Decrease) in Cash and Cash Equivalents                            |  |                                   | (399,557
|                                                                                |  |                                   |         
|Cash and Cash Equivalents- Beginning of year                                    |  |                                   | 467,505 
|                                                                                |  |                                   |         
|Cash and Cash Equivalents - End of year                                         |  | $                                 | 67,948  
|                                                                                |  |                                   |         
|Supplemental Disclosures of Cash Flow Information                               |  |                                   |         
|Cash Paid:                                                                      |  |                                   |         
|Income Taxes                                                                    |  | $                                 | –       
|Interest                                                                        |  |                                   | 71,244  
|Noncash financing and investing activities:                                     |  |                                   |         
|Conversion of note payable for common stock                                     |  | $                                 | 250,000 
|Accrued Preferred Dividend payable                                              |  |                                   | 41,720  
|Common stock subscription                                                       |  |                                   | –       
|Common stock issued in connection with the issuance of convertible note payable |  |                                   | –       





See accompanying notes to condensed financial
statements.



4











SCRIPSAMERICA, INC.

Condensed Notes to Financial Statements

For the six months ended June 30, 2012



1
-	Basis of Presentation



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



We were incorporated in the
State of Delaware on May 12, 2008, and primarily engage in the sale of generic pharmaceutical drugs through our main customer,
McKesson Corporation (“McKesson”), to various end users, including physicians’ offices, retail pharmacies, long-term
care sites, hospitals and home care agencies, located throughout the United States. We use a single vendor, Marlex Pharmaceuticals,
Inc. for our packaging, distribution, warehouse and customer service needs.



The Company’s
common stock became eligible for trading on the Over-the-Counter Bulletin Board (“OTCBB”) under the ticker symbol “SCRC”
on July 18, 2012. The OTCBB is a regulated quotation service that displays real-time quotes, last-prices, and volume information
in the over-the-counter (“OTC”) equity securities. An OTC equity security is any equity that is not listed or traded
on NASDAQ or a national securities exchange. The Company began trading on the OTCBB on July 24, 2012.



The accompanying unaudited interim
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, 2011 filed with the SEC on March 22, 2012.  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
-	Summary of Significant Accounting Policies



A summary of significant
accounting policies follows:





| | a. | 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.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b. | RevenueRecognition-Revenue
                                                                                                                                                     is
                                                                                                                                                     recognized
                                                                                                                                                     when
                                                                                                                                                     product
                                                                                                                                                     is
                                                                                                                                                     shipped
                                                                                                                                                     from
                                                                                                                                                     our
                                                                                                                                                     contract
                                                                                                                                                     packager
                                                                                                                                                     (Marlex
                                                                                                                                                     Pharmaceuticals
                                                                                                                                                     Inc.)
                                                                                                                                                     to
                                                                                                                                                     our
                                                                                                                                                     customers’
                                                                                                                                                     warehouses,
                                                                                                                                                     mainly
                                                                                                                                                     McKesson,
                                                                                                                                                     and
                                                                                                                                                     is
                                                                                                                                                     adjusted
                                                                                                                                                     for
                                                                                                                                                     any
                                                                                                                                                     charge
                                                                                                                                                     backs
                                                                                                                                                     received
                                                                                                                                                     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
                                                                                                                                                     for
                                                                                                                                                     the
                                                                                                                                                     corresponding
                                                                                                                                                     period
                                                                                                                                                     is
                                                                                                                                                     reduced
                                                                                                                                                     accordingly.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | 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 customer assures that collectability is reasonable assured.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | c. | Research and Development- Expenditures for research and development associated with
contract research and development provided by third parties are expensed as incurred. The Company had charges of $26,414 and $441,494
for research and development expenses for the six months ended June 30, 2012 and 2011, respectively.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------







| | d. | Receivable Due From Factor-Accounts receivable are stated
                                                                  at estimated net realizable value and net of accounts receivable
                                                                  sold subject to charge-back.  Management provides
                                                                  for uncollectible amounts through a charge to earnings and a
                                                                  credit to an allowance for doubtful accounts based on its assessment
                                                                  of the current status of individual accounts and historical
                                                                  collection information.  Balances that are deemed
                                                                  uncollectible after management has used reasonable collection
                                                                  efforts are written off through a charge to the allowance and
                                                                  a credit to accounts receivable. The Company has entered into
                                                                  an accounts receivable factoring facility agreement in June
                                                                  2012. As of June 30, 2012, gross receivable were $972,322 of
                                                                  which $387,748 was sold to a factor, a contract allowance reverse
                                                                  of $8,175, for a net receivable balance of $576,399. As of December
                                                                  31, 2011, there were no receivables factored and the net receivable
                                                                  balance was $204,640.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



5







SCRIPSAMERICA, INC.

Condensed Notes to Financial Statements

For the six months ended June 30, 2012





| | e. | Income Taxes -The
Company provides for income taxes using an asset and liability based approach for reporting for income taxes.  Deferred
income tax assets and liabilities are computed for differences between the financial statement and the tax basis of assets and
liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to
the periods in which the differences are expected to affect taxable income.  Valuation allowances are established when
necessary to reduce deferred tax assets to the amounts expected to be realized.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | The Company also complies with the provisions of Accounting for Uncertainty in Income Taxes.
The accounting regulation prescribes a recognition threshold and measurement process for recording in the financial statements
uncertain tax positions taken or expected to be taken in a tax return. The Company classifies any assessment for interest and/or
penalties as other expenses in the financial statements.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





| | f. | Stock-Based Compensation- The Company adopted FASB ASC No. 718
                                                                  “Share-Based Payment,” requiring the expense recognition of the fair value of all share-based payments
                                                                  issued to employees. Stock grants to employees were valued using the fair value of the stock as determined by the board of
                                                                  directors since our stock is not publicly traded and the volume is immaterial. As of June 30, 2012 the Company has not
                                                                  issued                                                                   any 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
to be provided, or the fair value of stock at the date the agreement is reached, whichever is more readily determinable. For stock
options 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, 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 (we do not anticipate paying dividends for
    the foreseeable future),
| | • the risk free interest rate for the expected option or warrant term, and                                      
| | • the expected forfeiture rate.                                                                                 







| | g. | Earnings Per Share
                                                                    - Basic net income per common share is computed using the weighted
                                                                  average number of common shares outstanding
                                                                  during the periods. Diluted earnings per share include
                                                                  additional dilution from common stock equivalents, such as stock
                                                                  issuable pursuant to the exercise of stock warrants and convertible
                                                                  notes payable. 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, 2012, common stock equivalents consisted of preferred
                                                                  stock convertible into 5,980,504 shares, warrants convertible
                                                                  into 478,440 shares and notes payable convertible into 3,517,600
                                                                  shares of common stock.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------









| | h. | Reclassification
                                                                  - Certain reclassifications have been made to the 2011 financial
                                                                  statements to conform to the 2012 condensed financial statement
                                                                  presentation. These reclassifications had no effect on net loss
                                                                  or cash flows as previously reported.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------







3
- Loan Receivable - Vendor



During the six months ended June
30, 2012, the Company loaned an additional $345,123 to Marlex Pharmaceuticals Inc., our contract packager. The amount is unsecured,
non-interest bearing and has no stipulated repayment terms as the loan was made pursuant to an oral agreement. Although there is
no written contract for this loan, the Company considers this to be a current asset based on assurances from the management of
Marlex Pharmaceuticals that the loan would be repaid within twelve months and Marlex’s ability to pay its debt. The loan
balance as of June 30, 2012 and December 31, 2011 is $1,397,759 and $1,052,636, respectively.



6







SCRIPSAMERICA, INC.

Condensed Notes to Financial Statements

For the six months ended June 30, 2012



4
- Convertible Notes Payable



On May 7, 2012, the Company received
$320,000 in cash for one convertible promissory note payable. The note provides for interest only payments of 2%, payable monthly
until March 14, 2013 and 1% monthly thereafter, in cash, or common stock of the Company at $0.25 per share, at the option of the
lender. There is no required principal payment on the note until maturity which is November 7, 2013. The principal portion of the
notes can be converted into common stock at any time during the term of the loan at the rate of $.25 per share at the option of
the lender. The note can be extended by mutual consent of the lender and the Company. Marlex Pharmaceuticals, our re- packager/
supplier, also co-signed this note. In addition, the Company shall pay to the lender a royalty ranging from 2.6% to 3.5%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 commencing December 31, 2012. Collateral for this loan also includes 1,400,000 shares
of the Company’s common stock.



