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 March 31,
2013



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 May 15, 2013, the registrant had
61,836,821 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 MARCH 31, 2013



TABLE OF CONTENTS



PART I.   FINANCIAL INFORMATION



|Item 1. | Financial Statements (Unaudited)                                                                   |   
|------- | -------------------------------------------------------------------------------------------------- | --
|        | Condensed Balance Sheets  as of March 31, 2013 and December 31, 2012                               | 1 
|        | Condensed Statements of Operations for the three months ended March 31, 2013 and 2012              | 2 
|        | Condensed Statements of Changes in Stockholders’ Deficit for the three months ended March 31, 2013 | 3 
|        | Condensed Statements of Cash Flows for the three months ended March 31, 2013 and 2012              | 4 
|        | Condensed Notes to Financial Statements                                                            | 5 
|Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations              | 20
|Item 4. | Controls and Procedures                                                                            | 31





PART II.  OTHER INFORMATION



|Item 1.        | Legal Proceedings                                           | 31
|-------------- | ----------------------------------------------------------- | --
|Item 2.        | Unregistered Sales of Equity Securities and Use of Proceeds | 31
|Item 3.        | Defaults Upon Senior Securities                             | 32
|Item 4.        | Mine Safety Disclosures                                     | 32
|Item 5.        | Other Information                                           | 32
|Item 6.        | Exhibits                                                    | 32
|               |                                                             |   
|SIGNATURES     | 33                                                         
|               |                                                             |   
|CERTIFICATIONS |                                                            









i







PART I - FINANCIAL INFORMATION



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



SCRIPSAMERICA, INC.

Condensed Balance Sheets

(Unaudited)



|                                                                                                                                                                                              |  | March 31, 2013 |            |   | December 31,
    2012 |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | ---------- | - | --------------------- | -
|ASSETS                                                                                                                                                                                        |  |                |            |   |                       |  
|Current Assets                                                                                                                                                                                |  |                |            |   |                       |  
|Cash                                                                                                                                                                                          |  | $              | 3,309      |   |                       | $
|Accounts receivable-trade, net allowance for charge backs of $59,465 and $105,443, respectively                                                                                               |  |                | 149,958    |   |                       |  
|Receivable - contract packager                                                                                                                                                                |  |                | 1,536,541  |   |                       |  
|Prepaid expenses and other current assets                                                                                                                                                     |  |                | 313,710    |   |                       |  
|                                                                                                                                                                                              |  |                |            |   |                       |  
|Total Current Assets                                                                                                                                                                          |  |                | 2,003,518  |   |                       |  
|                                                                                                                                                                                              |  |                |            |   |                       |  
|Property and Equipment                                                                                                                                                                        |  |                | 69,650     |   |                       |  
|                                                                                                                                                                                              |  |                |            |   |                       |  
|Other Assets                                                                                                                                                                                  |  |                | –          |   |                       |  
|                                                                                                                                                                                              |  |                |            |   |                       |  
|TOTAL ASSETS                                                                                                                                                                                  |  | $              | 2,073,168  |   |                       | $
|                                                                                                                                                                                              |  |                |            |   |                       |  
|LIABILITIES AND STOCKHOLDERS' DEFICIT                                                                                                                                                         |  |                |            |   |                       |  
|Current Liabilities                                                                                                                                                                           |  |                |            |   |                       |  
|Line of credit                                                                                                                                                                                |  | $              | 77,266     |   |                       | $
|Accounts payable and accrued expenses                                                                                                                                                         |  |                | 126,727    |   |                       |  
|Purchase order financing - related party                                                                                                                                                      |  |                | 512,583    |   |                       |  
|Obligation due to factor                                                                                                                                                                      |  |                | –          |   |                       |  
|Royalty payable                                                                                                                                                                               |  |                | –          |   |                       |  
|Convertible notes payable - related parties                                                                                                                                                   |  |                | 130,000    |   |                       |  
|Current portion of long-term debt – related parties                                                                                                                                           |  |                | 114,561    |   |                       |  
|Convertible notes payable - net of discount $208,880 and $50,918 respectively                                                                                                                 |  |                | 825,770    |   |                       |  
|Derivative liability                                                                                                                                                                          |  |                | 208,404    |   |                       |  
|                                                                                                                                                                                              |  |                |            |   |                       |  
|Total Current Liabilities                                                                                                                                                                     |  |                | 1,995,311  |   |                       |  
|                                                                                                                                                                                              |  |                |            |   |                       |  
|Non-Current Liabilities                                                                                                                                                                       |  |                |            |   |                       |  
|Preferred stock dividends payable                                                                                                                                                             |  |                | 125,160    |   |                       |  
|Convertible notes payable - related parties                                                                                                                                                   |  |                | –          |   |                       |  
|Convertible notes payable                                                                                                                                                                     |  |                | –          |   |                       |  
|Long-term debt, less current portion – related parties                                                                                                                                        |  |                | 323,206    |   |                       |  
|Total Non-Current Liabilities                                                                                                                                                                 |  |                | 448,366    |   |                       |  
|                                                                                                                                                                                              |  |                |            |   |                       |  
|Total Liabilities                                                                                                                                                                             |  |                | 2,443,677  |   |                       |  
|                                                                                                                                                                                              |  |                |            |   |                       |  
|Commitments and Contingencies                                                                                                                                                                 |  |                |            |   |                       |  
|Series A Convertible preferred stock - $.001 par value;
    10,000,000 shares authorized, 2,990,252 issued and outstanding                                                                    |  |                | 1,043,000  |   |                       |  
|                                                                                                                                                                                              |  |                |            |   |                       |  
|Stockholders' Deficit                                                                                                                                                                         |  |                |            |   |                       |  
|Common stock - $0.001
    par value; 150,000,000 shares authorized; 58,400,115 and     56,404,972 shares issued and outstanding as of March 31, 2013,
    and December 31, 2012, respectively |  |                | 58,400     |   |                       |  
|Additional paid-in capital                                                                                                                                                                    |  |                | 1,599,625  |   |                       |  
|Accumulated deficit                                                                                                                                                                           |  |                | (3,071,534 | ) |                       |  
|                                                                                                                                                                                              |  |                | .          |   |                       |  
|Total Stockholders' Deficit                                                                                                                                                                   |  |                | (1,413,509 | ) |                       |  
|                                                                                                                                                                                              |  |                |            |   |                       |  
|TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT                                                                                                                                                   |  | $              | 2,073,168  |   |                       | $



See accompanying notes to condensed
financial statements.

1





SCRIPSAMERICA, INC.

Condensed Statements of Operations

(Unaudited)



|                                               |  | For the three months ended 
March 31, |           
|---------------------------------------------- |  | ------------------------------------- | ----------
|                                               |  | 2013                                  |           
|Net revenues                                   |  |                                       |           
|Product revenues - net of contract adjustments |  | $                                     | 150,500   
|Revenues net, from contract packager           |  |                                       | 136,874   
|Total net revenues                             |  |                                       | 287,374   
|                                               |  |                                       |           
|Cost of Goods Sold                             |  |                                       |           
|Product revenues                               |  |                                       | 210,540   
|Royalty expense                                |  |                                       | 87,500    
|                                               |  |                                       | 298,040   
|                                               |  |                                       |           
|Gross Profit (Loss)                            |  |                                       | (10,666   
|                                               |  |                                       |           
|Selling, General and Administrative Expenses   |  |                                       | 629,602   
|Research  and Development                      |  |                                       | –         
|                                               |  |                                       |           
|Total Operating Expenses                       |  |                                       | 629,602   
|                                               |  |                                       |           
|Loss from Operations                           |  |                                       | (640,268  
|                                               |  |                                       |           
|Other Income (Expenses), net                   |  |                                       |           
|Interest expense                               |  |                                       | (83,142   
|Loss on revaluation of derivatives             |  |                                       | (6,864    
|Amortization of debt discount                  |  |                                       | (41,083   
|Gain on extinguishment of debt                 |  |                                       | 51,225    
|                                               |  |                                       | (79,864   
|                                               |  |                                       |           
|Loss Before Provision for Income taxes         |  |                                       | (720,132  
|                                               |  |                                       |           
|Provision (Benefit) for Tax Expense            |  |                                       | –         
|                                               |  |                                       |           
|Net Loss                                       |  |                                       | (720,132  
|                                               |  |                                       |           
|Preferred Stock Dividend                       |  |                                       | (20,860   
|                                               |  |                                       |           
|Net Loss Available to Common Shareholders      |  | $                                     | (740,992  
|                                               |  |                                       |           
|Loss Per Common Share                          |  |                                       |           
|Basic  and Diluted                             |  | $                                     | (0.01     
|                                               |  |                                       |           
|Weighted Average Number of Common Shares       |  |                                       |           
|Basic and Diluted                              |  |                                       | 57,631,739





See accompanying notes to condensed financial
statements.



2







SCRIPSAMERICA, INC.

Condensed Statement of Changes in Stockholders'
Deficit

For the three months ended March 31,
2013 (unaudited)





|                                                 |  | Common Stock |            |  | Additional Paid-In |   |        | Accumulated |  |   | Stockholders' | 
|------------------------------------------------ |  | ------------ | ---------- |  | ------------------ | - | ------ | ----------- |  | - | ------------- | 
|                                                 |  | Shares       |            |  | Amount             |   |        | Capital     |  |   | Deficit       | 
|                                                 |  |              |            |  |                    |   |        |             |  |   |               | 
|Balance - December 31, 2012                      |  |              | 56,404,972 |  |                    | $ | 56,405 |             |  | $ | 1,090,772     | 
|                                                 |  |              |            |  |                    |   |        |             |  |   |               | 
|Common stock issued for cash                     |  |              | 739,641    |  |                    |   | 740    |             |  |   | 109,260       | 
|Common stock issued for services - non employees |  |              | 669,391    |  |                    |   | 669    |             |  |   | 194,930       | 
|Common stock issued for Royalty payment          |  |              | 586,111    |  |                    |   | 586    |             |  |   | 204,663       | 
|Dividends for convertible preferred stock        |  |              |            |  |                    |   |        |             |  |   |               | 
|Net Loss                                         |  |              |            |  |                    |   |        |             |  |   |               | 
|                                                 |  |              |            |  |                    |   |        |             |  |   |               | 
|Balance - March 31, 2013                         |  |              | 58,400,115 |  |                    | $ | 58,400 |             |  | $ | 1,599,625     | 















See accompanying notes to condensed financial
statements.







3







SCRIPSAMERICA, INC.

Condensed Statements of Cash Flows

(Unaudited)



|                                                                            |  | For the three months ended 
March 31, |         
|--------------------------------------------------------------------------- |  | ------------------------------------- | --------
|                                                                            |  | 2013                                  |         
|                                                                            |  |                                       |         
|Cash Flows from Operating Activities                                        |  |                                       |         
|Net Loss                                                                    |  | $                                     | (720,132
|Adjustments to reconcile net loss to net cash used by operating activities: |  |                                       |         
|Amortization of discount on convertible notes payable                       |  |                                       | 45,387  
|Amortization of loan fees                                                   |  |                                       | 4,322   
|Common stock issued for services                                            |  |                                       | 125,175 
|Common stock issued for payment of royalty fees                             |  |                                       | 87,500  
|Change in derivative liability                                              |  |                                       | 6,864   
|Deferred Income tax provision (benefit)                                     |  |                                       | –       
|Change in reserve on loan receivable - Contract
    packager                |  |                                       | (26,000 
|Gain on extinguishment of debt                                              |  |                                       | (51,225 
|Allowance for chargebacks                                                   |  |                                       | (45,978 
|Reserve on  other assets                                                    |  |                                       | 200,000 
|Change in operating assets and liabilities                                  |  |                                       |         
|(Increase) decrease in:                                                     |  |                                       |         
|Accounts receivable - trade                                                 |  |                                       | 186,551 
|Receivable - Contract packager                                              |  |                                       | 42,510  
|Prepaid expenses and other current assets                                   |  |                                       | 51,162  
|Loan Receivable - Contract packager                                         |  |                                       | 26,000  
|Accounts payable and accrued expenses                                       |  |                                       | 25,206  
|                                                                            |  |                                       |         
|Cash used in operating activities                                           |  |                                       | (42,658 
|                                                                            |  |                                       |         
|Cash Flows from Investing Activities                                        |  |                                       |         
|Proceeds from note receivable                                               |  |                                       | –       
|Cash provided by investing activities                                       |  |                                       | –       
|                                                                            |  |                                       |         
|Cash Flows from Financing Activities                                        |  |                                       |         
|Proceeds from bank line of credit, net                                      |  |                                       | 37,207  
|Proceeds from issuance of common stock                                      |  |                                       | 110,000 
|Proceeds from convertible notes payable                                     |  |                                       | 210,300 
|Payments for PO financing from related party, net                           |  |                                       | (65,697 
|Payments to factor, net                                                     |  |                                       | (141,725
|Payments for convertible notes payable                                      |  |                                       | (90,561 
|Payments for  note payable - related party                                  |  |                                       | (27,070 
|Collection of stock subscription receivable                                 |  |                                       | –       
|Cash provided by financing activities                                       |  |                                       | 32,454  
|                                                                            |  |                                       |         
|Net Decrease in Cash                                                        |  |                                       | (10,204 
|                                                                            |  |                                       |         
|Cash - Beginning of period                                                  |  |                                       | 13,513  
|                                                                            |  |                                       |         
|Cash  - End of period                                                       |  | $                                     | 3,309   
|                                                                            |  |                                       |         
|Supplemental Disclosures of Cash Flow Information                           |  |                                       |         
|Cash Paid:                                                                  |  |                                       |         
|Interest                                                                    |  | $                                     | 34,128  
|Noncash financing and investing activities:                                 |  |                                       |         
|Accrued Preferred Dividend payable                                          |  | $                                     | 20,860  
|Conversion of note payable for common stock                                 |  | $                                     | –       
|Common stock issued for services                                            |  | $                                     | 195,599 
|Common stock issued for Royalty payment                                     |  | $                                     | 205,249 



See accompanying notes to condensed financial
statements.



