UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K



(Mark One)

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



For the fiscal year ended  December
31, 2013



OR



o
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



For the transition period from    to



Commission File Number   
000-54550



SCRIPSAMERICA, INC.

(Exact name of registrant as specified in
its charter)



|Delaware                                                       | 26-2598594                       
|-------------------------------------------------------------- | ---------------------------------
|(State of Other Jurisdiction of Incorporation or Organization) | (IRS Employer Identification No.)



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

(Address of Principal Executive Offices
and Zip Code)



(800) 957-7622

(Registrant’s telephone number, including
area code)



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



Securities registered under Section 12 (g)
of the Act:



Common Stock, $0.001 par value

(Title of Class)



Indicate by check mark if the registrant
is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o
Nox



Indicate by check mark if the registrant
is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o
No x



Indicate by check mark whether the registrant:  (1)
has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes x No o



Indicate by check mark whether the registrant
has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted
and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files). Yes x
No o



Indicate by check mark if disclosure of
delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not
be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to this Form 10-K. o



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



|Large accelerated filer | o                                            | Accelerated filer         | o
|----------------------- | -------------------------------------------- | ------------------------- | -
|Non-accelerated filer   | o(Do not check if smaller reporting company) | Smaller reporting company | x



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



As of June 30, 2013, the aggregate market
value of voting common stock held by non-affiliates of the Registrant (40,719,809 shares) was approximately $17,916,716.  The
aggregate market value was computed by reference to the last sale price of such common equity as of that date.



As of April 8, 2014, the issuer had 125,610,436
shares of Common Stock issued and outstanding and 2,990,252 shares of Series A Preferred Stock issued and outstanding.



Documents Incorporated by Reference:            None











INDEX



|               |                                                                                                              | Page
|-------------- | ------------------------------------------------------------------------------------------------------------ | ----
|PART I         |                                                                                                              |     
|Item 1.        | Business                                                                                                     | 1   
|Item 1A.       | Risk factors                                                                                                 | 15  
|Item 1B.       | Unresolved Staff Comments                                                                                    | 19  
|Item 2.        | Properties                                                                                                   | 19  
|Item 3.        | Legal Proceedings                                                                                            | 19  
|Item 4.        | Mine Safety Disclosures                                                                                      | 19  
|               |                                                                                                              |     
|PART II        |                                                                                                              |     
|Item 5.        | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 20  
|Item 6.        | Selected Financial Data                                                                                      | 25  
|Item 7.        | Management’s Discussion and Analysis of Financial Condition and Results of Operations                        | 25  
|Item 7A.       | Quantitative and Qualitative Disclosures About Market Risk                                                   | 40  
|Item 8.        | Consolidated Financial Statements and Supplementary Data                                                     | 41  
|Item 9.        | Changes In and Disagreements With Accountants on Accounting and Financial Disclosure                         | 42  
|Item 9A.       | Controls and Procedures                                                                                      | 42  
|Item 9B.       | Other Information                                                                                            | 43  
|               |                                                                                                              |     
|PART III       |                                                                                                              |     
|Item 10.       | Directors, Executive Officers and Corporate Governance                                                       | 43  
|Item 11.       | Executive Compensation                                                                                       | 46  
|Item 12.       | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters               | 48  
|Item 13.       | Certain Relationships and Related Transactions, and Director Independence                                    | 49  
|Item 14.       | Principal Accounting fees and Services                                                                       | 49  
|               |                                                                                                              |     
|PART IV        |                                                                                                              |     
|Item 15.       | Exhibits, Financial Statement Schedules                                                                      | 50  
|               |                                                                                                              |     
|SIGNATURES     | 53                                                                                                          
|CERTIFICATIONS |                                                                                                             













PART I



This Form 10-K contains forward-looking
statements. For this purpose, any statements contained in this Form 10-K that are not statements of historical fact
may be deemed to be forward-looking statements. You can identify forward-looking statements by those that are not historical
in nature, particularly those that use terminology such as “may,” “will,” “should,” “could,”
“expects,” “anticipates,” “contemplates,” “estimates,” “believes,”
“plans,” “projected,” “predicts,” “potential,” or “continue” or the
negative of these similar terms. In evaluating these forward-looking statements, you should consider various factors,
including those listed in the “Risk Factors” section of this annual report on Form 10-K. The Company’s
actual results may differ significantly from the results projected in the forward-looking statements. The Company assumes
no obligation to update forward-looking statements.



As used in this Form 10-K, references
to the “Company,” the “Registrant,” “we,” “our,” or “us” refer to ScripsAmerica,
Inc. unless the context otherwise indicates.





|ITEM 1. | BUSINESS
|------- | --------



Overview



ScripsAmerica,
Inc. (www.ScripsAmerica.com) is a Delaware corporation that was formed in May 2008. Currently, ScripsAmerica’s primary
focus is on the (1) development, branding and distribution of rapidly disintegrating drug formulations for Over the Counter
(OTC) drugs, vitamins and supplements, (2) supporting and financing efficient pharmaceutical supply chain management services
to the Independent Pharmacy market and (3) management of specialty pharmacy businesses. We developed a branded rapidly
dissolving tablet OTC product called “RapiMed®” (www.RapiMeds.com), which is a children’s pain reliever
and fever reducer recently launched in China through our joint venture entity Global Pharma Hub in February 2014. We have
also entered into agreements with third parties pursuant to which we receive fees based on a formula tied to the gross profit
on sales of pharmaceutical products to independent pharmacies by such third parties. Lastly, on February 20, 2014 we
entered into an agreement with a New Jersey specialty pharmacy that specializes in topical creams, pursuant to which we
manage their business operations in exchange for a percentage of the pharmacy’s operating profit, as defined in the
agreement.



Recent Developments



On February 3,
2014, we entered into a joint venture with Global Pharma Hub, an international pharmaceutical marketing
and distribution company, to license, market and distribute our RapiMed® children’s acetaminophen (a pain reliever and
fever reducer). Under this agreement, Global Pharma Hub has an exclusive license to market and distribute RapiMed® children’s
acetaminophen worldwide with the exception of the United States. Additionally, Global Pharma Hub, which has the right to sublicense
RapiMed® children’s acetaminophen, entered into a sublicense agreement to NYJJ, a Hong Kong-based company, to generate
initial and ongoing orders for our RapiMed® children’s acetaminophen, subject to and upon the registration approval of
RapiMed® children’s acetaminophen by the Hong Kong government. On February 5, 2014, we received such registration approval
for our RapiMed® children’s acetaminophen. With the registration process complete, we are now free to distribute RapiMed®
children’s acetaminophen throughout Hong Kong. Because RapiMed® children’s acetaminophen is an over-the-counter
(OTC) medication, it does not require FDA approval in order to be sold in Hong Kong due to the fact that our manufacturer is CGMP
(Current Good Manufacturing Practices) certified. On March 17, 2014, we received a$200,000
purchase order for RapiMed® children’s acetaminophen from Global Pharma Hub for the Hong Kong market.



Our
joint venture partner, Global Pharma Hub, entered into a sublicense agreement with Jetsaw Pharmaceutical, Inc. in Canada, giving
Jetsaw exclusive sublicensing right to market and distribute RapiMed® Children's acetaminophen in Canada for a term of three
years.



On February 20, 2014, we entered into a
business management agreement with Main Avenue Pharmacy, a New Jersey specialty pharmacy. The agreement
provides that we will manage all business operations of the pharmacy, which specializes in topical creams, in exchange for a percentage
of the pharmacy’s total revenue. These creams are experiencing growing demand because they provide an effective alternative
to pills that can be more easily ingested in higher doses than originally prescribed. From February 14, 2014 through March 31,
2014, Main Avenue Pharmacy had sales revenue of approximately $642,000, and under our management agreement with them, we earned
fees of approximately $125,000. The calculation of our management fee under this agreement is described on page 13 of this Annual
Report.