On March 12, 2012 the Company
prepaid the sum of $85,300 to a holder of a $100,000 convertible note payable, leaving a balance of $14,700. By mutual consent
the maturity date was also extended from November 23, 2012 to January, 30, 2014 and the interest rate was decreased from 2% per
month to 1% per month.



On March 12, 2012 the Company
prepaid the sum of $85,300 to a holder of a $200,000 convertible note payable, leaving a balance of $114,700. By mutual consent
the maturity date was also extended from November 23, 2012 to January 30, 2014 and the interest rate was decreased from 2% per month
to 1% per month.



Also on March 12, 2012 the holder
of two other convertible notes, totaling $300,000, agreed to extende the maturity dates of these notes to January 30, 2013 and also
agreed to reduce the interest rate from 2% per month to 1% per month.



The principal portion of these
convertible notes can be converted into common stock at any time at the rate of $.25 per share at the option of the lender.



On
March 12, 2012, the holders of a $250,000 long-term convertible note elected to convert the convertible note into 2,000,000
shares of the Company’s common stock. At the time of conversion the Company  modified the conversion price from $0.25
per share to $0.125 per share of common stock resulting in an additional one million shares being issued per the original
loan agreement. At the time of the conversion the fair value of the Company’s stock was below the revised $0.125
conversion price, consequently the Company did not have to record any extra expense for this beneficial conversion feature.
This reduction in price for this conversion was not offered on any other convertible debt which the Company holds. Upon
conversion, the royalty liability and debt discount of $53,186 associated with this note were offset resulting in the
elimination of both accounts.The Company anticipates launching this orally disintegrating tablet for which a 4%
royalty payment is due after the third fiscal quarter of 2012.



Interest expense, including the
amortization above associated with these notes for the six months ended June 30, 2012 and 2011, was $52,289 and $95,868, respectively.
Interest expense for the three months ended June 30, 2012 and 2011, was $27,568 and $65,868, respectively.



5
-	Notes Payable - Related Parties



On May 1, 2012, the Company received
$50,000 in cash for one convertible promissory note payable from a related party. The note provides for interest only payments
of 3%, payable quarterly in cash, or common stock of the Company at $0.25 per share, at the option of the lender. There is no required
principal payment on the note until maturity which is November 1, 2016. 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 $.25 per share at the option of the lender. The note can be
extended by mutual consent of the lender and the Company. Marlex Pharmaceuticals, our re- packager/ supplier, also co-signed this
note. In addition, the Company shall pay to the lender 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 commencing December
31, 2012. Collateral for this loan also includes 200,000 shares of the Company’s common stock.



7









SCRIPSAMERICA, INC.

Condensed Notes to Financial Statements

For the six months ended June 30, 2012



In March 2012, the Company
and lender, a company owned by the Company’s president and CEO, mutually agreed to extend the maturity date of $80,000
of notes to January 30, 2014 and the monthly interest rate will decrease from 2% per month to 1% per month effective October
1, 2012.



Interest expense associated with
these notes for the three and six months ended June 30, 2012 and 2011, was $5,800 and $4,860 and $10,600 and $8,460, respectively.



6
-	Convertible Preferred Stock



Convertible Preferred Stock



On April 1, 2011 the Company issued 2,990,252 shares of convertible preferred stock (“Series
A Preferred stock”) for $1,043,000 to one investor. The Series A Preferred stock has the following rights, preferences, powers,
privileges, and restrictions: (a) 8% dividend (appropriately adjusted to reflect any stock splits), the dividends shall accrue
and be paid on March 31, June 30, September 30 and December 31. (b) Preferential payments of the assets available for distribution
to its stockholders by reason of their ownership in an amount equal to the Series A Preferred stock Original Issue price ($.1744).
(c) Voting rights - one vote for the number equal to the number of whole shares of common stock and shall be entitled to elect
one director of the Corporation. (d) Rights to Convert – Each share of Series A Preferred stock shall be convertible, at
the option of the holder at any time and from time to time without the payment of additional consideration by the holder into such
number of fully paid and non-assessable shares of common stock as determined by dividing the Original Issue price by the Conversion
price in effect at the time of the conversion. The conversion price is initially equal to $.1744 and can be adjusted any time if
the Company issues non-exempted common shares at a price below $.1744. At June 30, 2012 these convertible preferred stock shares
can be converted into 5,980,504 shares of the Company’s common stock. (e) the owner of the Series A Preferred stock can waive
its right to adjust the conversion price at his choosing. (f) Exempted securities – no anti-dilution protection for shares
issued to employees, directors or consultants or advisors if the issuance is approved by the Board.



The Company has reviewed the
rights and privileges of the Series A Preferred stock and determined the holders have a liquidation preference which requires the
company to redeem the preferred shares at the original issuance price as a result of either an voluntary or involuntary liquidation
event (as defined in the Company’s amended and restated certificate of incorporation).  The Company has determined this
preference meets the requirement that the potential redemption is outside of the control of the Company.  As a result, the
convertible preferred stock has to be recorded outside of permanent equity.



Because this Series A Preferred
stock has liquidation preference which is outside the control of the Company it was not recorded in the Shareholders' Equity section
of our balance sheet, but rather is shown as a liability in the balance sheet per SEC rules and regulations. Because we also had
a loss for 2011 and we have a retained deficit, under Section 174 of the Delaware General Corporation Law our directors cannot
declare a dividend without incurring personal liability. We had stockholders’ equity of $448,824 at June 30, 2012, but we
did not record a profit for the six months ended June 30, 2012 (but we did have a net profit for the three months ended June 30,
2012). Unless we generate net income in remaining periods in 2012, our board of directors will not be able to declare a dividend
nor will we be able to pay the dividend owed to the Series A Preferred Stockholder which dividends will accrue on our balance sheet.
We will not be able to declare any dividends to our common stockholders until the accrued dividends owed to the Series A Preferred
Stockholder have been paid.



7
-	Stockholders’ Equity (Deficit)



Common Stock



The Company
issued 300,000 restricted shares of common stock for cash proceeds of $30,000 during the six months period ended June 30, 2012.



In March 2012, the Company received
payment for the balance of the outstanding common stock receivable, $170,800. The sales of these common stock shares were recorded
as a stock subscription receivable, contra equity account, to the equity section of the balance sheet in April 2011.



On May 25, 2012, the Company issued
400,000 restricted shares of its common stock to Sarav Patel and 500,000 restricted shares of its common stock to Samir Patel for
services rendered under their respective consulting agreements with the Company. These services were valued at $40,000 and $50,000,
respectively. Sarav and Samir Patel have a controlling interest in Marlex Pharmaceuticals, Inc. During the six month period ended
June 30, 2012, the Company charged its operations $7,500, with $82,500 to be amortized over the next eleven months for services
to be provided.





8







SCRIPSAMERICA, INC.

Condensed Notes to Financial Statements

For the six months ended June 30, 2012



On May 25, 2012 the Company issued
75,000 of its common stock in connection with services provided by non-employees, these services were valued at $7,500. During
the six month period ended June 30, 2012, the Company charged its operations $1,250, with $3,125 to be amortized over the next
two months for services to be provided.



The Company issued 32,000 restricted
shares of its common stock in connection with services provided by members of the board of directors during the six months period
ended June 30, 2012. The Company charged its operations for the three months and six months ended June 30, 2012, $2,000 and $3,200
respectively.



The Company issued 114,288 restricted
shares of its common stock to the Company’s President and CEO for payment of his salary in lieu of a cash compensation payments
for services rendered during the six months period ended June 30, 2012. These services were valued at $20,000 and the Company charged
its operations for the three months and six months ended June 30, 2012 $10,000 and $20,000, respectively.



On March 12, 2012, the holders
of a long-term note payable in the amount of $250,000 elected to convert the convertible note payable into 2,000,000 shares of
the Company’s common stock. See note 4 above for additional details



8
-	Commitments and Contingencies



In March
2010, the Company signed a “Product, Manufacturing and Supply Agreement” with Marlex our contract packager and labeler
for orally disintegrating tablets. The total value of this contract is $935,000. The Company has paid a total of approximately
$744,000, of which $200,000 is considered a stand still fee that has been reflected as a deposit on the balance sheet as of June
30, 2012 and December 31, 2011. The project was completed during the first quarter of 2012 and the Company does not expect to incur
any more charges toward this contract. Upon the commencement of product being shipped, a 7% royalty on the gross profit related
to the orally disintegrating tablet sales will be due on a quarterly basis. The Company anticipates launching this orally disintegrating
tablet after the third fiscal quarter of 2012. The $200,000 deposit will be applied towards future royalty payments.