4









SCRIPSAMERICA, INC.

Notes to Condensed Financial Statements (Unaudited)

For the three months ended March 31, 2013







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





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. (“Marlex” or “Contract Packager”), for our packaging, distribution, warehouse and customer service
needs. The Company has developed a branded OTC product that is currently expected to be shipped to retail drug stores in the fourth
quarter of 2013.



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, 2012 filed with the SEC on April 15, 2013. Certain information and note disclosure normally included
in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted
pursuant to those rules and regulations. In the opinion of management, all adjustments, consisting of normal recurring adjustments,
necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been
reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for
the full year.





|2 - | Liquidity and Business Risks
|--- | ----------------------------





At March 31, 2013, the Company
had approximately $3,000 in cash and incurred a loss from operations of $640,268.  The Company’s cash expenditures are
projected to be approximately $90,000 a month for continuing operating expenses.  Included in these cash expenditures are
approximately $15,000 a month in interest costs.  After taking into consideration our interim results and current projections,
management believes that the cash flow from operations, together with debt financing and our line of credit will be sufficient
to support the working capital requirements, debt service and applicable debt maturity requirements through the next twelve month
period ending March 31, 2014.  However the generic pharmaceutical industry is highly competitive and as such, historical sales
and projections based on current information are not always indicative of future results. Further, although
the Company has successfully obtained various funding and financing in the past, future financing and funding options may be challenging
in the current environment.



In March 2010, we entered into
a product development, manufacturing and supply agreement with our contract supplier/packager, which develops generic and over
the counter (OTC) drug products. Under this agreement, we have developed a children’s pain relief
orally disintegrating rapidly dissolving 80 mg and 160 mg tablets for OTC products. We completed the development of these rapid
dissolving products in the first quarter of 2012, with production and sales pending manufacturing and process qualification and
marketing execution.  However, we estimate that we will need approximately $1.5 million of incremental funding for expenses
required to launch these products. The funding for launching the rapid dissolving products is to come from the sale of equity securities,
preferred and/or common stock securities and debt financing.





|3- | 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 to our customers’
warehouses, mainly McKesson, and is adjusted for anticipated charge backs from our customers which include inventory credits,
discounts or volume incentives. These charge back costs are received monthly from our customers’ and the sales revenue and
accounts receivables are reduced accordingly based on historical experience, customer contract programs, product pricing trends
and the mix of products shipped.



5


SCRIPSAMERICA, INC.Notes to Condensed Financial Statements (Unaudited)For the three months ended March 31, 2013




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



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



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 $0 and $10,044 for research and development expenses for the three months ended
March 31, 2013 and 2012, respectively.



d.Accounts Receivable
Trade, net-Accounts receivable are stated at estimated net realizable value net of the sales allowance due
to charge backs.  Management provides for uncollectible amounts through a charge to earnings and a credit to an allowance
for bad debts 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. As of March 31, 2013 and December 31, 2012 no allowance for doubtful accounts has
been recorded.



The
Company entered into an accounts receivable factoring facility agreement in June 2012. As of March 31, 2013, gross accounts receivable
were $209,423 of which none was sold to a factor. Accounts receivable were reduced by $59,465 to provide for an allowance for charge
backs, for a net receivable balance of 149,958. As of December 31, 2012, gross receivableswere $395,974 of which $141,725
was sold to a factor, and has been included in the liabilities section in the balance sheet. Gross accounts receivable was reduced
by $105,443, to provide for an allowance for charge backs, for a net accounts receivable balance of $290,531.



e.	Property and Equipment
-Property and equipment are stated at cost less accumulated depreciation. The Company computes depreciation using the
straight-line method over the estimated useful lives of the assets. Maintenance costs, which do not significantly extend the useful
lives of the respective assets and repair costs are charged to operating expense as incurred. The assets purchased in 2012 have
not been put into operations as of March 31, 2013, and as a result, no depreciation was recorded in 2013 and 2012.



f.	 Receivable –
Contract Packager- The Company has receivables from our Contract Packager, a related party in the amount of $1,536,541.
This receivable consists of the following: a) receivables relating to sales with a government agency in the amount of $694,380,
b) the Company paid $635,920 to a vendor for the product to be manufactured on behalf of our Contract Packager, and c) the Company
advanced $206,241 to our Contract Packager for the purchase of product inventory. The Company expects to receive payment within
the next twelve months thus no reserve for uncollectible amounts has been recorded.



g.Customer, Product,
and Supplier Concentrations -We sell our products directly to a wholesale drug distributor who, in
turn, supplies products to pharmacies, hospitals, governmental agencies, and physicians.  On January 1, 2010, the Company
entered into a Service Agreement with Marlex for a term of ten years, which is cancellable by either party upon twelve months written
notice. The Service Agreement provides for the packaging and distribution of goods to the Company’s customers. The Company
used this Contract Packager exclusively for all of its warehouse, customer service, distribution, and labeling services for 2013
and 2012.



h. Concentration in Cash
-. We maintain cash at financial institutions and, at times, balances may exceed federally insured limits. We have never
experienced any losses related to these balances. All of our non-interest bearing cash balances were fully insured at March 31,
2013 and December 31, 2012.



6


SCRIPSAMERICA, INC.Notes to Condensed Financial Statements (Unaudited)For the three months ended March 31, 2013




i.	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 annually 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 had a full valuation allowance
of $686,875 and $597,591 against deferred tax assets as of March 31, 2013 and December 31, 2012, respectively.



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, if applicable. There were no uncertain tax positions at March 31, 2013 and December 31, 2012.



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



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



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



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



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



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





7


SCRIPSAMERICA, INC.Notes to Condensed Financial Statements (Unaudited)For the three months ended March 31, 2013




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



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



The carrying values of accounts receivable, inventory,
accounts payable and accrued expenses, royalty payable, obligation due factor, and notes payable approximate their fair values
due to their short-term maturities. The carrying value of the Company’s long-term debt approximates fair value due to the
borrowing rates currently available to the Company for loans with similar terms. See note 8 for fair value of derivative liabilities.



l.	Advertising Expenses-The
Company expenses advertising costs as incurred.  The Company incurred advertising expenses in the amount of $44,496 and
$30,711 for the three month period ended March 31, 2013 and 2012, respectively.



m.	Shipping and Handling Cost –
The Company expenses all shipping and handling costs as incurred. These costs are included in cost of sales on the accompanying
condensed financial statements.



n.	Stock-Based Compensation– Compensation expense is recognized for 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 of August 3, 2012. Prior to our stock being publicly traded, the
fair value was determined by the board of directors for the value of services performed. As of December 31, 2012 and March 31,
2013, 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 the fair value of stock at the
date the agreement is reached, whichever is more readily determinable. For stock options and warrants granted to non-employees
the fair value at the grant date is used to value the expense. In calculating the estimated fair value of its stock options and
warrants, the Company used a Black-Scholes pricing model which requires the consideration of the following seven variables for
purposes of estimating fair value:



·the stock option or warrant exercise price,

·the expected term of the option or warrant,

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

·the expected volatility of our common stock,

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

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

·the expected forfeiture rate.





o.	Cost
of Goods Sold-The Company purchases all of its products from one supplier, MarlexPharmaceuticals
Inc., a related partyat various contracted prices. Raw materials are re-packaged by Marlex. Upon shipment
of product, the Company is charged the contracted price for services provided to ship the product.  Cost of goods consists
of raw material costs, re-packaging costs and shipping and handling.  The Company financed the purchase of inventory based
on confirmed purchase orders via a revolving finance agreement, provided by a related party.



p.	Earnings
Per Share - Basic net income (loss) per common share is computed using the weighted average number of common shares outstanding
during the period. Diluted earnings per share include additional dilution from common stock equivalents, such as stock issuable
pursuant to the exercise of stock warrants, convertible notes payable and Series A convertible preferred shares. Common stock equivalents
are not included in the computation of diluted earnings per share when the Company reports a loss because to do so would be anti-dilutive.



q. Reclassification -Certain reclassifications have been made to the 2012 financial statements to conform to the interim 2013 condensed financial
statements presentation. These reclassifications had no effect on net loss or cash flows as previously reported.



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



8


SCRIPSAMERICA, INC.Notes to Condensed Financial Statements (Unaudited)For the three months ended March 31, 2013






|4 - | Accounts
    Receivable, net
|--- | ----------------------------



The Company may at certain times
during the year sell qualified receivables to a factor (United Capital Funding). This agreement allows the Company to sell its
qualified accounts receivable with recourse in exchange for advances of funds equivalent to 83% of the value of receivables, leaving
17% of the receivables as a reserve by the factor for potential non-payment of the Company’s receivables. The factoring facility
is for a term of one year, which was renewed in May 2012 and is cancellable by either party upon one month’s written notice,
which provides a factoring line of up to $1,000,000. As collateral for the repayment of advances for receivables sold, the factor
has a priority security interest in all present and future assets and rights of the Company. The factor has required that the Company
notify all customers that all payments must be made to a lock-box controlled by the factor. The factoring fee is 2.2% every thirty
days or 26.4% annually. Factoring fees charged to interest expense for the three months period ended March 31, 2013 and 2012 were
$5,069 and $0, respectively.



As of March 31, 2013, there were
no open receivables sold to a factor. As of December 31, 2012, gross accounts receivables were $395,974 of which $141,725 were
sold to the factor and have been included in the liabilities section of the condensed balance sheet.





|5 - | Sales
    Impact due to net basis accounting
|--- | --------------------------------------------





In September 2012, the Company
announced that our Contract Packager, secured an 8-year, $79 million pharmaceutical distribution contract with the Office of Health
Affairs, a branch of the U.S. Department of Homeland Security, in conjunction with the Defense Logistics Agency (DLA). On September
30, 2012, our Contract Packager began shipping its first order on this distribution contract with the DLA.



The DLA contract with our Contract
Packager calls for a minimum purchase amount of $25 million over the next 2-3 years. The DLA awarded our Contract Packager the
contract based on the Contract Packager’s ability to provide specified pharmaceuticals at competitive prices.



A Joint Operating Agreement with
the Contract Packager enables the Company to receive a percentage of the Contract Packager’s gross profit after financing
charges, as defined. Since we are not deemed to be theprincipal in these sales transactions we do not report these sales
transaction on a gross basis in our condensed statements of operations. The revenue is reported separately in the condensed statements
of operations as revenues net, from Contract Packager. The gross sales and cost of sales from this DLA contacts were:



|                                           |  | Three month sales as of March 31, 2013 |          
|------------------------------------------ |  | -------------------------------------- | ---------
|                                           |  |                                        |          
|Sales from DLA contract                    |  | $                                      | 1,955,345
|Cost of sales on DLA                       |  |                                        | 1,818,471
|Product revenue net from contract packager |  | $                                      | 136,874  





|6 - | Loan
    Receivable – Contract Packager and other asseets
|--- | ---------------------------------------------------------





Beginning in fiscal year 2011,
the Company has loaned money to its Contract Packager in an unsecured, non-interest bearing loan which has no stipulated repayment
terms as the loan was made pursuant to an oral agreement. The outstanding balance at March 31, 2013 and December 31, 2012, was
$717,503 and $743,503 respectively. On September 11, 2012, the Company signed a letter of intent to purchase its Contract Packager.
Under the letter of intent agreement, upon closing, this loan will be eliminated. See footnote 14. However, due to the unavailability
of audited financial statements from the Contract Packager at the closing deadline of February 28, 2013, the closing of the transaction
has been postponed on a day-to-day basis until the Contract Packager’s audited financial statements are delivered. Consequently,
due to the uncertainty on closing this transaction, management has determined that the outstanding balance should be fully reserved
as of March 31, 2013 and December 31 2012.