1







On
March 24, 2014, we announced that our equity venture, Wholesale Rx, received and processed for itself $313,904 in orders
during the month of February 2014. Since we formed this equity joint venture six months ago, our monthly revenue has
increased by 398%. WholesaleRx has experienced 17% growth from January 2014. Additionally, February 2014 marked the third
consecutive month that WholesaleRx has increased its revenues from the prior month. For the period of January 1, 2014 to
March 31, 2014, WholesaleRx has generated for itself $792,627 in revenue.As described in more detail on page 7 of this Annual Report, we are entitled to a monthly fee of 20% of WholesaleRx’s
gross profit for the prior month.



Evolving Business Model



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



However, we had no exclusive contract with
McKesson and our other pharmaceutical distributors to utilize our services and our margins began to shrink. As a result, in 2013
we moved away from providing these pharmaceutical distribution services as our main source
of income, and we focused on generating revenue through (1) the marketing, sale and distribution of our RapiMed® products,
(2) our independent pharmacy distribution model and (3) our entry into the specialty pharmacy market.



On September 6, 2013, the Company and Marlex
Pharmaceuticals, Inc., its former Contract Packager, entered into an agreement pursuant to which the Company and its former Contract
Packager resolved various disagreements that had arisen between the parties on various projects covered by written agreements between
the Company and its former Contract Packager, namely (i) the Contract Packager’s agreement with the U.S. government, (ii)
the parties agreement with respect to the production and packaging of the Company’s RapiMed® products and (iii)
shares of the Company’s stock issued to the principals of the Contract Packager for consulting services. The Company’s
agreement with Marlex also contained mutual releases.



This
September 6th agreement provided that the Company will provide Marlex with financing through a related party, Development
72 LLC, for the continuance of Marlex’s pharmaceutical distribution contract with the U.S. government and for the Contract
Packager to make 15 equal monthly payments of $27,210 to the Company with respect to amounts its owed the Company for prior shipments
from McKesson and under the U.S. government contract (which stopped in May 2013 due to a dispute but have resumed in September
2013) for a total of $408,154. For net revenue generated after the September 6th agreement, the Company’s percentage of the
profits under the U.S. government contract had been revised in terms of the rate and the number of bottles of product sold to
the U.S. government for which the Company would receive payments. As a result of which, the Company will receive monthly payments
from Marlex equal to the actual amount of interest incurred by the Company from the financing arranged through Development 72,
royalty payments on the next 30,300 bottles sold by Marlex under the U.S. government agreement and a monthly interest payment
of $1,480 with each such royalty payments.



To protect our position with respect to
the RapiMed® product, the September 6th agreement also terminated the Product Development, Manufacturing and Supply
Agreement with the Contract Packager, which agreement was in regard to the Company’s RapiMed® products. All development
costs through the date of the cancellation of the Product Development Agreement have previously been expensed and paid by the Company,
which expects to enter into a manufacturing and supply contract directly with a manufacturer that owns a quick melt technology
used for the RapiMed® products to be sold outside of the United States. We expect to enter into this agreement with the new
manufacturer during the second quarter of 2014.



Pursuant to the September 6th
agreement, the principals of the Contract Packager returned 500,000 shares of common stock of the Company which they had received
under consulting agreements. Another 400,000 shares issued to them under consulting agreements is being
held as security for the payments due to the Company under the September 6th agreement. Each month an equal portion
of the 400,000 shares would be released as free trading shares to the principals of the Contract Packager. In September 2013, the
Company retired the 500,000 shares and reversed the consulting expense previously incurred through additional paid in capital.





2









Market Opportunity



Independent Pharmacy Distribution



According to the National
Community Pharmacist Association (“NCPA”), as of 2011, there were 23,106 independent pharmacies in the United States,
which population has changed very little in recent years, according to a 2013 Hamacher Resource Group, Inc. (“HRG”)
report entitled Independent Pharmacy Shoppers. This number of independent pharmacies includes independent, pharmacist-owned
regional chain operations, franchise stores, specialty pharmacies and long-term care pharmacies. The NCPA notes that over 25% of
independent pharmacy owners have ownership in two or more locations and that 38% of all retail pharmacies are independent, and
represent $80.7 billion in annual sales of prescription medicines. According to a Chicago Tribune article on independent
pharmacies published on September 2, 2013, independent pharmacies hold approximately 30% of the overall drug store market. The
NCPA reports that the average independent pharmacy dispenses 201 prescriptions per day and that annual prescription sales account
for approximately 91% of annual revenues among independent pharmacies. The HRG 2013 reports indicates that with the rapidly aging
population, influx of new prescription patients as a result of the Affordable Care Act, increased use of generic drugs and a dramatic
rise in chronic conditions, independent pharmacies could find themselves ideally positioned to become a consumer’s first
choice for care. The NCPA reports that independent pharmacies provide a range of patient services, including delivery, patient
charge accounts, compounding, durable medical goods and immunizations; and 77% of drugs dispensed by independent pharmacies are
generics. A March 15, 2014 S&P Capital IQ report states that U.S. drug sales are expected to rise modestly in 2014, lifted
in part by volume gains in specialty and generic drug sales.



With approximately
half of the states expanding Medicaid under the Affordable Care Act, pharmacies, small and large, can expect to see an increase
in prescription customers as a result of the expanded Medicaid coverage (which includes a prescription benefit).



We are ideally suited
to 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. We use our broad connections
to wholesale providers of prescription and generic medicines to source and provide our customers the best prices for their independent
pharmacy customers.





During
2013, wederived approximately $69,902, or approximately 12.5% of our revenue, from commissions on gross margins of
prescription and non-prescription medicines we sourced for our one customer, WholesaleRx. In 2014, we consolidated P.I.M.D. as a variable
interest entity  which distributes prescription and non-prescription pharmaceuticals to
independent pharmacies.



Our independent pharmacy distribution business
competes against large and medium sized pharmaceutical distributors such as McKesson, AmerisourceBergen Corporation, Anda Pharmaceuticals,
Inc., Cardinal Health, Harvard Drug Group, Capital Wholesale Drug Company, Henry Schein, Inc. and Matrix Distributors, Inc., Medsource
Corporation, Sunrise Wholesalers, Inc. and Top Rx. All of these competitors have more financial resources than we do and are better
positioned to offer lower prices for pharmaceutical products with better payment terms.



We believe that independent
pharmacies will continue to represent a significant market opportunity given the expansion of prescription patients under the Affordable
Care Act and the niche markets drawn to the patient services that large chain drug stores do not typically provide (such
as compounding, delivery and patient charge accounts). We believe that our ability to source low cost prescription and non-prescription
medicines will allow our clients to offer competitive wholesale prices for pharmaceutical products to independent pharmacies. We
will use our effective pharmaceutical sourcing abilities to expand the number of wholesale clients we have.





3







Rapid Oral Disintegrating Drug Formulations



During 2012 and 2013,
many large pharmaceutical companies will lose patent protection of some of their best-selling products. One of the ways
that these large pharmaceutical companies protect and expand the market for the brand name drugs is through new methods of delivery
– a new dosage form. According to IMS Health Incorporated, a health care information and consulting company, drugs
representing approximately $89.5 billion in sales during 2010 will be losing patent protection during the five year period ending
December 31, 2014. The pharmaceutical industry’s collective drug pipeline is simultaneously in decline. One
of the approaches that drug companies may consider for offsetting loss of patent protection and weak drug pipeline is updating
old drugs with reformulations, which secures revenues for extended time periods and have a higher likelihood of success as compared
to new drug development. Reformulation refers to the process of altering a drug’s characteristics just enough
to qualify for a new patent, while keeping the same indication to use previous clinical testing results for the purpose of FDA
approval.