The holders
of a $250,000 convertible note payable which was converted into 2,000,000 shares of our common stock on March 12, 2012 (see footnote
4 for details) 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.



9
-	Line of Credit



On October
19, 2011, the Company was approved for a line of credit from Wells Fargo Bank. This line of credit will allow the Company to borrow
up to a maximum of $85,000, at an interest rate of prime plus 1% through June 30, 2012, and prime plus 6.25% annually after June
30, 2012. The line is secured by a personal guarantee by the Company’s CEO. During the six months period ended June 30, 2012,
the Company did borrow funds ranging from $10,000 to $65,000 but these borrowings were paid in full as of June 30, 2012. Consequently
there was no outstanding balance related to this line of credit. The Company incurred interest expense of $373 which was included
in the statement of operations for the three and six months period ended June 30, 2012.



10
- Purchase Order Financing with related party



In June 2012, the Company entered
into a purchase order finance agreement with a company owned by a stockholder of the Company, who is also a member of the Board
of Directors. The agreement will allow the Company to borrow up to a maximum of $1 million, at an interest rate of 0.6% per 10
day period, 1.8% monthly and 21.6% annually. During the month of June 2012, the Company financed $245,328 of its purchase orders
and incurred an interest expense of $1,346 for the three months period ended June 30, 2012. As of June 30, 2012, $77,952 of unpaid
purchase order finance is included in accrued expenses.



9







SCRIPSAMERICA, INC.

Condensed Notes to Financial Statements

For the six months ended June 30, 2012



11
-	Concentrations



The Company purchased 100% of
its product packaging from Marlex during the three and six months periods ended June 30, 2012 and 2011. A disruption in the availability
of product packaging from this supplier could cause a possible loss of sales, which could affect operating results adversely.



The Company derived approximately
$1,913,000, or 76%, and approximately $3,177,000, or 93%, of its revenue from one customer during the six months ended June 31,
2012 and 2011, respectively. For the three months ended June 30, 2012 and 2011, the Company derived approximately $1,311,000 or
87% and $1,651,000 or 93%, of its revenue from this same customer, respectively.



As of June 30, 2012, one customer
accounted for approximately $519,000, or 91%, of the Company’s accounts receivable.



12
-	Subsequent Events



On July 23, 2012, the Company
entered into a three month consulting agreement whereby the consultant will receive compensation of $1,000 per month for the duration
of the contract and in addition, will receive 50,000 shares of common restricted stock.



On August 6, 2012, the Company
entered into a securities purchase agreement with Asher Enterprises Inc. (“Asher”) pursuant to which Asher purchased
from the Company an 8% convertible note in the principal amount of $63,000 (the “Note”). The Company received gross
proceeds of $60,000 from the sale of the Note (and $3,000 was used to pay the investor’s legal fees).



The Note is due and payable
on May 8, 2013 and accrues interest at the rate of 8% per annum. The Note may be prepaid at any time subject to a prepayment penalty
of up to 140% of the sum of the principal, accrued but unpaid interest and any other amounts due under the Note.



On and after February 2, 2013
and until the maturity date or the full payment of the Note (whichever is later), the principal and all accrued but unpaid interest
and any other amounts due under the Note are convertible into shares of the Company’s common stock. The conversion price
is at a 42% discount to the average of the five lowest high bid prices for the Company’s common stock at the close of trading
during the 10 trading day period prior to the date Asher delivers its notice of conversion. Under the Note, the Company may not
declare and pay any dividends or repurchase any of its securities without Asher’s prior written consent, except for any dividends
payable with respect to the outstanding shares of the Company’s Series A Preferred Stock.



The Note provides Asher with
anti-dilution protection from any issuances of shares of common stock or any securities exercisable, convertible or exchangeable
for shares of the Company’s common stock at a price per share less than the conversion price under the Note. The anti-dilution
protection does not apply to issuances to (i) directors for their attendance at board or committee meetings, (ii) persons who help
the Company raise capital, (iii) acquire Marlex Pharmaceutical and (iv) Development 72 LLC upon the conversion of the Series A
Preferred Stock.





10







|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; and other factors referenced in this and previous
filings.



Given these uncertainties, readers of this
prospectus and investors 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



We are ScripsAmerica, Inc., and were incorporated
in the State of Delaware on May 12, 2008. We are a healthcare services company focused on efficient supply chain management, from
strategic sourcing to delivering niche generic pharmaceuticals to market.  We primarily engage in the sale of generic
pharmaceutical drugs through our main customer, McKesson Corporation (“McKesson”), the largest pharmaceutical distributor
in North America, to a wide range of end users across the health care industry, including physicians’ offices, retail pharmacies,
long-term care sites, hospitals, and government and home care agencies, located throughout the United States. Current therapeutic
categories include pain, arthritis, prenatal, urinary and hormonal replacement drugs.  We use a single vendor, Marlex
Pharmaceuticals, Inc., (“Marlex”), for our packaging, distribution, warehouse and customer service needs.



The United States constitutes the
largest market in the world for generic pharmaceuticals, and its aging population represents a key driver for the growth of
the global pharmaceuticals and domestic consumer products markets.  Competitive pressures among U.S. generics
providers are continuing to increase as a result of the number of new market entrants growing faster than the generics market
as a whole, leading to cost competition on the manufacturing side and squeezed profit margins.  On the sales side,
generics prices are eroding due to low-cost suppliers from India and China capturing market share, as well as the success of
health insurers and health maintenance organizations in negotiating lower reimbursement rates.  Finally, large
direct purchase customers such as chain drugstores demand product variety and reliability of supply that allows them to lower
their inventory levels. We compete in the current environment by providing a low cost system of broad-based marketing, sales,
and distribution capabilities for generics, branded pharmaceuticals, over the counter medicines, vitamins, and
nutraceuticals.   A significant percentage of the Company’s sales are to one customer,
McKesson.  For the year ended December 31, 2011 and the six months ended June 30, 2012, McKesson accounted for
approximately 76% and 93% of our sales, respectively, and Curtis Pharmaceuticals and the United States Veterans
Administration (“VA”) accounted for the remainder of our sales. The Company expects sales during 2012 will be
similarly concentrated, with McKesson accounting for approximately 75% to 90% of the total sales.



Oral drug delivery remains the preferred
dosing method among patients and physicians, with more than 80% of all drugs administered in this manner.  Rapid melt
technology provides pharmaceutical companies with the opportunity for product line extensions for a wide variety of drugs, and
we believe there is a significant opportunity as a contract developer of rapidly dissolving drug formulations for specialty prescription
pharmaceuticals.   The combined US, EU and Japanese ODT market has doubled in size over the past four years to surpass
$6.4 billion in 2009, according to Technology Catalysts International’s report on Orally Disintegrating Table and Film Technologies
(sixth edition), which is available for purchase from TCI.





11







In March 2010, we entered into a product
development, manufacturing and supply agreement with our contract supplier, Marlex which develops generic drug products.  Under
this agreement, we are developing a pain relief orally disintegrating rapidly dissolving 80 mg and 160 mg tablets for OTC products.  We
have committed to investing approximately $935,000 with Marlex for the cost of developing these rapidly dissolving tablets. We
completed the development of these rapid melt products in the first quarter of 2012.  The development costs consisted
of (i) an advance payment to Marlex to cover their internal expenses for the development ($200,000), (ii) acquiring raw materials
and developing the ODT formulation ($400,000), (iii) analyze and validate the ODT formula and test sample batches ($94,000) and
(iv) acquiring a National Drug Code for the ODT formulation and validate the manufacturing process ($50,000).   However,
we estimate that we will need approximately $1.5 million of incremental funding for expenses required to launch these products.  The
funding for launching the rapid melt products will have to come from the sale of equity securities, preferred and/or common stock
securities and debt financing.



The Drug Efficacy Study Implementation
(“DESI”) Program was a program begun by the FDA in the 1960s based on the requirement of the Kefauver-Harris Drug Control
Act that all drugs be efficacious as well as safe. The DESI program was intended to classify all pre-1962 drugs that were already
on the market as either effective, ineffective, or needing further study. According to the U.S. Department of Health and Human
Services drug efficacy study (http://www7.nationalacademies.org/archives/drugefficacy.html) and The Annals of Pharmacotherapy
(Vol.39, No.7, pp.1260-1264),, to date, DESI has evaluated over 3,000 separate products and over 16,000 therapeutic claims. By
1984, final action had been completed on 3,443 products; of these, 2,225 (64.6%) were found to be effective, 1,051 (30.5%) were
found not effective, and 167 (4.9%) were pending.  Once a DESI drug has been FDA approved and granted market exclusivity,
the applicant will have the right to be the single source producer of the drug and control market supply and pricing.