The Company also had
a $200,000 deposit in other assets as of December 31, 2012 which it considered a stand still fee and was to be applied
towards future royalty payments. In March of 2013, the Company  reserves against this deposit since there is uncertainty
concerning the royalty agreement with its Contract Packager and this amount may never be applied to future royalty payments
or otherwise recovered (see note 11).



9


SCRIPSAMERICA, INC.Notes to Condensed Financial Statements (Unaudited)For the three months ended March 31, 2013






|7- | Debt
|-- | ----





Debt consists of the following
:



|                                           |  |     |  |     |  | March 31, 2013 |            |   | December 31, 2012 |  
|------------------------------------------ |  | --- |  | --- |  | -------------- | ---------- | - | ----------------- | -
|Convertible note                           |  | (a) |  | (1) |  | $              | 7,548      |   |                   | $
|Convertible note                           |  | (b) |  | (2) |  |                | 24,704     |   |                   |  
|Convertible note                           |  | (c) |  | (3) |  |                | 9,483      |   |                   |  
|Convertible note                           |  | (d) |  |     |  |                | 40,000     |   |                   |  
|Convertible note                           |  | (e) |  | (4) |  |                | 9,411      |   |                   |  
|Convertible note                           |  | (f) |  | (5) |  |                | 18,821     |   |                   |  
|Convertible note                           |  | (g) |  | (6) |  |                | 36,403     |   |                   |  
|Convertible note                           |  | (h) |  | (7) |  |                | –          |   |                   |  
|Convertible note                           |  | (i) |  |     |  |                | 290,000    |   |                   |  
|Convertible note                           |  | (j) |  |     |  |                | 14,700     |   |                   |  
|Convertible note                           |  | (k) |  |     |  |                | 114,700    |   |                   |  
|Convertible notes                          |  | (l) |  |     |  |                | 260,000    |   |                   |  
|Convertible note - Related party           |  | (m) |  |     |  |                | 80,000     |   |                   |  
|Convertible note - Related party           |  | (n) |  |     |  |                | 50,000     |   |                   |  
|                                           |  |     |  |     |  |                |            |   |                   |  
|Term loan - Related party                  |  | (o) |  |     |  |                | 437,767    |   |                   |  
|Line of Credit with Bank                   |  | (p) |  |     |  |                | 77,266     |   |                   |  
|                                           |  |     |  |     |  |                |            |   |                   |  
|Total Loan and notes payable               |  |     |  |     |  |                | 1,470,803  |   |                   |  
|Less current maturities                    |  |     |  |     |  |                | (1,147,597 | ) |                   |  
|Long-term debt                             |  |     |  |     |  | $              | 323,206    |   |                   | $
|                                           |  |     |  |     |  |                |            |   |                   |  
|(1) = Discounted amount $19,952            |  |     |  |     |  |                |            |   |                   |  
|(2) = Discounted amount $57,796            |  |     |  |     |  |                |            |   |                   |  
|(3) = Discounted amount $83,017            |  |     |  |     |  |                |            |   |                   |  
|(4) = Discounted amount $10,589            |  |     |  |     |  |                |            |   |                   |  
|(5) = Discounted amount $21,179            |  |     |  |     |  |                |            |   |                   |  
|(6) = Discounted amount $16,347 and 29,601 |  |     |  |     |  |                |            |   |                   |  
|(7) = Discounted amount $0 and $21,317     |  |     |  |     |  |                |            |   |                   |  



(a) On January 21, 2013, the Company
entered into a securities purchase agreement with Vista Capital Investments LLC (“Vista”) pursuant to which Vista purchased
from the Company a 10% convertible note. The Company received $22,500 in cash for a 10% convertible note payable with a principal
amount of $27,500, which note included a 10% discount, and we paid a $2,500 finder’s fee. The accrued interest and principal
are due on the maturity date of January 21, 2014. After 90 days from issuance there is a pre-payment fee of 150% of the principal
amount outstanding and interest due. The conversion price is the lesser of (a) $0.25 or (b) the amount equal to 60% of the lowest
trading price of the Company’s common stock at the close of trading during the 20 trading day period prior to the date of
the notice of conversion. Collateral for this loan also includes 3,000,000 shares of the Company’s common stock.



Since this note has a convertible
feature with a significant discount and could result in the note principal being converted to a variable number of the Company’s
common shares, the instrument includes an embedded derivative. The fair value of the derivative associated with this note was determined
by using the Black-Scholes pricing model with the following assumptions: no dividend yield, expected volatility of 59.8% to 40.1%,
risk-free interest rate of .15% and expected life of 12 and 10 months. The fair value of the derivative at the date issued amounted
to $22,240 and was revalued at March 31, 2013 to be $20,095. The debt discount associated with this derivative is being amortized
over the life of the note, the balance of the debt discount at March 31, 2013 is $19,952. Debt discount amortized to interest expense
in 2013 was $4,788.



The Company would have been required
to issue 134,804 shares of common stock if Vista converted on March 31, 2013.



This note contains a cross-default
provision, which means if the Company is in breach or default on any loan agreement the holder of this note, at its option, can
consider this note in default. If this note is considered in default all unpaid principal and interest is due immediately if not
cured within the applicable cure period. This note shall thereafter accrue interest at the rate of 10% per annum, compounding daily,
but in no event shall the applicable interest rate at any time exceed the maximum interest rate allowed under applicable law.



10


SCRIPSAMERICA, INC.Notes to Condensed Financial Statements (Unaudited)For the three months ended March 31, 2013




(b) On January 31, 2013, the Company
entered into a securities purchase agreement with JMJ Financial (“JMJ”) pursuant to which JMJ purchased a 12% convertible
note. The Company received $67,500 in cash for a 12% convertible note payable with a principal amount of $82,500, which note included
a 10% discount and we paid a $7,500 finder’s fee. The accrued interest and principal are due on the maturity date of January
31, 2014. The Company may repay this note at any time on or before 90 days from the issuance date and at such time the Company
shall not owe or pay any interest on the note. The conversion price is the lesser of (a) $0.21 or (b) the amount equal to 60% of
the lowest trading price of the Company’s common stock at the close of trading during the 25 trading day period prior to
the date of the notice of conversion. Collateral for this loan also includes 9,000,000 shares of the Company’s common stock.



Since this note has a convertible
feature with a significant discount and could result in the note principal being converted to a variable number of the Company’s
common shares, the instrument includes an embedded derivative. The fair value of the derivative associated with this note was determined
by using the Black-Scholes pricing model with the following assumptions: no dividend yield, expected volatility of 59.8% to 38.9%,
risk-free interest rate of .15% and expected life of 12 and 10 months. The fair value of the derivative at the date issued amounted
to $61,855 and was revalued at March 31, 2013 to be $60,212. The debt discount associated with this derivative is being amortized
over the life of the note, the balance of the debt discount at March 31, 2013 is $57,796. Debt discount amortized to interest expense
in 2013 was $11,559.



The Company would have been required
to issue 404,412 shares of common stock if JMJ converted on March 31, 2013.



This note contains a cross-default
provision, which means if the Company is in breach or default on any loan agreement the holder of this note, at its option, can
consider this note in default. If this note is considered in default all unpaid principal and interest is due immediately if not
cured within the applicable cure period. This note shall thereafter accrue interest at the rate of 18% per annum, compounding daily,
but in no event shall the applicable interest rate at any time exceed the maximum interest rate allowed under applicable law.



(c) On February 18, 2013, the
Company entered into a securities purchase agreement with Tonaquint, Inc (“Tonaquint”) pursuant to which Tonaquint
purchased an 8% convertible note. The Company received $67,500 in cash for an 8% convertible note payable with a principal amount
of $92,500. The note included a 10% discount, we paid a $7,500 finder’s fee and we agreed to pay $10,000 to cover the investor’s
legal fees. The accrued interest and principal are due on the maturity date of December 18, 2013. The Company can prepay the note
at any time before the maturity date but must pay a 135% of the principal amount outstanding and interest due. The conversion price
is equal to 65% of the average of the three lowest trading prices of the Company’s common stock at the close of trading during
the 20 trading day period prior to the date of the notice of conversion.



Since this note has a convertible
feature with a significant discount and could result in the note principal being converted to a variable number of the Company’s
common shares, the instrument includes an embedded derivative. The fair value of the derivative associated with this note was determined
by using the Black-Scholes pricing model with the following assumptions: no dividend yield, expected volatility of 56.2% to 53.9%,
risk-free interest rate of .15% and expected life of 10 and 9 months. The fair value of the derivative at the date issued amounted
to $88,553 and was revalued at March 31, 2013 to be $55,879. The debt discount associated with this derivative is being amortized
over the life of the note, the balance of the debt discount at March 31, 2013 is $83,017. Debt discount amortized to interest expense
in 2013 was $13,036.



The Company would have been required
to issue 410,503 shares of common stock if Tonaquint converted on March 31, 2013.



This note contains a cross-default
provision, which means if the Company is in breach or default on any loan agreement the holder of this note, at its option, can
consider this note in default. If this note is considered in default all unpaid principal and interest is due immediately if not
cured within the applicable cure period. This note shall thereafter accrue interest at the rate of 1.83% per month (or 22%per annum),
compounding daily, but in no event shall the applicable interest rate at any time exceed the maximum interest rate allowed under
applicable law.



(d) On March 20, 2013, the Company
received $35,200 in cash for a 12% annual interest convertible note payable with a principal amount of $40,000. The note did not
include a discount, however, we paid $2,000 to cover the investor’s legal fees and $2,800 was paid directly to a third party
on the Company’s behalf. Interest is payable monthly in the amount of $400. The unpaid interest and principal are due on
the maturity date of March 20, 2014. The principal portion of this convertible note can be converted into the Company’s common
stock at any time at the rate of $0.20 per share at the option of the lender.



11


SCRIPSAMERICA, INC.Notes to Condensed Financial Statements (Unaudited)For the three months ended March 31, 2013




(e) On March 20, 2013, the Company
entered into a securities purchase agreement with GEL Properties (“GEL”) pursuant to which GEL purchased a 6% convertible
note. The Company received $17,600 in cash for a 6% convertible note payable with a principal amount of $20,000. The note did not
include a discount, but $2,400 was paid directly to a third party on the Company’s behalf. The accrued interest and principal
are due on the maturity date of March 20, 2014. There is a prepayment charge of 150% of the principal amount outstanding and interest
due. The conversion price is equal to 70% of the lowest trading price of the Company’s common stock at the close of trading
during the 5 trading day period prior to the date of the notice of conversion.



Since this note has a convertible
feature with a significant discount and could result in the note principal being converted to a variable number of the Company’s
common shares, the instrument includes an embedded derivative. The fair value of the derivative associated with this note was determined
by using the Black-Scholes pricing model with the following assumptions: no dividend yield, expected volatility of 59.2%, risk-free
interest rate of .15% and expected life of 12 months. The fair value of the derivative at the date issued amounted to $10,912 and
was revalued at March 31, 2013 to be $10,900. The debt discount associated with this derivative is being amortized over the life
of the note, the balance of the debt discount at March 31, 2013 is $10,912. Debt discount amortized to interest expense in 2013
was $36.



The Company would have been required
to issue 81,633 shares of common stock if GEL converted on March 31, 2013.



This note contains a cross-default
provision, which means if the Company is in breach or default on any loan agreement the holder of this note, at its option, can
consider this note in default. If this note is considered in default all unpaid principal and interest is due immediately if not
cured within the applicable cure period. This note shall thereafter accrue interest at the rate of 24% per annum, compounding daily,
but in no event shall the applicable interest rate at any time exceed the maximum interest rate allowed under applicable law.



(f) On March 20, 2013, the Company
converted a portion of a $100,000 12% convertible note payable to a 6% convertible note payable with a principal amount of $40,000.
The note did not include a discount and the accrued interest and principal are due on the maturity date of March 20, 2014. There
is a prepayment charge of 150% of the principal amount outstanding and interest due. The conversion price is equal to 70% of the
lowest trading price of the Company’s common stock at the close of trading during the 5 trading day period prior to the date
of the notice of conversion.