Drug delivery technology
can be an effective defensive strategy when a company adds a relevant therapeutic benefit to a marketed drug, such as improved
efficacy or dosing frequency, or new therapeutic indications or target user groups. Additional benefits include boosting
a drug’s value, reviving its marketplace position, or rejuvenating products that are in their mature life-cycle stage. Drug
delivery technology can also enable or accelerate market entry by overcoming issues such as insolubility, formulation difficulties
or high dosing frequency.



Rapid melt technology
is an example of a reformulation technique aimed at advanced drug delivery and product differentiation.   The FDA’s
Center for Drug Evaluation and Research (CDER) Data Standards Manual defines orally disintegrating tablets (ODTs) as “a solid
dosage form containing medical substances which disintegrates rapidly, usually within a matter of seconds, when placed upon the
tongue.” The FDA recommends that, in addition to the original definition, ODTs be considered solid oral preparations
that disintegrate rapidly in the oral cavity, with an in-vitro disintegration time of approximately 30 seconds or less, without
the need for chewing or liquids. Rapid melt tablets are generally characterized by a hydrophilic matrix, which allows
prompt disintegration of tablets as they come into contact with saliva. Disintegration releases the active drug moiety trapped
in the matrix, permitting the patient to swallow the product in the form of a liquid, or a suspension in the case of non-soluble
components. The rapid disintegration tablet excipient offers extremely fast dissolution from tablets with good hardness made with
standard techniques. The combined US, EU and Japanese ODT market has doubled in size over the past four years to surpass $6.4
billion in 2009, according to Technology Catalysts International’s report on Orally Disintegrating Tablet and Film Technologies
(sixth edition), which is available for purchase from TCI.



Clinically, rapid melts
improve the pharmacoeconomics of drugs by providing faster onset of action as the dosage form is disintegrated prior to reaching
the stomach. This is particularly applicable for acute diseases and to manage breakthrough symptoms. Other potential
benefits include superior bioavailability, improved therapy through sustained release and high active dose capabilities, safety,
efficacy, convenience, and compliance. With medications for chronic diseases that display time-dependent symptoms, such
as ulcers or asthma, drug delivery systems can control the formulation release according to the timing of symptoms. For instance,
they could enable a drug to release when asthma attacks occur, generally in the middle of the night. This capability can provide
valuable and clinically proven therapeutic benefits, as well as a means for marketers to differentiate their product. Sustained
release action also reduces dosing frequency, which in turn can serve to decrease the frequency of caregiver interactions.  
Fewer visits from doctors and nurses save administration costs and time and increase convenience for both patients and caregivers.



Orally disintegrating
and fast-dissolving dosage forms have continued to expand as they address a combination of issues traditionally associated with
pharmaceuticals administered as oral solid dosages.   These include dysphagia (difficulty swallowing) common to pediatric
and geriatric patients, lack of patient compliance and lack of consumer convenience. In addition, the market for rapidly dissolving
formulations maintains its strength as an innovative concept for either brand or generic companies with access to dissolving technology.





4







As a result, the combined
US, EU and Japanese ODT market has doubled in size between 2005 to 2009, surpassing $6.4 billion in 2009, according to Technology
Catalysts International’s report on Orally Disintegrating Tablet and Film Technologies (sixth edition), which report is available
for purchase from TCI.   Increased generic competition has further expanded the ODT market volume. The number of commercial
over-the-counter and prescription ODT products has ballooned to over 450, which is attributable to the rapid genericization of
multiple products by a large number of generics companies. Aprecia Pharmaceutical Company
reports on its web site that the global ODT market reached revenues of $8.4 billion in 2011 and this segment grew by $1.4 billion
(+20%) from 2010 and by $2 billion from 2009.





The ODT market is one
of the fastest growing sectors of the drug delivery market, with industry experts projecting a 12-15% annual growth rate for the
next several years. Based on upward global growth trends of the past decade, the ODT market could produce revenues of $13 billion
by 2015, according to an article appearing on Pharmatech.com entitled “ODT Market to Exceed $13 Billion by 2015” by
Stephanie Sutton (available at http://pharmtech.findpharma.com/pharmtech/Formulation/ODT-Market-to-Exceed-13-Billion-by- 2015/ArticleStandard/Article/detail/694820).
  Growth is fueled by patient demand, with recent market studies indicating that more than half of the patients prefer ODTs
to other dosage forms, according to Kaushik Deepak’s article “ Orally disintegrating tablets: An overview
of melt-in-mouth technologies and techniques”, which appeared in the July 2004 edition of Tablets and Capsules magazine
(pp. 30 – 35), and most consumers would ask their doctors for ODTs (70%), purchase ODTs (70%), or prefer ODTs to regular
tablets or liquids (80%), according to Dave Brown’s article “Orally Disintegrating Tablets: Taste Over Speed”
which appeared in September 2003 edition of Drug Delivery Technology magazine (and can be found at http://www.drugdeliverytech.com/ME2/dirmod.asp?sid=&nm=&type=Publishing&mod=Publications%3A%3AArticle&mid=8F3A7027421841978F18BE895F87F791&tier=4&id=AF1FFE004FD14F3C9645BBE33360F7A9).



The ODT market for
both the prescription ODT and over the counter ODT is highly fragmented, with many companies putting out ODT products (either OTC,
prescription or both) into the market place. Aprecia reports that more than 900 branded and
generic products have now been commercialized in ODT formulations throughout the United States, European Union and Japan.



Patient demand is driven
by the fact that as many as 40% of Americans experience difficulty swallowing traditional tablets (especially among pediatric and
geriatric patients), even though most have no problems swallowing food or liquid.   Results from a 2003 nationwide survey
of 679 adults on pill-swallowing difficulties, conducted by Harris Interactive, indicated that of those who experienced difficulty
swallowing pills, 14% had delayed taking doses of their medication, 8% had skipped a dose, and 4% had discontinued their medication,
according to a January 2004 PR Newswire article entitled “40% of American Adults Report Experiencing Difficulty Swallowing
Pills” (available at http://www.spraynswallow.com/links&Articles.html).



Orally dissolving tablets
have emerged as a patient-friendly, convenient method of administering medications.   In addition to adults, the fast dissolving
tablet market will prove particularly applicable to children and the elderly and anyone else who has trouble swallowing regular
pills, tablets, or capsules; for example patients whose swallowing is compromised as a clinical symptom of disease. Other groups
who benefit from this dosing form include the mentally ill, developmentally disabled, and uncooperative patients. ODTs can also
be used in the field, for example in combat zones or for relief efforts following natural disasters, where clean sources of water
may be unavailable and rapid onset of action is desirable.



Our Target Niche



In light of the fact
that rapid melt technology provides pharmaceutical companies with the much-needed opportunity for product line extensions for a
wide variety of drugs, we see a significant opportunity as a contract developer of orally disintegrating tablet (ODT), especially
in prescription pharmaceuticals.