We have identified Compound SA 1022, a
non-steroidal anti-inflammatory drug, as our initial drug candidate for the DESI program approval. We estimate that the Company
will need to raise approximately $2.0 million to $3.0 million for clinical trials to obtain FDA approval of Compound SA 1022 under
the DESI program.  This funding is also expected to come from the sale of equity securities, preferred and/or common
stock securities.  We met with the FDA on August 9, 2011 to determine what must be submitted in order to gain approval
by the FDA for Compound SA1022.  The FDA discussed with us what kind of clinical trials and safety data we would need
to submit for Compound SA 1022 based on whether we would use it for acute pain (an OTC use) or chronic pain (a prescription use).  We
received a written summary of the meeting from the FDA on September 9, 2011.    We are meeting with our consultants,
advisors and legal staff to draft a response to the FDA meeting minutes. We will be requesting clarification from the FDA in regard
to their requirements to get approval for Compound SA 1022, in particular the clinical testing requirements/studies, because there
are conflicts in the FDA’s position on this issue. On January 13, 2012 we submitted a proposal to the FDA outlining the steps
we intended to take in order to move the approval process forward. As of August 14, 2012 we are awaiting a response from the FDA.



We also plan for an acquisition of a pharmaceutical
packager and distributor and management estimates we will require approximately $2.5 million of investment capital which we expect
to raise from the sale of equity securities, preferred and/or common stock securities.



Management believes that, based on anticipated
level of sales, the Company can fund its current operational expenses for the next twelve months, but if we are to achieve our
four new objectives for sales and profit growth described above we will need to raise approximately $9 million to $12 million.  Funding
is expected to come from the sale of equity securities, preferred and/or common stock securities. We may not be able to accomplish
our four objectives and obtain the necessary financing within the next twelve months.



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.



The Company’s revenue is generated
from the purchases of product from its suppliers and shipments of the completed product per the end users’ specifications
to distribution centers. The Company recognizes revenues in accordance with the guidance in the Securities and Exchange Commission
(“SEC”) Staff Accounting Bulletin No. 104. Accordingly, revenue is recognized when product is shipped from our contract
packager (Marlex) to our customers’ warehouses, mainly McKesson and is adjusted for any charge backs from our customer which
may include inventory credits, discounts or volume incentives. These charge backs costs are received monthly from our customers
and the sales revenue is reduced accordingly. Any product returns or non -confirmation of receipt of product is included in the
customers’ monthly charge back charge.



Purchase orders from our customers generate
our shipments. These purchase orders are the persuasive evidence that an arrangement exists. The pricing has also been agreed upon
and determined via the customer purchase orders and the credit worthiness of our customer ensures that collectability is reasonably
assured.





12







Description of Expenses



Our expenses include the following: (a)
Costs of Goods sold (the Company purchases all its product from suppliers at various contracted prices and does not own or maintain
any inventory. Upon shipment of product the Company is charged the contracted price. The Company may finance the purchases of product
sold based on confirmed purchase orders via a revolving Purchase Order finance agreement); (b) Costs of services, which consists
primarily of salaries and contracted professional fees for various consultants used for management of the Company; (c) Marketing
costs associated with contracts and selling product; (d) General administrative costs, which consists of overhead expenses, such
as travel, telecommunications and office expenses; (e) Interest expenses mainly related to our factoring and facility agreement
and convertible debt; and (f) Research and development cost associated with the development of new product delivery forms.



Results of Operations



Results for the three month period ended
June 30,



|                              |  | 2012 |           |   |  |  |      | 2011 |  |   |           |   |  | $ Change |     
|----------------------------- |  | ---- | --------- | - |  |  | ---- | ---- |  | - | --------- | - |  | -------- | ----
|Product sales - net           |  | $    | 1,511,000 |   |  |  | 100% |      |  | $ | 1,775,000 |   |  |          | 100%
|Cost of Goods Sold            |  |      | 1,213,000 |   |  |  | 80%  |      |  |   | 1,302,000 |   |  |          | 73% 
|Gross Profit                  |  |      | 298,000   |   |  |  | 20%  |      |  |   | 473,000   |   |  |          | 27% 
|Operating Costs and Expenses: |  |      |           |   |  |  |      |      |  |   |           |   |  |          |     
|General and Administrative    |  |      | 198,000   |   |  |  | 13%  |      |  |   | 272,000   |   |  |          | 15% 
|Research and Development      |  |      | 16,000    |   |  |  | 1%   |      |  |   | 157,000   |   |  |          | 9%  
|Total Operating expenses      |  |      | 214,000   |   |  |  | 14%  |      |  |   | 429,000   |   |  |          | 24% 
|Total Interest expenses       |  |      | (42,000   | ) |  |  | -3%  |      |  |   | (82,000   | ) |  |          | -5% 
|Income  (Loss) before taxes   |  |      | 41,000    |   |  |  | 3%   |      |  |   | (38,000   | ) |  |          | -2% 
|Tax Expense                   |  |      | 21,000    |   |  |  | 1%   |      |  |   | 2,000     |   |  |          | 0%  
|Net  Income (Loss)            |  | $    | 20,000    |   |  |  | 1%   |      |  | $ | (40,000   | ) |  |          | -2% 



The majority of the Company’s sales
revenue is generated from the sales of generic pharmaceutical prescription orders. For the three months ended June 30, 2012 the
Company generated net product sales of approximately $1.5 million as compared to net product sales of approximately $1.8 million
for the three month period ended June 30, 2011, a decrease of approximately $264,000, or 14.9%. The decline in sales versus the
same three month period a year ago was mainly a result of the completion of a supply agreement with the VA at the end of 2011.
The VA delayed renewing a new supply contract which impacted first and second quarter sales in 2012.



For the three month period ended June 30,
2012, McKesson accounted for 87% of our net product sales (versus 93% of net product sales for the same period in 2011), and MedVet
Supply LLC and Curtis Pharmaceuticals accounted for 13% of our net product sales.



Product Sales:The following table
sets forth selected statement of operations data as a percentage of gross sales for the three month periods ended June 30, 2012
and 2011.



|Products sold                   |  | 2012 |           |   | % to total |  |      | 2011 |  |   | % to total |  
|------------------------------- |  | ---- | --------- | - | ---------- |  | ---- | ---- |  | - | ---------- | -
|Prescription drug products      |  | $    | 1,293,000 |   |            |  | 77%  |      |  | $ | 1,625,000  |  
|OTC & non prescription products |  |      | 386,000   |   |            |  | 23%  |      |  |   | 286,000    |  
|Gross Sales                     |  |      | 1,679,000 |   |            |  | 100% |      |  |   | 1,911,000  |  
|Discounts / charge backs        |  |      | (168,000  | ) |            |  | 11%  |      |  |   | (136,000   | )
|Net Sales                       |  | $    | 1,511,000 |   |            |  |      |      |  | $ | 1,775,000  |  



Gross Profit:Gross profit for the
three month period ended June 30, 2012 was approximately $298,000, which was 20% of our net sales. This was a decline of approximately
$175,000 from the same three month period in 2011 and was mainly due to the sales decline of approximately $264,000 from the same
three month period a year ago. The gross margin percentage also declined 7% mainly due to product mix changes from our sales in
OTC non-prescription products, which rose as a percentage of our total sales.





13







Operating Expenses



General and Administrative. For
the three month period ended June 30, 2012, general and administrative expenses (“G&A”) decreased approximately
$74,000 to approximately $198,000 as compared to approximately $272,000 for the same three month period in 2011. The significant
decrease in G&A expenses was mainly a result of (a) a reduction in board of director’s compensation of approximately
$47,000 due to a one-time issuance of common stock grants to new board members in 2011, (b) costs associated with registration
and SEC compliance related to our S-1 filing in 2011 decreased by approximately $85,000 (of which approximately $55,000 was a non-cash
transaction for stock warrants granted for services provided), and (c) salaries and wages decline approximately $6,000. Offsetting
these declines were increases in (i) professional fees consisting mainly of legal costs of approximately $31,000, (ii) costs associated
with our marketing efforts to promote the Company within the industry sector increased approximately $34,000 and (iii) various
other office type expenses made up the balance of the increase in general and administrative expenses.