Since this note has a convertible
feature with a significant discount and could result in the note principal being converted to a variable number of the Company’s
common shares which we have deemed to be an instrument which requires us to value an embedded derivative. The Company accounted
for the conversion feature in accordance with ASC 815. The fair value of the derivative associated with this note was determined
by using the Black-Scholes pricing model with the following assumptions: no dividend yield, expected volatility of 59.2%, risk-free
interest rate of .15% and expected life of 12 months. The fair value of the derivative at the date issued amounted to $21,824 and
approximately the same value at March 31, 2013. The debt discount associated with this derivative equals the fair value of the
derivative at the date issued and is being amortized over the life of the note, the balance of the debt discount at March 31, 2013
is $21,179. Debt discount amortized to interest expense in 2013 was $645.



The Company would have been required
to issue 163,835 shares of common stock if converted on March 31, 2013 and on April 4, 2013, the creditor converted this $40,000
note into 200,000 shares of the Company’s common stock.



(g) On October 22, 2012, the Company
entered into a securities purchase agreement with Auctus Private Equity Fund (“Auctus”) pursuant to which Auctus purchased
from the Company an 8% convertible note in the principal amount of $52,750. The Company received gross proceeds of $50,000 from
the sale of this note of whcih $2,750 was used to pay the investor’s legal fees recorded as a discount.



The note is due and payable on
July 22, 2013 and accrues interest at the rate of 8% per annum. The Note may be prepaid at any time subject to a prepayment penalty
ranging from 115% to 140% of the sum of the principal, accrued but unpaid interest and any other amounts due under the note.



On or after April 20, 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 35% discount to the average of the five lowest trading prices of the Company’s common stock at the close of trading
during the 10 trading day period prior to the date Auctus delivers its notice of conversion. under the note, the Company may not
declare and pay any dividends or repurchase any of its securities without Auctus’s prior written consent, except for any
dividends payable with respect to the outstanding shares of the Company’s Series A Preferred Stock.



12


SCRIPSAMERICA, INC.Notes to Condensed Financial Statements (Unaudited)For the three months ended March 31, 2013




Since this note has a convertible
feature with a significant discount and could result in the note principal being converted to a variable number of the Company’s
common shares management has deemed this note to be an embedded derivative. The fair value of the derivative associated with this note was determined by using the Black-Scholes pricing
model with the following assumptions: no dividend yield, expected volatility of 77%, risk-free interest rate of .14 to .17% and
expected life of 7 and 9 months. The fair value of the derivative at the date issued was estimated to be $39,763 and was revalued
at March 31, 2013 and December 31, 2012 to be $39,482 and $36,328, respectively. The debt discount associated with this derivative
equals the fair value of the derivative at the date issued and is being amortized over the life of the note, the balance of the
debt discount at March 31, 2013 and December 31, 2012, is $16,347 and $29,601, respectively. Debt discount amortized to interest
expense for the three month period ending March 31, 2013 was $13,254.



The Company would have been required
to issue 235,229 shares of common stock if Actus converted on March 31, 2013.



On April 19, 2013, the Company
prepaid the sum of $76,804 to the holder of this $52,750 convertible note payable. The payment amount includes the premium costs
of $ 24,054 for full payment of the note before its maturity date of July 22, 2013.



(h) 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 net proceeds
of $60,000 from the sale of the Note (and $3,000 was used to pay the legal fees). No discount was recorded because the funds were
directed per the Company’s request.



The note was due on May 8, 2013
and accrued 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 variable and represents a 42% discount to the average of the five lowest trading prices of 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 a contract packager and (iv) Development 72 LLC upon the conversion of the Series A Preferred Stock.



Since this note has a convertible
feature with a significant discount and could result in the note principal being converted to a variable number of the Company’s
common shares which we have deemed to be an instrument which requires us to value an embedded derivative. The fair value of the
derivative associated with this note was determined by using the Black-Scholes pricing model with the following assumptions: no
dividend yield, expected volatility of 62% to 175%, risk-free interest rate of .12 to .17% and expected life of 9 and 4 months.
The fair value of the derivative at the date issued amounted to $47,964 and was revalued at December 31, 2012 to be $58,149 and
was revalued again up to the date of extinguishment to $90,321. The debt discount associated with this derivative is being amortized
over the life of the note, with the balance of the debt discount at December 31, 2012 being $21,317 and $19,535 at the date of
extinguishment. .



The Company would have been
required to issue 312,130 shares of common stock if Asher converted on December 31, 2012. On February 1, 2013, the Company extinguished
the debt and the embedded derivative for $90,561. The extinguishment of this debt resulted in a gain of $51,255.



13


SCRIPSAMERICA, INC.Notes to Condensed Financial Statements (Unaudited)For the three months ended March 31, 2013




(i) On May 7, 2012,
the Company received $320,000 in cash for one convertible promissory note payable. In September 2012 the Company prepaid
$30,000 of the principal and by mutual consent the holder of the note and the Company agreed to reduce the monthly interest
expense to 1% from 2%, in cash, or common stock of the Company at $0.25 per share, at the option of the lender effective July
2012. The maturity date of this note was also extended two months until January 7, 2014. There is no required principal
payment on the note until maturity. The note can be extended by mutual consent of the lender and the Company. Our Contract
Packager also co-signed this note. In addition, on December 18, 2012, by mutual consent with the Company the lender agreed to
reduce the royalty payment to 1.8% on the first $10 million of sales of a generic prescription drug under distribution
contracts with Federal government agencies and 0.09%on the next $15 million of such sales.
Payments for royalties will be paid quarterly commencing December 31, 2012, and as of December 31, 2012, the Company had
accrued $42,000 in royalties. In the first quarter 2013 the Company issued 455,556 shares of its common stock as payment for
the royalty expense and the Company recorded an expense of $70,000 in the quarter. Collateral for this loan also includes
1,400,000 shares of the Company’s common stock. Interest expense for the three months ended March 31, 2013 and 2012,
were $12,415 and $17,272, respectively.



(j) On March 12, 2012 the Company
prepaid the sum of $85,300 to the holder of a $100,000 convertible note payable, leaving a balance of $14,700. By mutual consent
the maturity date was extended from November 23, 2012 to January, 30, 2014 and the interest rate was decreased from 2% per month
to 1% per month. The principal portion of this convertible notes can be converted into common stock at any time at the rate of
$.25 per share at the option of the lender.



(k) On March 12, 2012 the Company
prepaid the sum of $85,300 to the holder of a $200,000 convertible note payable, leaving a balance of $114,700. By mutual consent
the maturity date was extend from November 23, 2012 to January 30, 2014 and the interest rate was decreased from 2% per month to
1% per month. The principal portion of this convertible note can be converted into common stock at any time at the rate of $.25
per share at the option of the lender.



(l) Also 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 agreed to reduce the interest rate from 2% per month to 1% per month. The principal portion of this 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 20, 2013 the Company
converted $40,000 of a $100,000 1% per month convertible note into a new $40,000 6% annual convertible note with a variable conversion
rate see (f) above for details.



(m) 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 decrease the interest rate from 2% per month to 1% per month effective October 1, 2012. The principal
portion of this convertible note can be converted into common stock at any time at the rate of $.25 per share at the option of
the lender. Interest expense for the three months ended March 31, 2013 and 2012, $2,400 and $4,800, respectively.



(n) 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 (12% annually), 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 January 30, 2014. The principal portion
of the note can be converted into common stock at any time during the term of the loan at the rate of $0.25 per share at the option
of the lender. The note can be extended by mutual consent of the lender and the Company. Our Contact Packageralso co-signed this
note. Additionally, 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 beginning December
31, 2012. As of December 31, 2012, the Company has accrued $10,500 in royalties. In first quarter 2013 the Company issued 130,555
shares of it’s common stock for payment of royalty expense. The Company recorded a royalty expense of $17,500 for the three
months period ended March 31, 2013. Interest recorded in the first quarter 2013 was $1,500. Collateral for this loan also includes
200,000 shares of the Company’s common stock.



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



In addition to the monthly loan
repayments, during the 48 month period ending August 15, 2016, and regardless if the loan is prepaid in full, the Company will
pay to Development 72 a royalty equal to one percent (1%) of all revenues that the Company receives from the Company’s sale
or distribution of its RapiMed rapidly dissolving formulation products. The royalty payments will be made quarterly and are subject
to a fee for late payment or underpayment



14


SCRIPSAMERICA, INC.Notes to Condensed Financial Statements (Unaudited)For the three months ended March 31, 2013




Development 72 is a related party
because it is the holder of record of 2,990,252 shares of the Company’s Series A Preferred Stock which is convertible into
5,980,504 shares of the Company’s common stock (representing approximately 11% of the outstanding shares). In addition, the
manager of development 72, Andrius Pranskevicius, is a member of the Company’s board of directors.



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



The Company is subject to various
negative covenants, including but not limited to (i) restrictions on secured loans (subject to certain exceptions), (ii) judgments
against the Company in excess of $25,000, (iii) prepayment of any long-term debt of the Company other than promissory notes held
by certain investors in the Company, and (iv) repurchases by the Company of outstanding shares of its common stock.



The loan agreement also provides
certain financial covenants which limit the amount of indebtedness the Company may incur until the loan is repaid and restricts
the payment of any dividends on its capital stock except for dividends payable with respect to the Company’s outstanding
shares of its Series A Preferred Stock.



Interest expense associated with
this note for the three months period March 31, 2013, was approximately $10,250. The outstanding balance at March 31, 2013 and
December 31, 2012, was $437,767 and $464,837, respectively with the current liability balance of $114,561 and $112,021, respectively.



(p) 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 year ended December 31, 2012, the Company borrowed funds
under this line of credit ranging from $10,000 to $65,000. The outstanding borrowings under this line of credit at March 31, 2013
and December 31, 2012 are $77,266 and $40,059, respectively. The Company incurred interest expense under this line of credit of
approximately $1,469 and $580 for the three months period ended March 31, 2013 and 2012, respectively.



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 changed 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 which was recorded in 2011 which should have been bifurcated resulting in the elimination
of the debt discount and royalty liability.The Company anticipates launching this orally disintegrating tablet for which
a 4% royalty payment is due sometime in the second half of fiscal year 2013.





|8 - | Derivative Financial
Instruments
|--- | --------------------------------



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



|                        |  | Range |               
|----------------------- |  | ----- | --------------
|Volatility              |  |       | 38.9% - 169.7%
|Expected life in years  |  |       | .27 – 1       
|Risk-free interest rate |  |       | .12% - .17%   
|Dividend yield          |  |       | 0.00%         



15


SCRIPSAMERICA, INC.Notes to Condensed Financial Statements (Unaudited)For the three months ended March 31, 2013




These derivative financial instruments
are indexed to an aggregate of 1,432,201 and 702,852, respectively, shares of the Company’s common stock as of March
31, 2013 and December 31, 2012 and are carried at fair value using level 2 inputs. The balance at March 31, 2013 and December
31, 2012 was $208,404 and $94,477, respectively.



Activity during the current period
is as follows:



|Derivative liabilities at December 31, 2012 |  | $ | 94,477  |  
|------------------------------------------- |  | - | ------- | -
|                                            |  |   |         |  
|New derivative liabilities issued in 2013   |  |   | 205,384 |  
|Extinguishment (note 7)                     |  |   | (98,321 | )
|Revalue at reporting period                 |  |   | 6,864   |  
|                                            |  |   |         |  
|Derivative liabilities at March 31, 2013    |  | $ | 208,404 |  





|9- | 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 $1,043,000 to a related party. The
Series A Preferred stock has the following rights, preferences, powers, privileges, and restrictions: (a) 8% dividend (appropriately
adjusted to reflect any stock splits); the dividends shall accrue and are payable quarterly. (b) Preferential payments of the assets
available for distribution to its stockholders by reason of their ownership in an amount equal to the Series A Preferred stock
Original Issue price ($.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 March 31, 2013 and December 31,
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 convertible 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.  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.



Since this Series A
Preferred Stock has liquidation preference which is outside the control of the Company it was not recorded in the
stockholders' deficit section but rather as mezzanine equity in the condensed balance sheets. Because we also had losses for
2012 and 2011 and an accumulated deficit, under Section 174 of the Delaware General Corporation Law our directors cannot
declare a dividend without incurring personal liability. However, in accordance with the privileges of the Series A Preferred
stock, as noted above, the Company shall continue to accrue dividends regardless of declaration by the Board of Directors. We
had a stockholders’ deficit of $1,413,509 at March 31, 2013. Since we did not generate net income in the first quarter
2013 and fiscal year 2012, we do not anticipate that we will be able to pay the
dividend owed to the Series A Preferred Stockholder within the next 12 months. As of March 31, 2013 we have
accrued $125,160 and is classified as a long-term liability in the condensed 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.