5







Our
target market for RapiMed® is 2-11 year olds and we anticipate that the formula
for our orally disintegrating tablets will be more effective than existing products due to its ability to melt faster, taste better
and provide more accurate dosing. Unlike other products available, ScripsAmerica’s is much smaller and dissolves in the child’s
mouth in 25 seconds, therefore entering their system faster. RapiMed® contains
Acetaminophen (main ingredient in Tylenol); however the bitter taste of this active ingredient is masked by a patented technology.
The cherry and wild grape flavors that our product will come in are most appealing to children. Additionally, the dosage of RapiMed®is controlled, not like the syringe based competing products and we offer the 80 mg for 2-6 year olds, and 160 mg for the
6-11 year olds. The 80mg and 160mg dosing strengths will be particularly applicable to children to solve common
overdosing or under dosing issues that 2-11 year olds tend to experience when taking pain relievers or fever reducers in doses
intended for adults.



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



ScripsAmerica
presented RapiMed® to retail buyers in February of 2013 at the ECRM Cough and Cold show in Florida and we received very positive
feedback. We have engaged Davison Product Group, LLC to roll out the product to retailers nationwide once we secure adequate funding.
Depending on the retailer, the product will be promoted through in-store temporary price reductions, coupons, store-circulars,
buy-two-and save packs, as a clip-strip program, radio and print advertising. As noted below, in March 2014, we began selling
our RapiMed® pediatric acetaminophen in the People’s Republic of China through our joint venture entity, Global Pharma
Hub, Inc.



In January 2014,
we entered into a joint venture entity, Global Pharma Hub, Inc., with Forbes Investments, Ltd. and Sterling, LLC and their
respective assigns. The purpose of this joint venture is to license, market and distribute U.S. manufactured over-the-counter
medications in foreign markets. We own 37% of Global Pharma Hub. In January 2014, we entered into a Worldwide Licensing
Agreement with Global Pharma Hub under which we granted to Global Pharma an exclusive worldwide license, excluding the United
States of America, to market, distribute and sell our RapiMed® children’s pain reliever and fever reducer. The
license is for the use of our registered trademarks and includes online marketing, distribution and sales so long as such
online outlets do not sell in the United States. We do not own the formula for the RapiMed® products sold outside of
the United States, which is owned by the manufacturer we will be using to supply RapiMed® products for Global Pharma Hub.
In March 2014, we secured a $200,000 order from Global Pharma Hub for our RapiMed® pediatric acetaminophen for the Hong
Kong market.



Our acetaminophen orally
disintegrating rapid dissolve tablets will compete with other children’s analgesic products, such as Johnson & Johnson’s
Children’s Tylenol Suspension Liquid and Children’s Tylenol Meltaways, Novartis’ Triaminic Fever Reducer Pain
Reliever, and Perrigo’s Junior Strength Non-Aspirin Suspension Liquids & Drugs. According to Euromonitor International’s
research, J&J’s Children’s Tylenol sales represented 23% of global and 76% of U.S. retail value sales in child-specific
acetaminophen. Global sales were valued at $695 million in 2009. While the strength of J&J’s Tylenol
brand seemed virtually bulletproof in the U.S. until recently, a multitude of product recalls over the past three years have weakened
its reputation and opened a window for competitors to capture market share, especially in the children’s analgesics market
where pediatricians’ support of the Tylenol brand has seen some erosion.



When analyzing the
advantage of the ODTs dosage form over liquids, it is imperative to consider that safely administering liquids such as Children’s
Tylenol suspension to children requires precise dosage measurement in increments of half a teaspoon, depending on the child’s
weight or age. Inadvertent overdosing – whether by an adult’s error or perhaps a child’s self-administration
- may lead to severe liver damage and requires immediate medical attention even in the absence of signs or symptoms. Conversely,
ODTs such as our acetaminophen orally disintegrating rapid dissolve tablets represent a precise, standardized dose in the form
of discrete, easy-to-count, individually blister-packaged tablets, thereby reducing the probability of human error while the drug
is being administered. Finally, the taste of ODTs can easily be tailored to appeal to children, using a variety of flavored
coatings.





6







Specialty Pharmacies



Specialty pharmacies, prepare medications for humans (and animals)
that are not commercially available for individual patients. A specialty pharmacy will mix or alter various drug ingredients
to create a customized medication for an individual patient in response to a doctor’s prescription. These custom doses may
be in the form of an alternate strength of the medication, flavoring of medication and/or preparation of the medication for patients
with allergies or other sensitivities. For example, a patient may be allergic to an additive to a pill, such as a certain dye color,
or the patient needs less of an inert (non-active) ingredient or needs a stronger dose than is commercially available.



According
to a report from the research firm IBISWorld, during the past five year period ended 2012, the specialty pharmacy industry
has largely grown as a result of increased awareness of compounding pharmacies and pharmaceutical applications, shortages of
mass-produced drugs and growth in the number of senior citizens. During such time, the number of prescription drug shortages
has increased, rising from 61 in 2005 to more than 280 in 2012. Further, a December 2012 article by the American Journal of
Managed Care cites that pharmacies specializing in compounding have become more prevalent, citing the primary reason as drug
shortages which have become more frequent over recent years. TheAmerican Society of Health-System Pharmacistscurrently
lists a shortage of 235 products on its website. Another factor for expected growth in the market for compounding pharmacies
is the increasing number of Americans aged 65 and over, supporting demand for medications from the compounding industry that
cannot be met by conventional medications. In the five years to 2017, IBISWorld estimates that revenue will increase. During
that time, a growing number of doctors and patients will likely turn to compounding pharmacies to prepare medications with
alternate doses and strengths. Rising demand will ultimately bring more operators into the industry. IBISWorld projects that
the number of firms operating in this industry will increase at an average of 2.3% annually to 178 in the five years to
2017.



Independent Pharmacy Distribution



Wholesale Rx



As of November 1, 2013, we entered into
a written agreement with WholesaleRx, Inc., which represents over 700 such independent pharmacies. WholesaleRx is DEA and State-licensed
to store and distribute controlled substances (which are drugs that have the potential for abuse or dependence and are regulated
under thefederal Controlled Substances Act).WholesaleRx
is in possession of the proper facility, the critical state licenses, DEA approval, and the network of customers to add to ScripsAmerica’s
current revenue stream. We anticipate adding available state licenses from additional states, thereby expanding WholesaleRx’s
reach while increasing the products available for distribution into their network.WholesaleRxorders the goods from the manufacturers and has them shipped to its warehouse facility. WholesaleRx thenships thegoods to the pharmacies in the bottles as received by the manufacturer. When WholesaleRx receives orders from
the independent pharmacies, they send the goods to them COD, which will eliminate any accounts receivable issues. We would provide
financing and administer the process of providing financing to WholesaleRx.



Prior to November 1, 2013, we had an oral
agreement with WholesaleRx pursuant to which we secured third party financing to fund WholesaleRx’s purchase orders in consideration
for which we received 12.5% of the WholesaleRx’s “gross profit” for the prior month (which gross profit would
be (i) sales to all customers minus (ii) cost of goods sold, freight in (to WholesaleRx), credits and allowances).





7







Under our November
2013 written agreement with WholesaleRx, we agreed to provide purchase order financing to WholesaleRx under new termsand
purchased a 20% equity stake in WholesaleRx. In consideration for providing the purchase order financing,
and to cover our costs in administering such financing, WholesaleRx has agreed to pay us on or before the 15th calendar
day of each month 20% of the gross profit (as described in the preceding paragraph) for the prior calendar month. If WholesaleRx
is late in paying such 20% fee, then the amount owed to us will accrue interest at the rate of 18% per annum until paid.