Research and Development.The Company’s
expenditures for research and development cost declined approximately $141,000 for the three month period ended June 30, 2012 compared
to the same period in 2011. This decline can mainly be attributed to the completion of our on-going research related to new product
development at the end of 2011. . Our research and development costs in the second half of 2012 will be significantly lower than
the prior year.



Interest Expense. The Interest
expense for the three month period ended June 30, 2012 decreased approximately $40,000 from approximately $82,000 in the same
three months in 2011 to approximately $42,000 for the three month period ended June 30, 2012. This decrease is mainly due to a
decline of approximately $21,000 associated with our interest expense on our convertible notes payable versus the same three month
period in 2011. Interest expense associated with the factoring of our accounts receivable which carried a high interest rate declined
approximately $10,000. The Company incurred interest expense associated with our factoring fees for the three month period ended
June 30, 2012 of approximately $17,500 versus approximately $27,700 in factoring fees incurred for the same three month period
in 2011. The Company obtained a line of credit with a bank that carries a lower interest rate. Interest expense associated the
our line of credit was only $7 for our second quarter 2012. For the three months ended June 30, 2012 we incurred no expense for
related to the amortization of the debt discount on convertible notes whereas in the same period in 2011 the amortization of the
debt discount was approximately $8,600.



Income taxes expense.The income
tax expense for the three months ended June 30, 2012, increased approximately $19,000 to approximately $21,000 as compared to income
tax expense of approximately $2,000 for the three months ended June 30, 2011. The increase in the three month tax expense is mainly
due to income generated by lower operational expenses and interest expenses for the three months ended June 30, 2012.



Net Income (Loss) Applicable to Common
Shares.The Company recorded net income of approximately $20,000 for the three month period ended June 30, 2012, as compared
to a loss of approximately $40,000 for the same three month period a year ago, an increase of approximately $60,000. This increase
in net income is mainly due to a significant decrease in R & D expenses of approximately $140,000 and a reduction in general
and administration expense of approximately $74,000. Offsetting the decreases in operating expense was a decline in the gross profit
of approximately $175,000, which was mainly due to sales declines of approximately $264,000. The Company was also able to decrease
interest expense approximately $40,000. The Company incurred approximately $23,000 of non-cash expense for the issuance of stock
for services during the three month period ended June 30, 2012. The income tax expenses increased approximately $19,000 compared
to the same three month period in 2011. The Company accrued a preferred stock dividend of $20,860 for both the three month period
ended June 30, 2011 and 2012 resulting in a loss of income available to common shareholders of $500 and $61,118 for the three months
ended June 30, 2012 and 2011, respectively. Basic and diluted earnings per common share were $0.00 for the three month periods
ended June 30, 2012, and 2011, respectively.



14







Results for the
six month period ended June 30,



|                              |  | 2012 |           |   |  |  |      | 2011 |  |   |           |   |  | $ Change |     
|----------------------------- |  | ---- | --------- | - |  |  | ---- | ---- |  | - | --------- | - |  | -------- | ----
|Product sales - net           |  | $    | 2,508,000 |   |  |  | 100% |      |  | $ | 3,416,000 |   |  |          | 100%
|Cost of Goods Sold            |  |      | 2,041,000 |   |  |  | 81%  |      |  |   | 2,477,000 |   |  |          | 73% 
|Gross Profit                  |  |      | 467,000   |   |  |  | 19%  |      |  |   | 939,000   |   |  |          | 27% 
|Operating Costs and Expenses: |  |      |           |   |  |  |      |      |  |   |           |   |  |          |     
|General and Administrative    |  |      | 397,000   |   |  |  | 16%  |      |  |   | 371,000   |   |  |          | 11% 
|Research and Development      |  |      | 26,000    |   |  |  | 1%   |      |  |   | 441,000   |   |  |          | 13% 
|Total Operating expenses      |  |      | 423,000   |   |  |  | 17%  |      |  |   | 812,000   |   |  |          | 24% 
|Total Interest expenses       |  |      | (80,000   | ) |  |  | -3%  |      |  |   | (150,000  | ) |  |          | -4% 
|Loss before taxes             |  |      | (36,000   | ) |  |  | -1%  |      |  |   | (23,000   | ) |  |          | -1% 
|Tax Expense (benefit)         |  |      | (17,000   | ) |  |  | -1%  |      |  |   | 5,000     |   |  |          | 0%  
|Net Loss                      |  | $    | (19,000   | ) |  |  | -1%  |      |  | $ | (28,000   | ) |  |          | -1% 



The majority of the Company’s sales
revenue is generated from the sales of generic pharmaceutical prescription orders. For the six months ended June 30, 2012 the Company
generated net product sales of approximately $2.5 million as compared to net product sales of approximately $3.4 million for the
six month period ended June 30, 2011, a decrease of approximately $908,000, or 26.6%. The decline in sales versus the same six
month period a year ago was mainly a result of the completion of a supply agreement with the VA at the end of 2011. The VA delayed
the renewing a new supply contract which impacted first and second quarter sales in 2012.



For the six months ended June 30, 2012,
McKesson accounted for76% of our net product sales (versus 93% of net product sales for the same period in 2011), and MedVet Supply
LLC and Curtis Pharmaceuticals accounted for 24% of our net product sales.



Product Sales:The following table
sets forth selected statement of operations data as a percentage of gross sales for the six month period ended June 30, 2012 and
2011.



|Products sold                   |  | 2012 |           |   | % to total |  |      | 2011 |  |   | % to total |  
|------------------------------- |  | ---- | --------- | - | ---------- |  | ---- | ---- |  | - | ---------- | -
|Prescription drug products      |  | $    | 1,981,000 |   |            |  | 71%  |      |  | $ | 3,052,000  |  
|OTC & non prescription products |  |      | 826,000   |   |            |  | 29%  |      |  |   | 538,000    |  
|Gross Sales                     |  |      | 2,807,000 |   |            |  | 100% |      |  |   | 3,590,000  |  
|Discounts / charge backs        |  |      | (299,000  | ) |            |  | 11%  |      |  |   | (174,000   | )
|Net Sales                       |  | $    | 2,508,000 |   |            |  |      |      |  | $ | 3,416,000  |  



Gross Profit:Gross profit for the
six month period ended June 30, 2012 was approximately $467,000, which was 19% of our net sales. This was a decline of approximately
$472,000 from the same six month period in 2011 and was mainly due to the sales decline of approximately $908,000 from the same
six month period a year ago. The gross margin percentage also declined 9% mainly due to product mix changes from our sales in OTC
non-prescription products, which rose as a percentage of our total sales.



Operating Expenses



General and Administrative. For
the six month period ended June 30, 2012, general and administrative expenses (“G&A”) increased approximately $26,000
to approximately $397,000 as compared to approximately $371,000 for the same six month period in 2011. The changes in G&A expenses
was mainly a result of (a) a reduction in board of director’s compensation of approximately $46,000 due to a one-time issuance
of common stock grants to new board members in 2011, (b) costs associated with registration and SEC compliance related to our S-1
filing in 2011 decreased by approximately $83,000 (of which approximately $55,000 was a non-cash transaction for stock warrants
granted for services provided), (c) salaries and wages increased approximately $19,000, (d) professional fees, consisting mainly
of legal costs, increased approximately by $48,000, (e) costs associated with our marketing efforts to promote the Company within
the industry sector and launch of new product increased by approximately $86,000 and (f) various other office type expenses made
up the balance of the increase in general and administrative expenses.





15







Research and Development.The Company’s
expenditures for research and development cost declined approximately $415,000, for the six month period ended June 30, 2012, compared
to the same period in 2011. The decline in our research and development costs can mainly be attributed to the completion of our
on-going research related to new product development at the end of 2011. Our research and development in the second half of 2012
will be significant lower than prior year.



Interest Expense. Interest expenses
for the six month period ended June 30, 2012 decreased approximately $70,000 from approximately $150,000 in the same six months
in 2011 to approximately $80,000 for the six month period ended June 30, 2012. This decrease is mainly due to a decline of approximately
$41,000 in interest expense associated with our factoring of our accounts receivable which carried a high interest rate. The Company
incurred some interest expense associated with our factoring fees for the six month period ended June 30, 2012 of approximately
$17,500 versus incurring approximately $58,000 for the same six month period in 2011. Interest expense associated with convertible
notes payable versus the same six month period in 2011 decreased approximately $14,000. For the six months ended June 30, 2012
we incurred approximately $2,000 expense for amortization of debt whereas in the same period in 2011 the amortization of the debt
discount was approximately $16,000. The Company obtained a line of credit with a bank that carries a lower interest rate. Interest
expense associated our line of credit was $375 for our second quarter 2012. .