16


SCRIPSAMERICA, INC.Notes to Condensed Financial Statements (Unaudited)For the three months ended March 31, 2013






|10- | Stockholders’
Deficit
|--- | ---------------------



Common Stock



General



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



The common stock shares have a
par value of $.001 per share and the Company is authorized to issue 150,000,000 shares, each share shall be entitled to cast one
vote for each share held at all stockholders’ meeting for all purposes, including the election of directors. The common stock
does not have cumulative voting rights.



The Company issued 739,641 restricted
shares of common stock for cash proceeds of $110,000 during the three month period ended March 31, 2013.



The Company issued 669,391 restricted
shares of its common stock to non-employees for services rendered or to be rendered during the three month period ended March 31,
2013. These services were valued at $195,600 and the Company charged its operations $125,175 in first quarter 2013. The unamortized
amount of prepaid services at March 31, 201 is $70,425.



The Company issued 586,111 restricted
shares of its common stock to non-employees for payment of royalties due during the three month period ended March 31, 2013. The
payment of royalties were valued at $205,249 and the Company charged its operations $87,500 in first quarter 2013.



Warrants



No warrants were issued during
the three months period ended March 31, 2013.





|11- | Commitments
and Contingencies
|--- | -----------------------------



In March 2010, the Company
signed a “Product, Manufacturing and Supply Agreement” with our Contract Packager and labeler, for orally
disintegrating tablets. The total value of this contract was estimated to be $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 December 31, 2012. This deposit was reserved for  in March 2013 as it was deemed that it is unlikely that it will
be used for future royalty payments. 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 to our Contract
Packager. The Company anticipates launching this orally disintegrating tablet in the second half of fiscal year 2013.



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 Note 7 above 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. Shipments for this product are expect
to occur in fourth quarter 2013.



The holder of a $320,000
note payable (see note 7i) are entitled to a to 1.8% royalty payment on the first $10 million of sales of a generic
prescription drug under distribution contracts with Federal government agencies and 0.09%on
the next $15 million of such sales. Payments for royalties will be paid quarterly commencing December 31, 2012, and as of
December 31, 2012, the Company had accrued $42,000 in royalties. In first quarter 2013 the Company issued 455,556 shares of
its common stock as payment for the royalty expense and the Company recorded an expense of $70,000 in the quarter. In
addition a holder of a $50,000 note payable (see note 7n), a related party, is entitled to a 0.9% on the first $25 million of
sales of a generic prescription drug under distribution contracts with Federal government agencies. The Company had accrued
$10,500 in royalties as of December 31, 2012, and in first quarter 2013 the Company issued 130,555 shares of its common stock
for payment of royalty expense. The Company recorded a royalty expense of $17,500 for the three months period ended March 31,
2013. For both of these notes the total  value for the shares issued for these royalty payments was $205,249 of which $65,249
remains in the prepaid expenses and other current assets on the condensed balance sheets as of March 31, 2013.





17


SCRIPSAMERICA, INC.Notes to Condensed Financial Statements (Unaudited)For the three months ended March 31, 2013




On September 27, 2012, the Company
entered into a 12 month service/consulting agreement with Olympic Capital Group (“OCG”) for the purpose and intent
to introduce the Company to sources which can help the Company grow its business through joint ventures, purchase orders, licensing
and/or royalty agreements, marketing the Company’s products, and/or to sell its business.



The fees associated with the OCG
agreement are as follows:

a)To pay a cash consulting fee of 8% of the gross revenue derived by the Company for any transaction enters into from a source
that OCG introduced. Such transaction are a joint venture, or a licensing or royalty agreement, or other agreement involving the
sales or licensing or royalty or other revenue-producing agreement regarding the Company’s products or technology or services.

b)Consideration for OCG’s services, upon signing the consulting agreement to issue OCG a total of 150,000 restricted
common stock shares. These shares were issued in October 2012.

c)In the event that the Company completes the transactions described in section (a) above, then, in the event that the Company
subsequently is acquired or sells its assets, or mergers with another company, the Company agrees to pay a cash consulting fee
equal to 6% of the purchase price.

d)If any transaction set forth in section (a) or (c) above consists of any payments to be made to the Company and/or shareholders
or affiliates in the future, the Company agrees that a the consulting fee is due and payable to OCG and is payable upon receipt
of such consideration.

e)When a transaction described in section (a), (c), (d) above is completed, then in addition to the compensation described
above the Company agrees to pay OCG a monthly consulting fee of $5,000 for a 24 month period beginning on the first day of the
first month after the closing of the transaction.

f)Also when a transaction described in section (a), (c), (d) above is completed, the Company agrees to an equity interest
payment of 6% of the combined present and projected future value of the transaction, which value will be ascertained and delivered
to the Company and OCG at least ten days before the closing of the proposed transaction.



|12- | Purchase
    Order Financing With Related Party
|--- | -----------------------------------------------



In June 2012, the Company entered
into a purchase order finance agreement with Development 72, a major stockholder of the Company which is controlled by a member
of the Board of Directors. The agreement will allow the Company to borrow up to a maximum range of $500,000 to $600,000 on a case
by case basis, at an interest rate of 0.6% per 10 day period, 1.8% monthly and 21.6% annually. During the 2013, the Company financed
$1,200,000 of its purchase orders and incurred an interest expense of $39,591. As of March 31, 2013 and December 31, 2012, the
unpaid purchase order finance balance was $503,520 and $570,000, respectively, and accrued fees and interest was $9,063 and $8,280,
respectively.





|13- | Concentrations
|--- | --------------



During the three months period
ended March 31, 2013 and 2012, the Company purchased approximately 100% of its product packaging from our Contract Packager. 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
$287,374 or 100% of its revenue from two customers. Of this total one customer accounted for 52% and the other accounted for 48%
during the three month period ended March 31, 2013. During the three month period ended March 31, 2012, three customers accounted
for 100% of the $996,827 in sales revenue. Of this total one customer accounted for 60.4%, another 21.2% and the third 18.4%.



As of March 31, 2013, the Company
had two customers in our accounts receivable –trade, one customer accounted for $97,693 or 65% of the Company’s accounts
receivable balance of $149,958. As of December 31, 2012, the Company had two customers in our accounts receivable – trade,
one customer accounted for $175,054, or 60% of the Company’s accounts receivable balance of $290,531.





|14- | Material
    Definitive Agreement – Acquisition of Contract Packager
|--- | --------------------------------------------------------------------



On September 11, 2012, the
Company entered into a letter of intent with its Contract Packager and its principals to acquire all of the outstanding
shares of the Contract Packager. The purchase price for the Company’s Contract Packager is approximately $10.9 million,
$4.5 million in cash, $744,000 for the Contract Packager loan which will be converted into a capital contribution and $5
million will be paid by the issuance of restricted shares of the Company’s common stock. The number of shares of the
Company’s common stock to be issued to the shareholders of the Contract Packager will be based on the purchase price
divided by the lesser of (i) $0.338, which is the average closing price of the Company’s common stock on the OTC
Bulletin Board for the five day period ended September 11, 2012 and (ii) the average closing price of the Company’s
common stock on the OTC Bulletin Board for the five day period ending on the date of the closing of the merger (but in no
event less than $0.174 per share). The Company’s board of directors approved the acquisition of the Contract Packager
under the letter of intent based upon an appraisal from Corporate Valuation Advisors, Inc., which valued the Contract
Packager’s business at $12.5 million.



18


SCRIPSAMERICA, INC.Notes to Condensed Financial Statements (Unaudited)For the three months ended March 31, 2013




The closing of the merger is subject
to (i) the parties entering into a definitive agreement and plan of merger, (ii) the Contract Packager delivering to the Company
audited financial statements for the year ended December 31, 2011 and December 31, 2012, and may postpone the closing if the Company
requires additional time to (a) meet SEC filing requirements for the acquisition of the Contract Packager reviewed by an independent
auditor but and (iii) the Company securing financing to pay off the Contract Packager’s existing bank debt (which is estimated
to be between $4 million - $5 million). The closing must occur on or before March 1, 2013, but the Company may postpone the closing
to a future date no later than February 28, 2013 if the Company requires additional time to (a) meet SEC filing requirements for
the acquisition of the Contract Packager (such as preparing consolidated financial statements and/or pro forma financial statements)
or (b) secure the financing to pay off the Contract Packager’s existing bank debt. However, due to the unavailability of
audited financial statements from the Contract Packager at the closing deadline of February 28, 2013, the closing of the transaction
has been postponed on a day-to-day basis until the Contract Packager’s audited financial statements are delivered.



If the conditions to closing are
met and the Contract Packager neglects, fails or refuses to close, then (a) all amounts owed by the Contract Packager to the Company
shall become immediately due and payable with interest (at the rate of 3.5% per annum) and (b) the Contract Packager shall pay
the Company a break-up fee of $25,000 plus legal and accounting fees and costs incurred by the Company with respect to the transaction
and all other costs, expenses and losses of the Company.



The Company also has a right of
first refusal if the Contract Packager receives an offer from a third party to acquire the Contract Packager prior to the closing.





|15- | Subsequent
    Events
|--- | ---------------------



From April 1, 2013
through  May 15, 2013, the Company issued 3,436,706 shares of the Company’s common stock, in regard to the
following transactions: a) sold 348,820 shares in a private placement for $48,835 b) 87,417 shares for the payments of
monthly royalty expenses valued at $30,596 and c) 2,800,469 shares for services performed and to be performed, valued at
$695,105 and d) 200,000 shares for the conversion of a $40,000 convertible note.



On April 18, 2013, the Company
converted a portion of a $200,000 12% convertible note payable to a 12% convertible note payable with a principal amount of $85,300.
The note did not include a discount and the accrued interest and principal are due on the maturity date of January 30, 2014. There
is a prepayment charge of 150% of the principal amount outstanding and interest due. The conversion price is equal to 60% of the
lowest trading price of the Company’s common stock at the close of trading during the 10 trading day period prior to the
date of the notice of conversion. The conversion price may adjust downward if within 3 business days of the notice of conversion,
the conversion price is 5% or lower of the conversion price. Collateral for this loan also includes 2,000,000 shares of the Company’s
common stock.



On April 28, 2013, the Company
received $76,670 in cash for a 12% annual interest convertible note payable with a principal amount of $85,300. The note did not
include a discount, however, we paid $8,530 to cover finders fees. Interest is payable monthly in the amount of $830. The unpaid
interest and principal are due on the maturity date of April 28, 2014. The principal portion of this convertible note can be converted
into the Company’s common stock at any time at the rate of $0.18 per share at the option of the lender.



On April 29, 2013, the Company
entered into a securities purchase agreement with IBC Funds LLC (“IBC”) pursuant to which IBC purchased from the Company
a 10% convertible note. The Company received $40,500 in cash for a 10% convertible note payable with a principal amount of $45,000.
The note did not included a discount, we paid a $4,500 finder’s fee. The accrued interest and principal are due on the maturity
date of April 29, 2014. The conversion price is equal to the lesser of $0.25 or 60% of the lowest trading prices of the Company’s
common stock at the close of trading during the 10 trading day period prior to the date of the notice of conversion. There is a
prepayment charge of 25% of the principal amount at any time 30 days of the effective date and 150% of the principal amount outstanding
and interest due at any time 31 days until 179 days after April 29, 2013 and 200% if a prepayment after 180 days. Collateral for
this loan also includes 3,000,000 shares of the Company’s common stock.





19





|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 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 to a wide range of end users across the health care industry, including 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 have a Contract Packager
that is our primary supplier 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 two customers, McKesson and DLA Distributions. For the three months period
ended March 31, 2013, McKesson accounted for approximately 52% of our sales, and the DLA Distribution (described below)
accounted for 42%, respectively, of our sales. However, due to shrinking margins on the products we have sold through
McKesson, the Company has been and may continue to cut back significantly on the volume of products it will sell through
them. The Company expects that it will be able to make up (and even exceed) the cut back in sales to McKesson with the
Company’s sales to other customers and of other products.