Under this financing
arrangement, when WholesaleRx needs to fund the purchase of product to fill an order, we will secure advances financing from a
third party financing source (with which we have a pre-existing business relationship) and then turn around and lend the money
directly to WholesaleRx. WholesaleRx must repay the advance from us within 24 calendar days (which is six days before we must repay
the third party financing source). The loans we make to WholesaleRx are secured by certain assets of WholesaleRx (including
any proceeds from such assets), and WholesaleRx has agreed to indemnify and hold us harmless for any claims, charges and demands
resulting from or arising out of any purchase order financing with the third party financing source.



During 2013, we
borrowed from related third parties to provide WholesaleRx’s with purchase financing. These related third parties were Development
72, LLC, which is an affiliate of one of directors, and the wife of our Chief Executive Officer. We borrowed
an from Development 72 to provide WholesaleRx purchase order financing in August and September 2013, and we borrowed from the wife of our Chief Executive Officer to provide WholesaleRx purchase order financing from September to December 2013. Since January 1, 2014, we have provided
purchase order financing to WholesaleRx from our cash flow from operations without borrowing any funds.



In addition to
providing purchase order financing to WholesaleRx, we also agreed in the November 2013 written agreement to make an equity investment
in WholesaleRx in the amount of $400,000 for 12,000 shares, which represents a 20% interest in WholesaleRx. We paid
the subscription amount in three installments ($150,000 was paid upon execution of the agreement, $125,000 was paid in January
2014 and $125,000 was due on February 15, 2014 but we have not yet paid this amount). A proportionate number of the
shares of WholesaleRx were released to us from an escrow agent upon each payment. As of April 9, 2014, we have received
8,250 shares from the escrow agent (representing a 14% interest in WholesaleRx). Under the November 2013 written agreement we also
have a right of first refusal for (i) any proposed transfer of shares by the current owners of WholesaleRx and (ii) any financing
(debt or equity) by WholesaleRx.



If either of the other two shareholders
have a desire to sell some or all of their shares of WholesaleRx stock, they are required to notify us immediately of that intent
of that intent and offer us that opportunity to both the shares to be sold. If the selling shareholder and we cannot agree on terms
for the purchase of the shares, then the selling shareholder may try to sell his stock to a third party. However, if the either
of the other two shareholders of WholesaleRx receive a bona fide offer for the purchase of some or all of their WholesaleRx from
a third party, we have a right of first of first refusal to purchase such WholesaleRx stock on the terms and conditions of such
bona fide offer. The selling shareholder must provide us with a written copy of the bona fide offer, and we have then fifteen calendars
after the receipt of the notice to exercise our right of first refusal.



We also have a right of first refusal with
respect to any proposed investment in WholesaleRx.



PIMD Sourcing
and Marketing Agreement



On October 18, 2013, we entered into an
agreement to acquire 90% of the Membership Units in P.I.M.D. International,
LLC (“PIMD”), a start-up limited liability company based in, and proposing to do business in, Florida. Florida
is a most desirable state to be a base of operations and distribution due to the current needs of its diverse population. The operation
will be guided by our full time pharmacist who will ensure both DEA and Florida compliance. This additional revenue stream will
certainly enhance shareholder value. Although founded approximately 4 years ago, PIMD has had no sales, but has the necessary licenses
for operation of a drug wholesale operation. The purchase of the Membership Units in PIMD was subject to certain conditions precedent,
of which the most important was that we obtain the necessary licenses from Florida (and the DEA) for the ownership of a drug distribution
company like PIMD. At that time we entered into the agreement, we believed that the licensing could be accomplished within about
12 weeks.





8







However, it was determined that securing the licenses was going
to require a substantially longer period of time than the parties had anticipated. Consequently, in order to preserve the business
opportunity, it was necessary to change the structure of the relationship. Accordingly, the original purchase agreement was cancelled
and voided. The funds already advanced by us to PIMD were converted to a loan and the relationship between PIMD and us became a
Sourcing and Marketing Agreement



Under this Sourcing and Marketing Agreement, which we entered
into with PIMD in December 2013, we will assist PIMD by helping PIMD to (1) secure advantageous sources of drugs and (2) secure
marketing and sales assistance in selling the drugs. For these services, we will receive a “Sourcing and Marketing Fee”
which is 45% of the “Calculated Basis” to be calculated under a formula in the Sourcing and Marketing Agreement. PIMD
has no material sales in fiscal 2013 and no sales as of the three months ended March 31, 2014, but should be operational by the
end of June 2014. Under the terms of the revised agreement with PIMD, we have no authority or control with respect to PIMD’s
business - the purchase of the drugs and the sale of the drugs. Additionally, we do not have any authority to bind PIMD for any
transaction relating to the purchase, sale or transfer of pharmaceutical products.



In the meantime, Implex Corporation, owned by our legal counsel,
Richard Fox, who is a Florida resident, has stepped in to assist with any licensing issues. We believe that if licensing is required
it will be that of Implex, based in Florida and with a Florida owner. Implex borrowed $272,000 from ScripsAmerica at an interest
rate of 2% and has re-loaned the funds to PIMD at an interest rate of 5%. Implex will keep the 3% differential. Our loan to Implex
and Implex’s loan to PIMD are both for a 5-year period. Implex will be entering into a “Business Development and Retention
Agreement” with PIMD to assist PIMD with the development of its business.



Rapidly Dissolving Drug Formulations



Rapidly dissolving
drug formulation refers to an oral drug delivery formulation, which entails drugs in tablet form that can be taken without water
and will dissolve in the mouth in less than 30 seconds. Rapidly dissolving drug formulations represent a convenient
dosing form for patients who have difficulty swallowing – a widespread phenomenon among the elderly - or have sustained injuries
to the esophagus. Other groups who benefit from this dosing form include the mentally ill, developmentally disabled,
and uncooperative patients. Rapidly dissolving drug formulations can also be used in the field, where a clean source
of water may be unavailable.



Rapidly dissolving
drug formulations’ primary advantages over other oral dosage forms include patient friendliness, sustained release and high
active dose capabilities, low manufacturing cost, manufacture using conventional equipment and blister packaging, and low moisture
sensitivity. Rapidly dissolving drug formulations for children can be customized to solve common overdosing or under
dosing issues that 2-11-year-olds frequently experience when taking pain relievers or fever reducers in doses intended for adults.



Oral drug delivery
remains the preferred dosing method among patients and physicians, with more than 80% of all drugs administered in this manner,
according to ONdrugDelivery Ltd.’s 2007 white paper entitled “Oral Drug Delivery: When You Find the Holy Grail”
(available at http://www.ondrugdelivery.com/publications/Oral_Drug_Delivery_07.pdf). Rapidly dissolving drug
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 formulation for specialty prescription
pharmaceuticals.  The combined US, EU and Japanese ODT market has doubled in size over the past four years to surpass
$6.4 billion in 2009, according to Technology Catalysts International’s report on Orally Disintegrating Tablet and Film Technologies
(sixth edition), which is available for purchase from TCI.



On February 5, 2014,
we received registration approval for our RapiMed® children’s acetaminophen in Hong Kong. With the registration process
complete, we are now free to distribute RapiMed® children’s acetaminophen throughout Hong Kong. On March 17, 2014, we
received a$200,000 purchase order for RapiMed® children’s acetaminophen from Global
Pharma Hub, our joint venture entity, for the Hong Kong market.