Income taxes (benefit).Total income
taxes (benefits) for the six months ended June 30, 2012 was approximately $17,000 as compared to a tax expense of approximately
$5,000 for the six months ended June 30, 2011, an increase in the tax benefit of approximately $22,000 as compared to the same
period in the prior year. This tax benefit is a result of a net operating loss of approximately $179,000 for the six months ended
June 30, 2012.



Net Income (Loss) Applicable to Common
Shares.The Company recorded a net loss of approximately $19,000 for the six month period ended June 30, 2012, as compared
to a net loss of approximately $28,000 for the same six month period in 2011, an increase in net loss of approximately $44,000.
This increase in net loss is mainly due to a significant reduction in net sales of approximately $908,000 resulting in the gross
margin decline of approximately $472,000 versus the same six month period in 2011. Offsetting the decline in our gross margin was
a decrease in R & D expenses of approximately $416,000 and a reduction in our interest expense of approximately $70,000. Our
general and administration expenses increased by approximately $26,000. The Company incurred approximately $32,000 of non-cash
expense for the issuance of stock for services during the six month period ended June 30, 2012. The income tax benefit increased
approximately $22,000 compared to the same six month period in 2011. The Company accrued a preferred stock dividend of $41,720
and $20,860 for the six months ended June 30 2012 and 2011, repectively, resulting in a loss of income available to common shareholders
of $60,429 and $49,062 for the six months ended June 30, 2012 and 2011, respectively Basic and diluted earnings per common share
were $0.00 for the six month period ended June 30, 2012, and 2011, respectivly.



Liquidity and Capital Resources



Summary



At June 30, 2012, the Company had total
current assets of approximately $2,328,000 and total current liabilities of approximately $170,000 resulting in working capital
of approximately $2.2 million. The Company's current assets consisted of approximately $68,000 in cash and cash equivalents, approximately
$576,000 in receivables due from factor, approximately $1,398,000 due from our packaging / supplier and approximately $286,000
in prepaid expenses and deferred taxes. Current liabilities at June 30, 2012 consist primarily of accounts payable and accrued
expenses, purchase order financing and dividends payable in the amount of approximately $170,000.



For the six months ended June 30, 2012,
we mainly used funds from operations to support our operations and payoff some of our debt. We were able to convert $250,000 of
debt into equity. We raised $370,000 in cash through the issuance of convertible notes which was used to supplement operations
and fund our packager supplier.



During the years ended December 31, 2011
and 2010, we met our liquidity needs primarily from financing activities. The Company raised approximately $1.5 million in cash
via financing activity by: 1) selling preferred stock, raising approximately $0.9 million and 2) borrowing approximately $0.6 million
through the sale of convertible notes. The Company loaned a significant portion the cash raise from financing activity, approximately
$1.1 million, to our packager / supplier in order to assure supply and shipping activities would not be interrupted. The balance
of funds were used to support a new product development and cover operational costs.





16







The following table summarizes our cash flows from operating
investing and financing activities for the past three years:



|                                                 |  | Six months ended June 30, |          |   | Six months ended June 30, |  |           | Year ended December 31, | 
|------------------------------------------------ |  | ------------------------- | -------- | - | ------------------------- |  | --------- | ----------------------- | 
|                                                 |  | 2012                      |          |   | 2011                      |  |           | 2011                    | 
|Total cash provided by (used in):                |  |                           |          |   |                           |  |           |                         | 
|Operating activities                             |  |                           | (472,000 | ) |                           |  | (515,000  | )                       | 
|Investing activities                             |  |                           | (406,000 | ) |                           |  | (296,000  | )                       | 
|Financing activities                             |  |                           | 478,000  |   |                           |  | 1,238,000 |                         | 
|Increase (decrease) in cash and cash equivalents |  |                           | (400,000 | ) |                           |  | 427,000   |                         | 



Management believes that, based on the
anticipated level of sales, estimated to be approximately $6.0 to $8.0 million for 2012, and no significant increase in operational
expense as compared to the 2011 calendar year spending of approximately $1.6 million, the Company can fund its current operational
expenses for fiscal year 2012. Our gross profit margin is expected to continue to be in the range of approximately 25% and our
outlays of cash for general and administrative costs are expected to be in the range of 5% to 7% of net sales. Current Research
and Development costs are almost complete and any incremental spending in the R & D area will be funded from additional funds
raised via equity instruments, as described below. To the extent that any excess cash is generated from operations, it has been,
and will continue to be, used for payment of our debt obligations. The Company negotiated an extension to January 31, 2014 of all
debt due to mature in 2012. Additionally, management negotiated the conversion of $250,000 of long term notes into 2,000,000 shares
of common stock. However, should the sales decline significantly, profits will decline and additional funding will be required
and the Company can provide no guarantee that the funding will be realized.



Management plans to pursue sales and profit
growth through (a) expansion of its distribution network, (b) development of new products (i.e. rapidly dissolving drug formulation
pain relief products scheduled to ship in the fourth quarter of 2012), (c) an acquisition of a pharmaceutical packager/supplier
and (d) acquisition of a pharmaceutical manufacturer. These future plans will be dependent upon securing additional sources of
liquidity.



In March 2010, we entered into a product
development, packaging and supply agreement with our current packaging supplier, Marlex Pharmaceuticals Inc., which develops and
packages generic drug products. Under this agreement, we are developing a pain relief orally disintegrating rapidly dissolving
80 mg and 160 mg tablets for a OTC product. The Company committed to invest $935,000 with Marlex Pharmaceuticals Inc. for the cost
of developing these rapidly dissolving tablets. The Company completed the development of these rapid melt products in the first
quarter of 2012. The development costs consisted of (i) an advance payment to Marlex to cover their internal expenses for the development
($200,000), (ii) acquiring raw materials and developing the ODT formulation ($406,000), (iii) analyze and validate the ODT formula
and test sample batches ($154,000) and (iv) acquiring a National Drug Code for the ODT formulation and validate the manufacturing
process ($175,000). However, the Company estimates that it will need approximately $1.5 million of incremental funding for expenses
required to launch these products. The funding for launching the rapid melt products will have to come from the sale of equity
securities.



We are in the process of selecting our
initial drug candidate for the DESI program approval. We estimate that the Company will need to raise approximately $2.0 million
to $3.0 million for clinical trials to obtain FDA approval of our initial drug candidate under the DESI program. This funding is
also expected to come from the sale of equity securities, preferred and/or common stock securities.



The Company also plans for an acquisition
of a pharmaceutical packager and distributor and management estimates it will require approximately $2.5 million of investment
capital which the Company expects to raise from the sale of equity securities, preferred and/or common stock securities.



To reduce costs from manufacturers, thus
improving our gross profit, the Company plans include the acquisition of a pharmaceutical manufacturer which management estimates
it will require approximately $7.0 million of investment capital, which the Company expects to raise form the sale of equity securities,
preferred and /or common stock securities.



If the Company is to achieve its four new
objectives for sales and profit growth described above the Company will need to raise approximately $9 million to $12 million.
The Company does not expect to have any excess cash from operations to adequately fund these expansion programs and current sales
growth and operational profits will not be nearly enough to support these expansion programs. So funding is expected to come from
the sale of equity securities, preferred and/or common stock securities.





17







In October 2011 the Company received $250,000
for a convertible promissory note payable. The proceeds were used to fund the product development for pain relief disintegrating
rapidly dissolving 80mg and 160mg tablets. This note was converted into 2,000,000 shares of the Company’s common stock on
March 12, 2012 at $0.125 per share. Upon conversion, the royalty liability and debt discount of $53,186
associated with this note were bifurcated resulting in the elimination of both accounts. The holders of this converted
note are entitled to a royalty of 4% on all sales of a pain relief orally disintegrating rapidly dissolving 80mg and 160mg tablets
from January 1, 2012 on until/unless the product line of these rapidly dissolving tables are sold to a third party.. The Company
expects to start shipments of these products sometime after our fiscal third quarter 2012, which is when royalty payments are schedule
to begin.