20







On September 11, 2012, the Company entered
into a letter of intent with our Contract Packager and its principals to acquire all of the outstanding shares of our Contract
Packager. The purchase price for our Contract Packager is approximately $10.4 million, $4.5 in cash, $743,500 for the Contract
Packager loan which will be converted into a capital contribution and $5 million will be paid by the issuance of restricted shares
of the Company’s common stock. The number of shares of the Company’s common stock to be issued to the shareholders
of our Contract Packager will be based on the purchase price divided by the lesser of (i) $0.338, which is the average closing
price of the Company’s common stock on the OTC Bulletin Board for the five day period ended September 11, 2012 and (ii) the
average closing price of the registrant’s common stock on the OTC Bulletin Board for the five day period ending on the date
of the closing of the merger (but in no event less than $0.1744 per share). The Company’s board of directors approved the
acquisition of our Contract Packager under the letter of intent based upon an appraisal from Corporate Valuation Advisors, Inc.,
which valued our Contract Packager’s business at $12.5 million. However, due to the unavailability of audited financial statements
from the Contract Packager at the closing deadline of February 28, 2013, the closing of the transaction has been postponed on a
day-to-day basis until the Contract Packager’s audit financial statements are delivered through the date of filing. The Company
is uncertain when, or if, the acquisition of the Contract Packager will close.



In September 2012, the Company announced
that our Contract Packager, secured an 8-year, $79 million pharmaceutical distribution contract with the Office of Health Affairs,
a branch of the U.S. Department of Homeland Security, in conjunction with the Defense Logistics Agency (DLA). On September 30,
2012, our Contract Packager began shipping its first order on this distribution contract with the DLA.



The DLA contract with our Contract Packager
calls for a minimum purchase amount of $25 million over the next 2-3 years. The DLA awarded our Contract Packager the contract
based on the Contract Packager’s ability to provide specified pharmaceuticals at competitive prices.



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 U.S., E.U. 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 Tablet and Film Technologies (sixth edition), which
is available for purchase from TCI.



In March 2010, we entered into a product
development, manufacturing and supply agreement with our contract supplier/packager, which develops generic and over the counter
(OTC) drug products. Under this agreement, we have developed a children’s pain relief orally disintegrating
rapidly dissolving 80 mg and 160 mg tablets for OTC products. We completed the development of these rapid dissolving products in
the first quarter of 2012, with production and sales pending manufacturing and process qualification and marketing execution. 
However, we estimate that we will need approximately $1.5 million of incremental funding for expenses required to launch these
products. The funding for launching the rapid dissolving products is to come from the sale of equity securities, preferred and/or
common stock securities and debt financing.

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.



Revenue
is recognized when product is shipped from our Contract Packager to our customers’ warehouses, mainly McKesson, and is adjusted
for anticipated charge backs from our customers which include inventory credits, discounts or volume incentives. These charge back
costs are received monthly from our customers’ and the sales revenue and accounts receivables are reduced accordingly based
on historical experience, customer contract programs, product pricing trends and the mix of products shipped.



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



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



21







Results of Operations



Results for the three month period ended
March 31, 2013.



|                              |  | Three month period ended March 31, |          |   |  |  |       | (  ) = unfavorable change | 
|----------------------------- |  | ---------------------------------- | -------- | - |  |  | ----- | ------------------------- | 
|                              |  | 2013                               |          |   |  |  |       | 2012                      | 
|Product sales - net           |  | $                                  | 287,000  |   |  |  | 100%  |                           | 
|Cost of Goods Sold            |  |                                    | 298,000  |   |  |  | 104%  |                           | 
|Gross Margin                  |  |                                    | (11,000  | ) |  |  | -4%   |                           | 
|Operating Costs and Expenses: |  |                                    |          |   |  |  |       |                           | 
|General and Administrative    |  |                                    | 629,000  |   |  |  | 219%  |                           | 
|Research and Development      |  |                                    | –        |   |  |  | -%    |                           | 
|Total Operating Expenses      |  |                                    | 629,000  |   |  |  | 219%  |                           | 
|Total Other Expenses          |  |                                    | (80,000  | ) |  |  | -28%  |                           | 
|Loss before taxes             |  |                                    | (720,000 | ) |  |  | -251% |                           | 
|Tax Expense (Benefit)         |  |                                    | –        |   |  |  | -%    |                           | 
|Net Income (Loss)             |  | $                                  | (720,000 | ) |  |  | -251% |                           | 



The majority of the
Company’s sales revenue is generated from the sales of generic pharmaceutical prescription orders. For the three month
period ended March 31, 2013, the Company generated net product sales of approximately $287,000 as compared to net product
sales of approximately $997,000 for 2012, a decrease of approximately $710,000, or 71%. The decline in sales when comparing
the three month period ended March 31, 2013 to March 31, 2012 was mainly a result of a reduction in  McKesson sales due
to increased charge back costs and the loss of  sales from two customers, Cutis Pahrmaceuticals and MedVet. Sales from the DLA did not replace the lost sales volume partly because the sales are recorded
net of costs. The Company sales in the three months ended March 31, 2013 would have been approximately a $1.9 million higher
if the sales for DLA were recorded at gross and were not recognized on the net basis for sales associated with the DLA
contract with our Contract Packager.



For the three month period ended March
31, 2013, McKesson accounted for 52% of our net product sales (versus 60% of net product sales for the same period in 2012), Cutis
Pharmaceuticals and MedVet accounted for another 40% of our net product sales in 2012.



Product Sales:The following table
sets forth selected statement of operations data as a percentage of gross sales for the three months period ended March 31, 2013
and 2012.



|Products sold                          |  | 2013 |            |   | % of total |  |      | 2012 |  |   | % of total |  
|-------------------------------------- |  | ---- | ---------- | - | ---------- |  | ---- | ---- |  | - | ---------- | -
|Prescription drug products             |  | $    | 184,000    |   |            |  | 8%   |      |  | $ | 688,000    |  
|Revenue, from contract packager        |  |      | 1,955,000  |   |            |  | 87%  |      |  |   | –          |  
|OTC & non prescription products        |  |      | 117,000    |   |            |  | 5%   |      |  |   | 440,000    |  
|Gross Sales                            |  |      | 2,256,000  |   |            |  | 100% |      |  |   | 1,128,000  |  
|Discounts / charge backs               |  |      | (150,000   | ) |            |  | 7%   |      |  |   | (131,000   | )
|Adjustment for contract packager sales |  |      | (1,819,000 | ) |            |  | 81%  |      |  |   | –          |  
|Net Sales                              |  | $    | 287,000    |   |            |  |      |      |  | $ | 997,000    |  





Gross Margin:Gross margin for the
three month period ended March 31, 2013 was approximately negative $11,000, which was -4% of our net sales. This was a decline
of approximately $180,000 from the same period in 2012 and was mainly due to the sales decline of approximately $710,000 from the
same three month period a year ago. The prescription drug products decreased 73% and OTC products also decreased 73% from the prior
year. The decline in sales as a result of product mix changes created lower gross margins. The margin percentage on our DLA sales
was only 7% coupled with a margin compression from McKesson sales and an increase in charge back costs of approximately $19,000
for the McKesson product revenue. Also impacting our gross margin percentage was the royalty expenses included in cost of goods
in the amount of $87,500 which we did not incur in 2012.



22







Operating Expenses



Selling, General and Administrative.For the three months period ended March 31, 2013, selling, general and administrative expenses (“S,G&A”) increased
approximately $430,000 to approximately $629,000 as compared to approximately $199,000 for same three month period in 2012. The
increases in S,G&A expenses are mainly a result of the following: (a) an increase in professional fees of approximately $110,000,
consisting of legal, accounting and consulting fees incurred during the quarter; (b) increased spending on investor relations,
in the amount of approximately $143,000, and of which $75,000 was non-cash payment by the issuance of the Company’s common
stock; (c) the Company expense of $200,000 from a deposit paid in 2011 relating future products which was deemed not refundable;
and (d) all other items in S,G&A decreased approximately $23,000 versus prior year.



Research and Development.The Company’s
expenditures for research and development cost declined approximately $10,000, for the three month period ended March 31, 2013,
compared to the same period in 2012. 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 during 2012.



Total Other Expenses. Other expenses
for the three months period ended March 31, 2013 decreased approximately $11,000 to approximately $80,000 from approximately $91,000
in 2012. Other expenses consist of interest expense, amortization of debt discount, change in fair value of derivative liabilities
and gain on extinguishment of debt. Interest expense associated with our factoring fees for first quarter 2013 increased approximately
$5,000. Interest expense associated with convertible notes payable for 2013 was approximately $28,000, which is a decrease of approximately
$8,000 over the same period in 2012. In our first quarter of 2013 we incurred approximately $41,000 for amortization of debt discount
whereas in the same three month period in 2012 the amortization of the debt discount was approximately $55,000, a decline of approximately
$14,000. The Company obtained a line of credit with a bank that carries a low interest rate. Interest expense associated our line
of credit was approximately $800 for first quarter 2012 as compared to approximately $400 for the same period 2013. Interest cost
associated with our purchase order financing was approximately $40,000 for the three months ended March 31, 2013 and $0 for the
same period in 2012. Interest cost associated with a term loan of $500,001 was approximately $10,000 for the first quarter of 2013
compared to $0 for the same period in 2012. The loss on derivative liability was approximately $7,000 for the first quarter of
2013 compared to $0 for the same period in 2012. With an extinguishment of debt from paying off a convertible note early we incurred
a gain of approximately $51,000.



Income taxes (benefit).Total income
taxes expense for the three month period ended March 31, 2013 was none as compared to a tax benefit of approximately $39,000 for
the same period in 2012. For the three months ended March 31, 2013 the Company incurred loss that are added to the current deferred
tax benefit but since the likelihood of not being able to recover the deferred tax benefit an allowance of 100% of the tax benefit
was applied for the first quarter 2013. In first quarter 2012 we recorded a tax benefit of approximately $39,000 and did not reserve
an allowance for this deferred tax asset.



Net Loss Applicable to Common Shares.The Company recorded a net loss of approximately $720,000 for the three month period ended March 31, 2013, compared to a net
loss of approximately $92,000 for the same period in 2012, an increase in our net loss of approximately $628,000 as compared to
the same period in the prior year. This increase in net loss is mainly due to a significant reduction in our gross margin, as a
result of product mix changes and the profit margin decline of approximately $180,000 in first quarter 2013 versus 2012. Also contributing
to the loss was an increase in our S,G&A expense of approximately $430,000, as described above. The income tax benefit decreased
approximately $39,000 for the first quarter of 2013 as compared to same period in 2012, which was mainly due to fully reserving
the deferred tax in 2013. Other expense declined approximately $11,000 for the three months ended March 31, 2013 as compared to
the same period of 2012 as described above. Research and development cost decline approximately $10,000 from the 2012 first quarter
spending. The Company accrued a preferred stock dividend of $20,860 and $20,860 for the three month period ended March 31 2013
and 2012, respectively, resulting in a loss of income available to common shareholders of $740,992 and $113,115 for the three month
period ended March 31, 2013 and 2012, respectively. Basic and diluted loss per common share were $0.01 and $0.00 for the three
month period ended March 31, 2013, and 2012, respectively



Liquidity and Capital Resources



Summary



At March 31, 2013, the Company had total
current assets of approximately $2.0 million and total current liabilities of approximately $2.0 million resulting in working capital
of approximately $8,000. The Company's current assets consisted of approximately $3,000 in cash, approximately $150,000 in accounts
receivable-trade, approximately $1.5 million in receivables due from our Contract Packager and approximately $314,000 in prepaid
expenses. Current liabilities at March 31, 2013 consist of a payable for purchase order financing of approximately $513,000, current
portion of long term debt from related party of approximately $115,000, convertible
notes payables of approximately $956,000, accounts payables of approximately $127,000,
a line of credit borrowing of approximately $77,000 and a derivative liability of approximately $208,000.



23







During the three month period ended
March 31, 2013 we supplemented our liquidity needs primarily from financing activities. Our sales revenue did not cover our
operational costs and some of our debt requirements. The Company raised approximately $357,000 in cash through the following:
approximately $210,000 from the sale of convertible notes, common stock sales which raised approximately $110,000, and
borrowing of approximately $37,000 under a line of credit with a bank. Approximately $325,000 of these funds were used to for
payments on convertible notes payable, payments on our purchase order financing, payments to a note payable to a related
party, and payments to factor.