Although not
planned for the next 12 months, we do plan to develop and launch additional products as quickly as cash flows allow.
Vitamins and OTC products are among the product categories currently under consideration. The rapidly dissolving drug
formulation for vitamins can be developed within one to two months, as no regulatory approval is required to bring such
products to market, and can be distributed through the existing network. OTC rapidly dissolving drug formulations can be
launched with a five- to six-month lead time, including three months of accelerated studies and one month of process
validation. We do not need to obtain FDA approval to market and sell orally disintegrating rapid dissolve tablets for
vitamins and OTC products. We only need to be sure that the contract manufacturers we use for making our orally
disintegrating rapid dissolve tablets for vitamins and OTC products have quality control and manufacturing procedures that
conform to the FDA's good manufacturing practices (“GMP”) regulations, which must be followed at all times. In
complying with standards set forth in these regulations, manufacturers must continue to expend time, monies and effort in the
area of production and quality control to ensure full technical compliance.  We expect it would take us nine (9) months
to purchase the raw materials, manufacture the product using a contract manufacturer, complete the packaging, ship the
finished product and conduct the marketing/advertising for the product. Launch of generics as a rapidly dissolving drug
formulation requires filing of an Abbreviated New Drug Application or New Drug Application under Section 505(b)(2) of the
Federal Food, Drug and Cosmetics Act, which covers new pharmaceutical products with innovative dosage forms or delivery
routes. Generics will require at least two years of time to approval as well as a $1 million - $2 million investment in
safety and efficacy studies.





9







Except for the 80 mg
and 160 mg pediatric orally disintegrating rapid dissolve tablets, we currently do not have any other marketable rapid dissolve
products. We may not successfully develop any of the potential rapid dissolve products for vitamins and OTC products,
or we may require more funding than we expect to develop such potential orally disintegrating products.



We do not have exclusive
use for this material for our rapid dissolve products. The remainder of our formulation to develop these potential rapid
dissolve products, such as particle size, coating agents, flavors, binders, manufacturing lubricants, package design, manufacturing
process, packaging materials and packaging process, are treated as our trade secrets. Although any competitor or potential
competitor may use the same patented material to make a rapidly dissolving product, we rely on the trade secret aspect for our
competitive edge in the market for rapid dissolve products. As of March 31, 2014 we are not aware of any patent that
would block our use of our “trade secrets” for the development of rapid dissolve vitamins and OTC products.



An overview of potential
rapidly dissolving drug formulation products is shown below for each of the three categories:



|Vitamin | Chemical Name        | Function                                                                                                         
|------- | -------------------- | -----------------------------------------------------------------------------------------------------------------
|B1      | Thiamine Mononitrate | Breakdown of sugars in the diet                                                                                  
|B2      | Riboflavin           | Energy metabolism; metabolism of fats, ketone bodies, carbohydrates, and proteins                                
|B3      | Niacinamide          | Anti-inflammatory                                                                                                
|B6      | Pyridoxine HCl       | Balancing of sodium and potassium, promotion of red blood cell production                                        
|B12     | Cobalamin            | Key role in the normal functioning of the brain and nervous system, and for the formation of blood               
|C       | Ascorbic Acid        | Antioxidant used for treatment and prevention of scurvy                                                          
|D2      | Ergocalciferol       | Promotion of the active absorption of calcium and phosphorus by the small intestine to permit bone mineralization
|D3      | Cholecalciferol      | Treatment of Vitamin D deficiency                                                                                





|OTC Product                | Function                                                                                                                                                                                 
|-------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Aspirin                    | Analgesic for minor aches and pains, fever reducer, anti-inflammatory medication                                                                                                         
|Ibuprofen                  | Non-steroidal anti-inflammatory drug for relief of symptoms of arthritis, menstrual pain, fever, and as an analgesic                                                                     
|Tylenol                    | Analgesic for relieving pain, reducing fever, and relieving the symptoms of allergies, cold, cough, and flu                                                                              
|Guaifenesin                | Expectorant used to relieve chest congestion                                                                                                                                             
|Dextromethophan            | Cough suppressant                                                                                                                                                                        
|Chlorpheniramine           | Control of symptoms of cold or allergies                                                                                                                                                 
|Claritin (Loratidine)      | Antihistamine for treatment of allergies                                                                                                                                                 
|Benadryl (Diphenhydramine) | Antihistamine for treatment of allergies                                                                                                                                                 
|Potassium Chloride         | Treatment for low potassium blood levels                                                                                                                                                 
|Ferrous Sulfate            | Treatment for iron deficiency anemia                                                                                                                                                     
|Glucosamine                | Treatment for osteoarthritis; non-vitamin, non-mineral dietary supplement; an amino acid sugar and a prominent precursor in the biochemical synthesis of glycosylated proteins and lipids
|Chondroitin Sulfate        | Treatment for osteoarthritis; structural component of cartilage that provides much of its resistance to compression                                                                      
|Zantac (Ranitdine)         | Histamine H2-receptor antagonist that inhibits stomach acid production                                                                                                                   
|Bisacodyl                  | Stimulant laxative for relief of constipation and for the management neurogenic bowel dysfunction; part of bowel preparation before medical examinations such as colonoscopy             
|Caffeine                   | Central nervous system stimulant                                                                                                                                                         





10







Global Pharma Hub Joint Venture



In January 2014, we formed Global Pharma Hub, Inc. with Forbes
Investments, Ltd. (and its assigns) and Sterling, LLC (and its assigns) for the purpose of marketing, supplying and distributing
OTC products as RapiMed® orally dissolving tablets in foreign markets. The initial market is in China, where Global Pharma
Hub began marketing and distributing our RapiMed® children’s acetaminophen in China.



The ownership of Global Pharma Hub, Inc. is as follows: (a)
we own 37%, (b) Forbes Investments, Ltd. owns 37% and (c) Sterling, LLC owns 26%. Forbes Investment, Ltd. is based in Shenzhen,
China. The parties have a written understanding of this joint venture although a final, binding contract is in process of being
prepared for signature.



Global Pharma Hub will seek out and identify
companies that have market ready OTC products and then structure a licensing agreement with that company for the international
distribution of such OTC Product reformulated and marketed as a RapiMed® orally dissolving tablet. The process of identifying
companies with OTC products that Global Pharma Hub would be interested in distributing will involve Global Pharma Hub’s management
leveraging their network of business associates they have developed over several years, and then using those connections to arrange
introductions for Global Pharma Hub with the potential target companies with the targeted OTC products.



Global Pharma Hub will source from the
US the OTC products for licensing to be formulated, marketed and sold as a RapiMed® products and then based upon market due-diligence,
determines which foreign markets present the highest demand for said OTC product. Once Global Pharma Hub determines which countries
present the highest demand for the RapiMed® version of the OTC product, it will structure a license agreement with the OTC
product company for the exclusive licensing, marketing and distribution rights for a particular country or countries. Global Pharma
Hub seeks to have exclusive foreign territory rights for the RapiMed® version of a particular OTC product to prevent third
party competition from other potential licensees of the same OTC product.



Global Pharma Hub will then distribute
the licensed OTC products through arranging agreements with importers in the foreign distribution markets and arranging sub-licensing
distribution agreements with distribution partners in the foreign distribution markets. The process of identifying the importers
and distributers primarily involves leveraging the business network of Global Pharma’s officers and directors.



The importer’s function is to assist
in arranging the shipping logistics for the RapiMed® version of the OTC product to reach the designated port and then appropriately
delivered to the distributor. For these services the importer earns a designated fee based upon several variables such as the size
of the OTC order and importer’s level of logistical involvement.



The distributors function is to arrange
retail distribution of the OTC product. The distributor will hold either the exclusive or non-exclusive sub-licensing rights for
the RapiMed® version of the OTC product in the particular foreign market. The distributors earns a percentage of every purchase
order it arranges with retailers. This percentage is determined through negotiations between Global Pharma Hub and the distributor.



Sometimes, the importer and distributor
in the foreign market may be the same party, or affiliated in some fashion.