The Company has obtained a line of credit
from Wells Fargo Bank to borrow up to $85,000. The line of credit has an interest rate of prime plus 1% through June 30, 2012 and
prime plus 6.25% annually after June 30, 2012. This credit line will allow the Company to fund basic operation and also reduce
any reliance on factoring the Company’s receivable, which will reduce possible future interest expense.



On May 1, 2012, the Company received $50,000
in cash for one convertible promissory note payable from a related party. The note provides for interest only payments of 3% payable
monthly in cash, or common stock of the Company valued at $0.25 per share, at the option of the lender. There is no required principal
payment on the note until maturity, which is November 1, 2015. The principal portion of the notes can be converted, at the option
of the holder, into common stock at any time during the term of the loan at the rate of $.25 per share. The note can be extended
by mutual consent of the lender and the Company. In addition, the Company shall pay to the lender 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 commencing December 31, 2012. Collateral for this loan also included 200,000 shares of the Company’s
common stock.



On May 7, 2012, the Company received $320,000
in cash for one convertible promissory note payable. The note provides for interest only payments of 2%, payable monthly until
March 14, 2013 and 1% monthly thereafter, in cash, or common stock of the Company valued at $0.25 per share, at the option of the
lender. There is no required principal payment on the note until maturity, which is November 7, 2013. The principal portion of
the notes can be converted, at the option of the holder, into common stock at any time during the term of the loan at the rate
of $0.25 per share. The note can be extended by mutual consent of the lender and the Company. In addition, the Company shall pay
to the lender a royalty ranging from 2.6% to 3.5%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 commencing
December 31, 2012. Collateral for this loan also included 1,400,000 shares of the Company’s common stock.



On August 6, 2012, the Company received $60,000 in net proceeds
for a convertible promissory note. The note matures on May 8, 2013 and accrues interest at the rate of 8% per annum. The Note may
be prepaid at any time subject to a prepayment penalty of up to 140% of the sum of the principal, accrued but unpaid interest and
any other amounts due under the Note. On and after February 2, 2013 and until the maturity date or the full payment of the Note
(whichever is later), the principal and all accrued but unpaid interest and any other amounts due under the Note are convertible
into shares of the Company’s common stock. The conversion price is at a 42% discount to the average of the five lowest high
bid prices for the Company’s common stock at the close of trading during the 10 trading day period prior to the date Asher
delivers its notice of conversion. Under the Note, the Company may not declare and pay any dividends or repurchase any of its securities
without Asher’s prior written consent, except for any dividends payable with respect to the outstanding shares of the Company’s
Series A Preferred Stock.



These funding efforts will proceed but
the Company can provide no guarantee that the funding will be realized.



Operating Activities



Net cash used by operating activities was
approximately $472,000 for the six month period ended June 30, 2012, as compared to cash used by opening activities of approximately
$515,000 for the six month period ended June 30, 2011, a decrease in cash used by operations of approximately $43,000. Use of cash
from basic operations was approximately $49,000 for the six month period ended June 30, 2012, as compared to cash generated from
basic operations of approximately $121,000 in the same period in 2011, a decrease of approximately $72,000 in the use of cash from
basic operations. This decrease in cash generated from basic operation is mainly due to lower sales for the six month period in
2012 as compared to the same period in 2011. Sales for the six months ended June 30, 2012 were approximately $908,000 lower than
the same period in the prior year, resulting in the gross margin to be approximately $472,000 lower for the six months ended June
30, 2012 compared to the same period in 2011. The other declines and increases in cash used from operations are a result of the
following: (i) prepaid expense increased approximately $90,000 for the six month period ended June 30, 2012 as compared to an increase
in prepaid expenses during the same period in 2011 of approximately $20,000, for an increase in use of cash of approximately $70,000;
(ii) accounts receivable also increased approximately $372,000 for the six month period ended June 30, 2012, as compared to an
increase of approximately $606,000 for the same period in 2011, resulting in a decline in the use of cash of approximately $234,000;
(iii) accounts payable decreased approximately $59,000 for the six month period ended June 30, 2012, as compared to a decline in
accounts payable of approximately $9,000 for the same period in 2011,resulting in a increase in the use of cash of approximately
$50,000.





18







Investing Activities



For the six months period ended June 30,
2012, the Company used approximately $406,000 for investing activities, an increase of approximately $110,000. Investing activities
mainly consisted of approximately $345,100 for the issuance of a note receivable to our contract / packager supplier to help support
their operational costs which was an increase of approximately $49,000 over the same six months period in 2011. In 2012, the Company
also invested approximately $66,000 in manufacturing equipment needed for the production of our new products to be launched in
the second half of 2012.



Financing Activities



Net cash provided by financing activities
was approximately $478,000 for six month period ended June 30, 2012 compared to approximately $1,238,000 for the same six month
period in 2011, a decrease of approximately $760,000. Financing activities for the six months ended June 30, 2012 consisted of
the following: (a) the Company paid down the balance on two convertible notes payable in the amount of $170,600, (b) the Company
received the cash balance of $170,800 for subscription receivable, (c) the Company raised $370,000 from the issuance of convertible
notes payable, of which $50,000 was from a related party and (d) the Company sold shares of common stock in the amount of $30,000,
(e) purchase order financing raise a net amount of approximately $78,000. In six month period ended June 30, 2011, cash provided
by financing activities consisted mainly of: (a) proceeds from the issuance of convertible preferred stock of approximately $912,000,
(b) proceeds from convertible promissory notes of approximately $434,000, of which $20,000 was issued to a related party and (c)
the sale of common stock in the amount of $5,600. These funds were used to fund operations and to pay down $114,000 due on a convertible
promissory notes.



The following is a listing of our current financing.



On August 6, 2012, the Company received $60,000 in net proceeds
for a convertible promissory note payable. The note matures on May 8, 2013 and accrues interest at the rate of 8% per annum. The
Note may be prepaid at any time subject to a prepayment penalty of up to 140% of the sum of the principal, accrued but unpaid interest
and any other amounts due under the Note. On and after February 2, 2013 and until the maturity date or the full payment of the
Note (whichever is later), the principal and all accrued but unpaid interest and any other amounts due under the Note are convertible
into shares of the Company’s common stock. The conversion price is at a 42% discount to the average of the five lowest high
bid prices for the Company’s common stock at the close of trading during the 10 trading day period prior to the date Asher
delivers its notice of conversion. Under the Note, the Company may not declare and pay any dividends or repurchase any of its securities
without Asher’s prior written consent, except for any dividends payable with respect to the outstanding shares of the Company’s
Series A Preferred Stock.



On May 1, 2012, the Company received $50,000
in cash for one convertible promissory note payable from a related party. The note provides for interest only payments of 1%, payable
quarterly in cash, or common stock of the Company at $0.25 per share, at the option of the lender. There is no required principal
payment on the note until maturity which is November 1, 2015. The principal portion of the notes can be converted into common stock
at any time during the term of the loan at the rate of $.25 per share at the option of the lender. The note can be extended by
mutual consent of the lender and the Company. In addition, the Company shall pay to the lender 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 commencing December 31, 2012. Collateral for this loan also included 200,000 shares of the Company’s
common stock.



On May 7, 2012, the Company received $320,000
in cash for one convertible promissory note payable. The note provides for interest only payments of 2%, payable monthly until
March 14, 2013 and 1% monthly thereafter, in cash, or common stock of the Company at $0.25 per share, at the option of the lender.
There is no required principal payment on the note until maturity which is November 7, 2013. The principal portion of the notes
can be converted into common stock at any time during the term of the loan at the rate of $.25 per share at the option of the lender.
The note can be extended by mutual consent of the lender and the Company. In addition, the Company shall pay to the lender a royalty
ranging from 2.6% to 3.5%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 commencing December 31, 2012.
Collateral for this loan also included 1,400,000 shares of the Company’s common stock.



On March 12, 2012 the Company prepaid the
sum of $85,300 to a holder of a $100,000 convertible note payable, leaving a balance of $14,700. By mutual consent the maturity
date was also extend from November 23, 2012 to January 30, 2014 and the interest rate was decreased from 2% per month to 1% per
month. $85,000 of this note was classified in the balance sheet as current in the December 31, 2011 balance.





19







On March 12, 2012 the Company prepaid the
sum of $85,300 to a holder of a $200,000 convertible note payable, leaving a balance of $114,700. By mutual consent the maturity
date was also extend from November 23, 2012 to January 30, 2014 and the interest rate was decreased from 2% per month to 1% per
month. $85,000 of this note was classified in the balance sheet as current in the December 31, 2011 balance.