The following table summarizes our cash flows from operating
investing and financing activities for the three months period ended March 31, 2013 and 2012:





|                                      |  | Three months period ended March 31, |         |   | Three Months period ended March 31, |   |          |        | 
|------------------------------------- |  | ----------------------------------- | ------- | - | ----------------------------------- | - | -------- | ------ | 
|                                      |  | 2013                                |         |   | 2012                                |   |          | Change | 
|Total cash provided by (used in):     |  |                                     |         |   |                                     |   |          |        | 
|Operating activities                  |  | $                                   | (43,000 | ) |                                     | $ | (413,000 | )      | 
|Investing activities                  |  |                                     | –       |   |                                     |   | 3,000    |        | 
|Financing activities                  |  |                                     | 33,000  |   |                                     |   | 30,000   |        | 
|Decrease in cash and cash equivalents |  | $                                   | (10,000 | ) |                                     | $ | (380,000 | )      | 





After taking into consideration our interim
results and current projections, management believes that the cash flow from operations, together with debt financing and our line
of credit will be sufficient to support the working capital requirements, debt service and applicable debt maturity requirements
through the next twelve month period ending March 31, 2014.  However the generic pharmaceutical industry is highly competitive
and as such, historical sales and projections based on current information are not always indicative of future results. Further,
although the Company has successfully obtained various funding and financing in the past, future financing and funding options
may be challenging in the current environment



Management plans to pursue sales and profit
growth through (a) expanding its distribution network, (b) developing new products (i.e. rapidly dissolving drug formulation pain
relief products scheduled to ship during 2013), and (c) closing its acquisition of its Contract Packager which will result in the
accompanying consolidating the revenues under our Contract Packager’s DLA agreement. These future plans will be dependent
upon securing additional sources of liquidity.



In March 2010, we entered into a product
development, manufacturing and supply agreement with our contract supplier/packager, which develops generic and over the counter
(OTC) drug products. Under this agreement, we have developed a children’s pain relief orally disintegrating
rapidly dissolving 80 mg and 160 mg tablets for OTC products. We completed the development of these rapid dissolving products in
the first quarter of 2012, with production and sales pending manufacturing and process qualification and marketing execution. However,
we estimate that we will need approximately $1.5 million of incremental funding for expenses required to launch these products.
The funding for launching the rapid melt products is to come from the sale of equity securities, preferred and/or common stock
securities and debt financing.



Operating Activities



Net cash used by operating
activities was approximately $43,000 for the three month period ending March 31, 2013, as compared to cash used by operating
activities of approximately $413,000 for the same three month period in2012, which is a decline in cash used by operations
of approximately $370,000. The operating loss impacting the use of cash from operation was approximately $720,000,
offsetting some of this loss was changes from non-cash items. As compared to the same three month period in 2012, there was
an increase in non-cash items of approximately $320,000 in 2013. Non-cash items consist of amortization of discounts,
issuance of common stock to payments of services and payments of royalty expense, allowance on chargebacks, write-off of
other assets and a gain from the extinguishment of debt. In addition to non-cash items changes in asset and liability
balances change a favorable approximately $678,000 as compared to same three month period in 2012. The changes were as
follows: (a) Accounts receivable – trade balance declined in first quarter 2013 and as compared to an increase in 2012
resulting in a decline in the use of cash of approximately $278,000; (b) receivable from Contract Packager decreased in 2013
as compared to an increase in 2012 resulting in a decline in cash used in the amount of approximately $43,000; (c) loan
receivable- Contract Packager also decrease in 2013 as compared to an increase in 2012 resulting in a decline in cash used of
approximately $258,000; (d) prepaid expense declined in 2013 and increased in 2012 resulting in a decline in cash use in the
amount of approximately $66,000; (e) accounts payable and royalty payables also decreased in 2013, as compared to an increase
in 2012 resulting in a decline in the use of cash of approximately $32,000.



24







Investing Activities



The Company had no investing activities
for the three month period ended March 31, 2013 as compared cash provided in the amount of $2,521 for the same period in 2012.



Financing Activities



Net cash provided by financing activities
was approximately $33,000 for the three month period ended March 31, 2013 compared to approximately $30,000 for the same three
month period in 2012. Financing activities for the first quarter of 2013 consisted of the following: the Company (a) sold shares
of common stock in the amount of $110,000, (b) raised $210,300 from the issuance of convertible notes payable, (c) borrowed $37,000
under an existing line of credit, (d) paid down the balance on convertible notes in the amount of $90,561, (e) paid down $27,070
on a four year term loan, (f) made payments on a Purchase Order in the amount of $65,697 and (g) payment from factor in the amount
of $141,725.



The following is a listing of our current financing.



On April 29, 2013, the Company entered
into a securities purchase agreement with IBC Funds LLC (“IBC”) pursuant to which IBC purchased from the Company a
10% convertible note. The Company received $40,500 in cash for a 10% convertible note payable with a principal amount of $45,000.
The note did not include a discount, and we paid a $4,500 finder’s fee. The accrued interest and principal are due on the
maturity date of April 29, 2014. The conversion price is equal to the lesser of $0.25 or 60% of the lowest trading prices of the
Company’s common stock at the close of trading during the 10 trading day period prior to the date of the notice of conversion.
There is a prepayment charge of 150% of the principal amount outstanding and interest due at any time 31 days until 179 days after
April 29, 2013 and 200% if a prepayment after 180 days. Collateral for this loan also includes 3,000,000 shares of the Company’s
common stock.



On April 28, 2013, the Company received
$76,670 in cash for a 12% annual interest convertible note payable with a principal amount of $85,300. The note did not include
a discount, however, we paid $8,530 to cover finder’s fees. Interest is payable monthly in the amount of $830. The unpaid
interest and principal are due on the maturity date of April 28, 2014. The principal portion of this convertible note can be converted
into the Company’s common stock at any time at the rate of $0.18 per share at the option of the lender.



On April 18, 2013, the Company converted
a portion of a $200,000 12% convertible note payable to a 6% convertible note payable with a principal amount of $85,300. The note
did not include a discount and the accrued interest and principal are due on the maturity date of April 18, 2014. There is a prepayment
charge of 150% of the principal amount outstanding and interest due. The conversion price is equal to 60% of the lowest trading
price of the Company’s common stock at the close of trading during the 10 trading day period prior to the date of the notice
of conversion. The conversion price may adjust downward if within 3 business days of the notice of conversion, the conversion price
is 5% or lower of the conversion price. Collateral for this loan also includes 2,000,000 shares of the Company’s common stock.



On March 20, 2013, the Company received
$35,200 in cash for a 6% convertible note payable with a principal amount of $40,000. The note did not include a discount, however,
we paid $2,000 to cover the investor’s legal fees and $2,800 was paid directly to a third party on our behalf. The accrued
interest and principal are due on the maturity date of March 20, 2014. There is a prepayment charge of 150% of the outstanding
principal amount and interest due. The conversion price is equal to 70% of the lowest trading price of the Company’s common
stock at the close of trading during the 5 trading day period prior to the date of the notice of conversion.



On March 20, 2013, the Company received
$17,600 in cash for a 6% convertible note payable with a principal amount of $20,000. The note did not include a discount, but
$2,400 was paid directly to third party on our behalf. The accrued interest and principal are due on the maturity date of March
20, 2014. There is a prepayment charge of 150% of the outstanding principal amount and interest due. The conversion price is equal
to 70% of the lowest trading price of the Company’s common stock at the close of trading during the 5 trading day period
prior to the date of the notice of conversion.



On February 18, 2013, the Company received
a net amount of $67,500 in cash for an 8% convertible note payable with a principal amount of $92,500. The note included a 10%
discount, we paid a $7,500 finder’s fee and we agreed to pay $10,000 to cover the investor’s legal fees. The accrued
interest and principal are due on the maturity date of December 18, 2014. The Company can prepay the note at any time before the
maturity date but must pay a 135% of the principal amount outstanding and interest due. The conversion price is equal to 65% of
the average of the three lowest trading prices of the Company’s common stock at the close of trading during the 20 trading
day period prior to the date of the notice of conversion.



25







On January 31, 2013, the Company received
$67,500 in cash for a 12% convertible note payable with a principal amount of $82,500, which note included a 10% discount. The
accrued interest and principal are due on the maturity date of February 6, 2014. The Company may repay this note at any time on
or before 90 days from the issuance date and at such time the Company shall not owe or pay any interest on the note. The conversion
price is the lesser of (a) $0.21 or (b) the amount equal to 60% of the lowest trading price of the Company’s common stock
at the close of trading during the 25 trading day period prior to the date of the notice of conversion. Collateral for this loan
also includes 9,000,000 shares of the Company’s common stock.



On January 21, 2013, the Company received
$22,500 in cash for a 10% convertible note payable with a principal amount of $25,000, which note included a 10% discount. The
accrued interest and principal are due on the maturity date of January 21, 2014. The Company may repay this note at any time on
or before 90 days from the issuance date and at such time the Company shall not owe or pay any interest on the note. After 90 days
from issuance there is a pre-payment fee of 150% of the principal amount outstanding and interest due. The conversion price is
the lesser of (a) $0.25 or (b) the amount equal to 60% of the lowest trading price of the Company’s common stock at the close
of trading during the 20 trading day period prior to the date of the notice of conversion. Collateral for this loan also includes
3,000,000 shares of the Company’s common stock.



From January 1, 2013 to April 5, 2013 the Company issued 2,443,989
shares of the Company’s common stock, the shares were issued for the following transactions: a) sold 739,641 shares in a
private placement for $110,000, b) issued 673,528 shares for the payments of monthly royalty expenses valued at $159,362 and
c) issued 1,030,820 shares for services performed and to be performed, valued at $207,624.



On October 22, 2012, the Company entered
into a securities purchase agreement with Auctus Private Equity Fund (“Auctus”) pursuant to which Actus purchased from
the Company an 8% convertible note in the principal amount of $52,750. The Company received gross proceeds of $50,000 from the
sale of the Note (and $2,750 was used to pay the investor’s legal fees).



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 net proceeds of
$50,000 from the sale of the Note (and $13,000 was used to pay the professional fees). On February1, 2013, the Company prepaid
the Note for the sum of $90,561. The payment amount to Asher included a prepayment penalty.



On May 7, 2012, the Company received $320,000
in cash for one convertible promissory note payable. In September 2012 the Company prepaid $30,000 of the principal and by mutual
consent the holder of the note and the Company agreed to reduce the monthly interest expense to 1% from 2%, in cash, or common
stock of the Company at $0.25 per share, at the option of the lender effective July 2012. The maturity date of this note was also
extended two months until January 7, 2014. There is no required principal payment on the note until maturity. 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. Our Contract Packager also co-signed this
note. In addition, on December 18, 2012, by mutual consent with the Company the lender agreed to reduce the royalty payment to
1.8% on the first $10 million of sales of a generic prescription drug under distribution contracts with Federal government agencies
and 0.9%on the next $15 million of such sales. These royalty payments will be paid quarterly,
commencing December 31, 2012. As of December 31, 2012, the Company has accrued and expensed $42,000 in the 2012 financial statements
for these royalty payments, but it has not made any cash payments on them. Collateral for this loan also includes 1,400,000 shares
of the Company’s common stock.



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 changed 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, and, 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 bifurcated resulting in the elimination of both accounts.The Company anticipates
launching this orally disintegrating tablet for which a 4% royalty payment is due sometime in the second half of fiscal year 2013.



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 (12% annually), 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 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. Our Contract Packager 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, and as of December
31, 2012, the Company has accrued and expensed $10,500 in the 2012 financial statements but has not made any cash payments pertaining
to the royalty. Collateral for this loan also includes 200,000 shares of the Company’s common stock.



26







On August 15, 2012, the Company entered
into a four year term loan agreement in the amount of $500,001 with Development 72, LLC (a related party) for the purpose of funding
the inventory purchases of RapiMed rapidly dissolving formulation products. This loan bears interest at the rate of 9% per annum,
with 48 equal monthly installments of interest and principal payments of $12,442.55 and matures on August 15, 2016. The Company
may prepay the loan, in full or in part, subject to a prepayment penalty equal to 5% of the amount of principal being prepaid.
The loan is secured by the assets of the Company.



In addition to the monthly loan repayments,
during the 48 month period ending August 15, 2016, and regardless if the loan is prepaid in full, the Company will pay to Development
72 a royalty equal to one percent (1%) of all revenues that the Company receives from the Company’s sale or distribution
of its RapiMed rapidly dissolving formulation products. The royalty payments will be made quarterly and are subject to a fee for
late payment or underpayment



Development 72 is a related party because
it is the holder of record of 2,990,252 shares of the Company’s Series A Preferred Stock which is convertible into 5,980,504
shares of the Company’s common stock (representing approximately 10.6% of the outstanding shares). In addition, the manager
of Development 72, Andrius Pranskevicius, is a member of the Company’s board of directors.