Global Pharma Hub does not engage in on
the ground solicitation of retail distributors in the foreign markets; those efforts are conducted by the distributors with whom
it has agreements.



The process of delivering the RapiMed®
version of the OTC product to the foreign distributor involves the distributor submitting purchase orders to Global Pharma Hub
and then Global Pharma submitting purchase orders to the U.S. company licensor of the OTC product. Global Pharma earns a percentage
on every order through marking up the product price it receives from the U.S. company licensor.





11







In January 2014, we entered into an exclusive
world-wide licensing agreement with Global Pharma Hub, a related party that is a joint venture entity of which we own 37%, for
the marketing and distribution of our children’s pain reliever and fever reducer OTC product called RapiMed® in all countries
except the United States. The license will allow Global Pharma Hub to market and distribute the children’s acetaminophen
orally dissolving tablets under our registered trademark, RapiMed®, as well as our registered trade mark “MELTS
IN YOUR CHILD'S MOUTH”.



In order to keep the license agreement,
Global Pharma Hub must meet minimum sales quotas terms which are as follows:



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

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

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



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



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

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

| | 3. | $2,500,000 in purchase orders during the third 12 months
| | -- | --------------------------------------------------------



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



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

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

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



Jetsaw
Pharmaceutical has over 14 years of experience in the Canadian pharmaceutical and OTC market in providing medication procurement
and distribution services to hospitals, clinic chains and both independent and large pharmacy brands. As a result Jetsaw has a
wide network of relationships in the Canadian pharmaceutical market. We expect that Jetsaw will be able to leverage these relationships
to aggressively introduce RapiMed® pediatric acetaminophen into multiple distribution channels.



Supplier Agreement



We have finalized the terms with a manufacturer
for the production of our RapiMed® pediatric acetaminophen for marketing, sale and distribution outside of the United States.
We expect to sign a Manufactuing and Supply Agreement with this manufacturer in the second quarter of 2014. This agreement will
be a non-exclusive arrangement. This supply agreement will be for a term of one year with automatic renewal for additional, successive
one year terms unless either party terminates upon 180 days prior notice. This supply agreement may be terminated for (i) a material
breach of the agreement which is not cured within 30 days after notice of the breach from the other party, (ii) a force majeure
(causes beyond the reasonable control of a party such as an act of god, natural disaster or governmental act or imposition) that
causes a party to be unable to perform for 90 days (consecutively or in the aggregate), (iii) insolvency or bankruptcy of a party,
(iv) breach of a confidentiality provision in the supply agreement or (v) if we terminate a RapiMed® product line with 90 days
prior notice to the Supplier. Each party under this supply agreement will retain ownership of their respective intellectual property
(patents, trademarks, trade secrets) despite use of such intellectual property under this supply agreement. The manufacturer owns
the formula that we will be using for our RapiMed® products made by them under this agreement.



Under this agreement, the Supplier will
manufacture, package and ship the RapiMed® pediatric acetaminophen in accordance with the specifications and directors we provide
to them. The Supplier will bill us within five (5) days of the shipment of product and we will pay the Supplier within 30 days
of the receipt of the invoice. We pay for the shipment of the RapiMed® product to our designated carrier.





12







This supply agreement will have mutual
indemnification provisions in the Supplier will indemnify us for any loss or expense directly or indirectly, arising out of, resulting
from or in any way connected with (a) any breach by Supplier of the terms of this supply agreement; (b) if the Supplier does not
manufacture, package or ship the RapiMed® goods in conformity with our written specifications provided to them, (c) if the
Supplier breaches any of their warranties made to us, (d) the Supplier does not comply with any laws that apply to the Supplier’s
obligations under this supply agreement, (e) any recall or return of RapiMed® products initiated by Supplier or by us if such
recall was a result of the Supplier’s failure to comply with the our written specifications or the Supplier’s warranties;
or (f) any claim that the manufacture, use or sale of any of the RapiMed® products infringes upon or violates any intellectual
property rights of any third party (so long as such claim is not based on any intellectual property owned by us). We will indemnify
the Supplier for any loss or expense arising out of, resulting from or in any way connected with our breach of the supply agreement.



If the use or sale of any RapiMed®
product (or a component part of RapiMed®) is enjoined because an infringement claim, and so long as such claim is not based
on any intellectual property owned by us, then under this agreement with the manufacturer we will have the option to require the
Supplier, at no expense to us, to (a) secure the right to continue using the RapiMed® products or components or parts thereof;
(b) replace the infringing items non-infringing item of equal performance and quality; or (c) modify the infringing items so that
they become non-infringing.



Specialty Pharmacies



On January 29, 2014, Implex Corporation,
which is owned by our legal counsel, Richard C. Fox, entered into a stock purchase agreement with the owner to acquire the
specialty pharmacy Main Avenue Pharmacy, Inc., located in New Jersey, for $550,000. The purchase price will be paid in installments
and the shares will be held by an escrow agent until the final payment is made. Under the purchase agreement, the final agreement
is to be made on July 11, 2014 (unless extended by the parties).



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



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



For the management services provided by us under this Business
Management Agreement, Implex will pay us a combined month Management and Financing Fee. This combined fee will be equal to 97%
of the Calculation Basis (as defined in the agreement), which amounts to receipts from paid invoices less Implex’s monthly
draw and various expenses of Main Avenue Pharmacy.





13







The Business Management Agreement will have an initial term
of five (5) years. If at September 30, 2018 we are not in default under this Business Management Agreement, we have the option
to extend the term of the agreement for an additional five year period. The Business Management Agreement can be terminated by
either party if (i) the other party (i) breaches the agreement and the breach is not cured within 30 days of notice from the other
party or (ii) the liquidation, bankruptcy, insolvency or receivership of the other party.



Development Agreement/Intellectual Property



We own the Websites
www.rapimeds.com and www.scripsamerica.com. We do not have any other intellectual property except as described
below.





On April 17,
2013 we filed a trademark application for “RAPI-MED” as a trade mark to use for our orally disintegrating drug formulation
products prior to the sales of the pain relief rapidly dissolving drug formulation we developed. On March 15, 2013, we filed a
trademark application for “MELTS IN YOUR CHILD’S MOUTH” as a trademark for use for our pain relief 80mg and 160
mg orally disintegrating rapid dissolve tablets that we developed. Both of these marks have been successfully registered with the
U.S. Patent and Trademark Office. On January 14, 2014, “MELTS IN YOUR CHILD’S MOUTH” was put on the Supplemental
Register and March 25, 2014 “RAPIDMED” was placed on the Principal Register.



During 2015, we expect
to submit an application for a “process patent” for how we make our 80 mg and 160 mg pain relief orally disintegrating
product. A process patent, if granted, would give us an exclusive method to produce not only our 80 mg and 160 mg pain
relief orally disintegrating product but any other orally disintegrating tablets we decide to produce, and it would prevent other
companies from using our manufacturing process. However, the process patent will not prevent other companies from producing
ODTs using any manufacturing process not covered by our process patent (if granted). In addition, our process patent
would not allow us to produce an orally disintegrating tablet that is covered by a product patent of another company (as a product
patent gives the holder exclusive rights to the product regardless of how it is produced). If our process patent application
is denied, we would not be able to seek protection for our manufacturing process under state trade secret law. Trade
secret law protects, among other things, non-patentable processes provided certain conditions are met: (i) the
process is generally not known, (ii) the process gives an economic benefit to the owner and (iii) the owner takes reasonable steps
of keeping the process secret. By filing a process patent our manufacturing process becomes disclosed to the public
and we would be unable to meet the condition of secrecy.