On March 12, 2012 the holder of two other
convertible notes, totaling $300,000, agreed to extend the maturity dates of these notes to January 30, 2014 and also agreed to
reduce the interest rate from 2% per month to 1% per month.



The principal portion of these convertible
notes can be converted, at the option of the holder, into common stock at any time at the rate of $0.25 per share.



On March 12, 2012, the holders of a long-term
convertible note in the amount of $250,000 elected to convert the note into 2,000,000 shares of the Company’s common stock.
At the time of conversion the Company changed the conversion price from $0.25 per share to $0.125 per share of common stock, resulting
in an additional 1,000,000 shares being issued than was provided under the original loan agreement. At the time of the conversion
the fair value of the Company’s stock was below the revised $0.125 conversion price. Consequently the Company did not have
to record any extra expense for this beneficial conversion feature. This reduction in the conversion price was not offered on any
other outstanding convertible notes payable issued by the Company.



Commitments and Concentrations



In March 2010, the Company signed a “Product, Manufacturing
and Supply Agreement” with a Marlex our contract packager and labeler for orally disintegrating tablets. The total value
of this contract is $935,000. The Company has paid a total of approximately $744000, of which $200,000 is considered a stand still
fee that has been reflected as a deposit on the balance sheet as of June 30, 2012 and December 31, 2011. The project was completed
during the first quarter of 2012 and the Company does not expect to incur any more charges toward this contract. Upon the commencement
of product shipped, a 7% royalty on the gross profit related to the orally disintegrating tablet sales will be due on a quarterly
basis. The Company anticipates launching this orally disintegrating tablet in the third fiscal quarter of 2012. The $200,000 deposit
will be applied towards future royalty payments.



The holders of a $250,000 convertible note
payable which was converted into 2,000,000 shares of our common stock are still entitled to a 4% royalty for upon the commencement
of the shipment of a new Acetaminophen product developed by the Company for a pain relief orally disintegrating rapidly dissolving
80mg and 160mg tablets, per a non-current convertible notes payable agreement. All sales of the rapidly dissolving 80mg and 160mg
tablets will be subject to this 4% royalty beginning January 1, 2012, and the Company expects the royalty payments to begin after
the third quarter of 2012. The Company anticipates the launch of these rapidly dissolving tablets sometime after the third quarter
of 2012. The royalty payments to the note holders have no minimum guarantee amounts and royalty payments will end only if and when
the product line of Acetaminophen rapidly dissolving 80mg and 160mg tablets are sold to a third party.



The holder of a $50,000 convertible note
payable issued by the Company on May 1, 2012 to a related party is entitled to royalty payments as follows: The Company shall pay
to the lender a royalty of 0.09% on the first $25 million of sales of generic prescription drug under distribution contracts with
Federal government agencies. Payments for royalty will be paid quarterly commencing December 31, 2012. Collateral for this loan
also included 200,000 shares of the Company’s common stock.



The holders of a $320,000 convertible note
payable issued by the Company on May 7, 2012 is entitled to royalty payments as follows: The Company shall pay to the lender a
royalty ranging from 2.6% to 3.5% on the first $25 million of sales of generic prescription drug under distribution contracts with
Federal government agencies. Payments for royalty will be paid quarterly commencing December 31, 2012. Collateral for this loan
also included 1,400,000 shares of the Company’s common stock



The Company purchased 100% of its package
product from one supplier for the six month period ended June 30, 2012 and during the years ended December 31, 2011 and 2010. A
disruption in the availability of package product from this supplier could cause a possible loss of sales, which could affect operating
results adversely.



The Company derived approximately $1,913,000,
or 76%, and approximately $3,177,000, or 93%, of its revenue from one customer during the six months ended June 31, 2012 and 2011,
respectively. For the three months ended June 31, 2012 and 2011, the Company derived approximately $1,311,000 or 87% and 1,651,000
or 93%, of its revenue from one customer, respectively.



As of June 30, 2012, one customer accounted
for approximately $519,000, or 91%, of the Company’s accounts receivable. As of December 31, 2011, one customer accounted
for approximately $204,640, or 100% of the Company’s accounts receivable.





20







Off-Balance Sheet Arrangements



We currently have no off-balance sheet
arrangements.



Critical Accounting Policies



The preparation of our financial statements
in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and judgments
that affect our reported assets, liabilities, revenues, and expenses, and the disclosure of contingent assets and liabilities.
We base our estimates and judgments on historical experience and on various other assumptions we believe to be reasonable under
the circumstances. Future events, however, may differ markedly from our current expectations and assumptions. While there are a
number of significant accounting policies affecting our financial statements, we believe the following critical accounting policies
involve the most complex difficult and subjective estimates and judgments:





RevenueRecognition - Revenue is recognized when product is shipped from our contract packager (Marlex Pharmaceuticals
Inc.) to our customers’ warehouses, mainly McKesson, and is adjusted for any charge backs received 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 for the corresponding period is reduced accordingly.



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



Research and development-
Expenditures for research and development associated with contract research and development provided by third parties, are expensed
as operating expenses as incurred.



Accounts receivable -Accounts
receivable are stated at estimated net realizable value and net of accounts receivable sold subject to charge-back. Management
provides for uncollectible amounts through a charge to earnings and a credit to an allowance for doubtful accounts based on its
assessment of the current status of individual accounts and historical collection information. Balances that are deemed uncollectible
after management has used reasonable collection efforts are written off through a charge to the allowance and a credit to accounts
receivable. The Company has entered into an accounts receivable factoring facility agreement.



Stock based compensation -The
Company adopted FASB ASC No. 718 “ Share -Based Payment,” requiring the expense recognition of the fair value
of all share-based payments issued to employees. Stock grants to employees were valued using the fair value to the stock as determined
by the board of directors since our stock is not publicly traded and the volume is immaterial. As of June 30, 2012 the Company
has not issued any 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 to be provided, or the fair value of stock at the date the agreement is reached, whichever is more readily determinable.



For stock options 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, 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 (we do not anticipate paying dividends for
    the foreseeable future),
| | • the risk free interest rate for the expected option or warrant term, and                                      
| | • the expected forfeiture rate.                                                                                 





|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, 2012 (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 effective.



(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.



21







PART II -  OTHER
INFORMATION





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



None.



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



On May 3, 2012, the Company issued 20,000
restricted shares of its common stock to five directors in connection with services provided by such members of the board of directors
for which we charged $2,000 to operations for the quarter ended June 30, 2012.



On April 24, 2012 and June 1, 2012, the
Company issued an aggregate of 57,144 restricted shares of its common stock to the Company’s President and CEO for payment
of his salary in lieu of cash compensation payments for services rendered during the month of April and May, respectively, for
which we charged $10,000 to operations for the quarter ended June 30, 2012.



On May 25, 2012, the Company issued 400,000
restricted shares of its common stock to Sarav Patel and 500,000 restricted shares of its common stock to Samir Patel for services
rendered under their respective consulting agreements with the Company. These services were valued at $40,000 and $50,000, respectively.
Sarav and Samir Patel have controlling interest in Marlex Pharmaceuticals, Inc.



On May 25, 2012, the Company issued 37,500
restricted shares of its common stock to Robert Rabinowitz and 37,500 restricted shares of its common stock to David Goodfriend.
The shares were issued a retainer fee under an agreement the Company entered into with JH Darbie & Co., Inc. for investment
banking and placement agent services. Messrs. Goodfriend and Rabinowitz are principals of JH Darbie & Co., Inc. These services
were valued at $7,500.



The shares of the Company’s common
stock issued to its outside directors and the Company’s Chief Executive Office qualified for an exemption under Section 4(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 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(2) of the Securities Act for this transaction



The shares of the Company’s common
stock issued to Sarav Patel, Samir Patel, Robert Rabinowitz and David Goodfriend qualified for an exemption under Section 4(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 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(2) of the Securities Act for this transaction.



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



Not applicable.



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



Not applicable.



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



None.



22







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



|Number  | Description                                                                                                                                      
|------- | -------------------------------------------------------------------------------------------------------------------------------------------------
|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
|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*                                                                                                             





* Pursuant to Rule 405(a)(2) of Regulation S-T, the
Company will furnish the XBRL Interactive Data Files with detailed footnote tagging as Exhibit 101 in an amendment to this
Form 10-Q within the permitted 30-day grace period for the first quarterly period in which detailed footnote tagging is
required after the filing date of this Form 10-Q.







23







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, 2012 |                                                                                                                 
|                        | 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)









24