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 and prime plus 6.25% annually. The outstanding
balance related to this line of credit at March 31, 2013 and December 31, 2012 was $77,266 and $40,059 respectively. 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.



Commitments and Concentrations



In March 2010, the Company signed a “Product,
Manufacturing and Supply Agreement” with our Contract Packager and labeler, for orally disintegrating tablets. The total
value of this contract was estimated to be $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 December 31, 2012. This deposit
was expense in March 2013 as it was deemed not applicable to future royalty payments. 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
to our Contract Packager. The Company anticipates launching this orally disintegrating tablet in the second half of fiscal year
2013.



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 Note 7 above 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. Shipments for this product are expect to occur
in fourth quarter 2013.



The holder of a $320,000
note payable (see note 7i) are entitled to a to 1.8% royalty payment on the first $10 million of sales of a generic prescription
drug under distribution contracts with Federal government agencies and 0.09%on the next $15
million of such sales. Payments for royalties will be paid quarterly commencing December 31, 2012, and as of December 31, 2012,
the Company had accrued $42,000 in royalties. In first quarter 2013 the Company issued 455,556 shares of its common stock as payment
for the royalty expense and the Company recorded an expense of $70,000 in the quarter. Additional a holder of a $50,000 note payable
(see note 7n), a related party, is entitled to a 0.9% on the first $25 million of sales of a generic prescription drug under distribution
contracts with Federal government agencies. The Company had accrued $10,500 in royalties as of December 31, 2012, and in first
quarter 2013 the Company issued 130,555 shares of its common stock for payment of royalty expense. The Company recorded a royalty
expense of $17,500 for the three months period ended March 31, 2013.





On September 27, 2012,
the Company entered into a 12 month service/consulting agreement with Olympic Capital Group (“OCG”) for the purpose
and intent to introduce the Company to sources which can help the Company grow its business through joint ventures, purchase orders,
licensing and/or royalty agreements, marketing the Company’s products, and/or to sell its business.



The fees associated
with the OCG agreement are as follows:

| | a) | To pay a cash consulting fee of 8% of the gross revenue derived by the Company for any transaction
enters into from a source that OCG introduced. Such transactions include any joint venture, or licensing or royalty agreement,
or other agreement involving the sales or licensing or royalty or other revenue-producing agreement regarding the Company’s
products or technology or services.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | b) | Consideration for OCG’s services, upon signing the consulting agreement to issue OCG a total
of 150,000 restricted common stock shares. These shares were issued in October 2012.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



27







| | c) | In the event that the Company completes the transactions described in section (a) above, then,
in the event that the Company subsequently is acquired or sells its assets, or mergers with another company, the Company agrees
to pay a cash consulting fee equal to 6% of the purchase price.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | d) | If any transaction set forth in section (a) or (c) above consists of any payments to be made to
the Company and/or shareholders or affiliates in the future, the Company agrees that a the consulting fee is due and payable to
OCG and is payable upon receipt of such consideration.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | e) | When a transaction described in section (a), (c), (d) above is completed, then in addition to the
compensation described above the Company agrees to pay OCG a monthly consulting fee of $5,000 for a 24 month period beginning on
the first day of the first month after the closing of the transaction.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | f) | Also when a transaction described in section (a), (c), (d) above is completed, the Company agrees
to an equity interest payment of 6% of the combined present and projected future value of the transaction, which value will be
ascertained and delivered to the Company and OCG at least ten days before the closing of the proposed transaction.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In September 2012, the Company announced
that our Contract Packager, which signed a Letter of Intent to be acquired by the Company, had secured an 8-year $79 million pharmaceutical
distribution contract with the Office of Health Affairs, a branch of the U.S. Department of Homeland Security, in conjunction with
the Defense Logistics Agency (DLA). On September 30, 2012, our Contract Packager began shipping its first order on this distribution
contract with the DLA. Our Contract Packager’s DLA contract calls for a minimum purchase amount of $25 million over the next
2-3 years. The DLA has awarded our Contract Packager the contract based on its ability to provide specified pharmaceuticals at
competitive prices. ScripsAmerica reports these sales as net sales from related party, gross sales are reduced by the cost of goods
fees for the product shipped that is paid to our Contract Packager. The Company expects to complete the acquisition of its Contract
Packager by the end of the second quarter of 2013. The DLA contract requires our Contract Packager to maintain a ten day inventory
supply level for various products. The Company estimates this minimum inventory supply level to be approximately $200,000 to $400,000.



During the first three months period ended
March 31, 2013 and for fiscal year 2012, the Company purchased approximately 100% of its product packaging from its Contract Packager.
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 $287,374
or 100% of its revenue from two customers. Of this total one customer accounted for 52% and the other accounted for 48% during
the three month period ended March 31, 2013. During the three month period ended March 31, 2012, three customers accounted for
100% of the $996,827 in sales revenue. Of this total, one customer accounted for 60.4%, another 21.2% and the third 18.4%.



As of March 31, 2013, the Company had two
customers in our accounts receivable – trade, one customer accounted for $97,693, or 65% of the Company’s accounts
receivable balance of $149,958. As of December 31, 2012, the Company had two customers in our accounts receivable-trade, one accounted
for $175,054, or 60% of the Company’s accounts receivable balance of $290,531.



Off-Balance Sheet Arrangements



We currently have no off-balance sheet arrangements.



Critical Accounting Policies



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.





RevenueRecognition- Revenue is recognized when product is shipped from our Contract Packager to our
customers’ warehouses, mainly McKesson, and is adjusted for anticipated charge backs from our customers which include inventory
credits, discounts or volume incentives. These charge back costs are received monthly from our customers’ and the sales revenue
and accounts receivables are reduced accordingly based on historical experience, customer contract programs, product pricing trends
and the mix of products shipped.





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



28







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



Accounts Receivable Trade, net-Accounts
receivable are stated at estimated net realizable value net of the sales allowance due to charge backs.  Management provides
for uncollectible amounts through a charge to earnings and a credit to an allowance for bad debts 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. As of March 31, 2013 and December 31, 2012 no allowance for doubtful accounts has been recorded.



The Company
entered into an accounts receivable factoring facility agreement in June 2012. As of March 31, 2013, gross accounts receivable
were $209,423 of which none was sold to a factor. Accounts receivable were reduced by $59,465 to provide for an allowance for charge
backs, for a net receivable balance of $149,958. As of December 31, 2012, gross receivableswere $395,974 of which $141,725
was sold to a factor, and has been included in the liabilities section in the balance sheet. Gross accounts receivable was reduced
$105,443 for an allowance for charge backs, for a net accounts receivable balance of $290,531.



Receivable – Contract Packager- The Company has receivables from our Contract Packager, a related party in the amount of $1,536,541. This receivable
consists of the following: a) receivables relating to sales with a government agency in the amount of $694,380, b) the Company
paid $635,920 to a vendor for the product to be manufactured on behalf of our Contract Packager, and c) the Company advanced $206,241
to our Contract Packager for the purchase of product inventory. The Company expects to receive payment within the next twelve months
thus no reserve for uncollectible amounts has been recorded.



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 annually 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 had a full valuation allowance
of $686,875 and $597,591against deferred tax assets as of March 31, 2013 and December 31, 2012, respectively.



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, if applicable. There were
no uncertain tax positions at March 31, 2013 and December 31, 2012.



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



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



29







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



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



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



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



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



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



The carrying values of accounts receivable, inventory,
accounts payable and accrued expenses, royalty payable, obligation due factor, and notes payable approximate their fair values
due to their short-term maturities. The carrying value of the Company’s long-term debt approximates fair value due to the
borrowing rates currently available to the Company for loans with similar terms. See note 8 for fair value of derivative liabilities.



Stock-Based Compensation–
Compensation expense is recognized for the fair value of all share-based payments issued to employees. Stock grants to employees
were valued using the fair value to the stock as of August 3, 2012. Prior to our stock being publicly traded, the fair value was
determined by the board of directors for the value of services performed. As of December 31, 2012 and March 31, 2013, 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 the fair value of stock at the date
the agreement is reached, whichever is more readily determinable. For stock options and warrants granted to non-employees the fair
value at the grant date is used to value the expense. In calculating the estimated fair value of its stock options and warrants,
the Company used a Black-Scholes pricing model which requires the consideration of the following seven variables for purposes of
estimating fair value:



·the stock option or warrant exercise price,

·the expected term of the option or warrant,

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

·the expected volatility of our common stock,

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

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

·the expected forfeiture rate.



Cost of
Goods Sold-The Company purchases all of its products from one supplier, MarlexPharmaceuticals
Inc., a related partyat various contracted prices. Raw materials are re-packaged by Marlex. Upon shipment
of product, the Company is charged the contracted price for services provided to ship the product.  Cost of goods consists
of raw material costs, re-packaging costs and shipping and handling.  The Company financed the purchase of inventory based
on confirmed purchase orders via a revolving finance agreement, provided by a related party.



Earnings
Per Share - Basic net income (loss) per common share is computed using the weighted average number of common shares outstanding
during the period. Diluted earnings per share include additional dilution from common stock equivalents, such as stock issuable
pursuant to the exercise of stock warrants, convertible notes payable and Series A convertible preferred shares. Common stock equivalents
are not included in the computation of diluted earnings per share when the Company reports a loss because to do so would be anti-dilutive.



30







|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 March 31, 2013 (the “Evaluation Date”).  Based
on this evaluation, our chief executive officer and chief financial officer concluded that as of the Evaluation Date, our disclosure
controls and procedures are ineffective.



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





PART II - OTHER INFORMATION



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



None.



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



On January 3, 2013, the Company issued
77,778 restricted shares of its common stock to a note holder as payment of royalties due under the note. The royalty payment was
in the amount of $23,333.



On January 9, 2013, the Company issued
84,579 restricted shares of its common stock to Implex Corporation for services rendered under a consulting agreement with regard
to assisting the Company with financial matters. These services were valued at $24,528.



On January 9, 2013, the Company issued
110,000 restricted shares of its stock to Mass Media 88 Inc. for services to be rendedered under a consulting agreement. These
services were valued at $31,900.



On January 11, 2013, the Company issued
105,932 restricted shares of its common stock to Implex Corporation for services rendered under a consulting agreement with regard
to assisting the Company with financial matters. These services were valued at $32,839.



On January 25, 2013, the Company issued
116,667 restricted shares of its common stock to a note holder as payment of royalties due under the note. The royalty payment
was in the amount of $29,167.



On January 25, 2013, the Company issued
an aggregate of 106,674 restricted shares of its common stock to two investors, who each paid $0.19 per share.



On January 25, 2013, the Company issued 140,000 restricted shares
of its common stock to American Capital Ventures, Inc. under a consulting agreement for financial advisory services. These services
were valued at $35,000.



On February 5, 2013, the Company issued
128,074 restricted shares of its common stock to Implex Corporation for services rendered under a consulting agreement with regard
to assisting the Company with financial matters. These services were valued at $32,019.



On February 5, 2013, the Company issued
an aggregate of 366,300 restricted shares of its common stock to two investors, who each paid $0.14 per share.



On February 5, 2013, the Company issued 266,667 restricted shares
of its common stock to an investor, who paid $0.15 per share.



On March 5, 2013, the Company issued 100,806
restricted shares of its common stock to Implex Corporation for services rendered under a consulting agreement with regard to assisting
the Company with financial matters. These services were valued at $39,314.



On March 5, 2013, the Company issued 261,111
restricted shares of its common stock to a note holder as payment of royalties due under the note. The royalty payment was in the
amount of $101,833.



31







On March 5, 2013, the Company issued 130,555
restricted shares of its common stock to a note holder as payment of royalties due under the note. The royalty payment was in the
amount of $50,916.



The shares of the Company’s common
stock issued during the first quarter as described above 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 each of the issuances, size of the offering, manner
of the offering and number of shares offered. Based on an analysis of the above factors, the Company has met the requirements to
qualify for exemption under Section 4(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.



|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
|99.1    | Temporary Hardship Exemption                                                                                                                     
|101.INS | XBRL Instance Document*                                                                                                                          
|101.SCH | XBRL Schema Document*                                                                                                                            
|101.CAL | XBRL Calculation Linkbase Document*                                                                                                              
|101.DEF | XBRL Definition Linkbase Document*                                                                                                               
|101.LAB | XBRL Label Linkbase Document*                                                                                                                    
|101.PRE | XBRL Presentation Linkbase Document*                                                                                                             



_____

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





32







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:  May 17, 2013 |                                                                                                                 
|                     | 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)









33