Competitors



Large, vertically integrated
industry players engaged in the development, manufacture, marketing, sale and distribution of generic and/or branded specialty
pharmaceuticals in various therapeutic categories include Actavis Group, Apotex, Dr. Reddy’s, Glenmark Pharmaceuticals, Jubilant
Life Sciences, Mylan, Par Pharmaceutical Companies, Ranbaxy Laboratories, Sandoz (a division of Novartis), Sun Pharmaceutical Industries,
Teva Pharmaceutical Industries, Barr Laboratories (a division of Teva), and Watson Pharmaceuticals.



Our independent pharmacy
distribution business competes against large and medium sized pharmaceutical distributors such as McKesson, AmerisourceBergen
Corporation, Anda Pharmaceuticals, Inc., Cardinal Health, Harvard Drug Group, Capital Wholesale Drug Company, Henry Schein, Inc.
and Matrix Distributors, Inc., Medsource Corporation, Sunrise Wholesalers, Inc. and Top Rx. All of these competitors have more
financial resources than we do and are better positioned to offer lower prices for pharmaceutical products with better payment
terms.



In
our RapiMed® orally disintegrating tablet business, we compete against small, mid-sized and large pharmaceutical companies. Our
major competitors for orally disintegrating tablets for prescription drugs are primarily large pharmaceutical companies such asALZA
Corporation, BTG, Catalent Pharma Solutions, Shire Plc, Watson Pharmaceuticals, Becton Dickinson and Genzyme Corporation. These
companies have significantly greater financial resources and marketing abilities than we do. However, we believe that
we can compete effectively against these larger companies by targeting niche markets that are ignored or under-served by these
larger pharmaceutical companies. We believe the niche prescription drug market offer, in the aggregate, the opportunity
to generate significant revenues in the future.



Traditionally,
specialty pharmacies tended to be small operations that create special formulations of drugs at the request of doctors. Consequently,
there are no dominant competitors in this segment of the specialty pharmacy industry. The specialty pharmacy is, in
general, fragmented with primarily single store operations. We do not compete against large-scale drug compounding companies,
such as Ameridose and The New England Compounding Center, which are more similar to drug manufacturers than pharmacies.



Our orally disintegrating
drug formulation for 80 mg and 160 mg acetaminophen will compete with other children’s analgesic products, such as Johnson
& Johnson’s Children’s Tylenol Suspension Liquid and Children’s Tylenol Meltaways, Novartis’ Triaminic
Fever Reducer Pain Reliever, and Perrigo’s Junior Strength Non-Aspirin Suspension Liquids& Drugs. While the
strength of J&J’s Tylenol brand seemed virtually bulletproof in the U.S. until recently, a multitude of product recalls
over the past three years have weakened its reputation and opened a window for competitors to capture market share, especially
in the children’s analgesics market where pediatricians’ support of the Tylenol brand has seen some erosion. We
will launch our rapidly dissolving drug formulation for 80 mg acetaminophen to try to take advantage of the open window in the
analgesics market by promoting the advantages of orally disintegrating tables – accurate dosing, patient-friendly and faster
onset to accelerate relief.



Employees



As of April 8, 2014,
we had two (2) full time employees and five (5) consultants. We plan to hire more persons on as-needed basis.





14









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



An investment in
our common stock involves a high degree of risk. You should carefully consider the risks described below and the other information
in this prospectus before investing in our common stock. If any of the following risks occur, our business, operating results and
financial condition could be seriously harmed.



Risk Related to Our Company



As a result of our
evolving business model, we have a limited operating history in our lines of business and, therefore, we may not be able to correctly
estimate our future operating expenses, which could lead to cash shortfalls.Since our inception,
our business model has evolved significantly. In 2013, we moved away fromproviding these
pharmaceutical distribution services as our main source of income, and we focused on generating revenue through (1) the marketing,
sale and distribution of our RapiMed® products, (2) our independent pharmacy distribution model and (3) our entry into the
specialty pharmacy market. As a result of the change in our business model, our revenues have significantly decreased from prior
periods. For the year ended December 31, 2013, our revenues decreased approximately 85.7% from 2012. We have a limited operating
history in our new lines of business from which to evaluate our business.Our failure to successfully bring our rapid
melt formulations to market or successfully execute our business plan for our independent pharmacy distribution and/or specialty
pharmacy business would have a material adverse effect on our ability to continue operating. Accordingly, our prospects must be
considered in light of the risks, expenses, and difficulties frequently encountered by companies in an early stage of development.
We may not be successful in addressing such risks, and the failure to do so could have a material adverse effect on our business,
operating results and financial condition.



Further, because of
the change in our business model, our historical financial data is of limited value in estimating future operating expenses and
future cash flow. Our budgeted expense levels are based in part on our expectations concerning future revenues. However, our ability
to generate the needed levels of revenues depends largely on our ability to be successful in our rapid melt drug development, independent
pharmacy distribution and specialty pharmacy businesses. Moreover, even if we successfully develop and market rapid melt drug formulation,
the size of any future revenues from such product sales depends on the market acceptance of such drugs we develop, which is difficult
to forecast accurately. After taking into consideration our 2014 interim results to date and current projections for the remainder
of 2014, the Company’s management believes that the Company’s cash flow from operations, coupled with recent financing
are not sufficient to support the working capital requirements, debt service, applicable debt maturity requirements, and operating
expenses through December 31, 2014.



Our quarterly and annual
expenses are likely to increase substantially over the next several years depending upon the level of capital spending required
to grow our revenues. Our operating results in future quarters may fall below expectations. Any of these events could adversely
impact our business prospects and make it more difficult to raise additional equity capital at an acceptable price per share.



Disruptions in our
supply chain or among other companies providing services to us could adversely affect our ability to fill purchase orders for our
independent pharmacy distribution business, which would have a negative impact on our financial performance. The failure of
a single source in the supply chain would cause only minor delays in our ability to fill purchase orders for our independent pharmacy
distribution business. In the event of a supply gap, we would either procure product in the market, if available at a reasonable
cost, or work with other sources to formulate the drug in question. Such fixes to the supply gap would cause delay of shipment
and increase costs, both of which would have negative impact on our profitability and our results of operations.



We do not have any
written contracts with our customers. This allows such customers to use other companies instead of us which may negatively impact
on our sales. Because we do not have any written contracts with our independent pharmacy customers or with our the customers
of specialty pharmacy, those customers are free to forward requests for pharmaceutical products or customize pharmaceutical compounds
from other distributors or specialty pharmacies (as the case may be). If a significant number of our customers began to use competing
companies instead of us, our sales would decrease significantly.





15







Competition from
horizontal and vertical markets involved in distribution to independent pharmacies may erode our sales. Our independent pharmacy
distribution business faces competition, both in price and service, from national, regional, and local full-line, short-line, and
specialty wholesalers, service merchandisers, self-warehousing chains and manufacturers engaged in direct distribution, and from
large payor organizations. In addition, competition exists from various other service providers and from pharmaceutical and other
healthcare manufacturers (as well as other potential customers) which may from time to time decide to develop, for their own internal
needs, supply management capabilities that would otherwise be provided by us. Price, quality of service, and in some cases convenience
to the customer are generally the principal competitive elements in this segment and which may cause our customers to use, or end
users to request use of, other distributors. Such a shift in distributors would adversely affect our sales.



Any technologies,
products and businesses that we may acquire to expand or complement our business may be difficult to integrate, could adversely
affect our relationships with key customers, and/or could result in significant charges to earnings as well potential dilution
to existing stockholders. One element of our business strategy is to identify, pursue and consummate acquisitions that either
expand or complement our businesses, namely (1) rapidly dissolving drug formulations for Over the Counter
(OTC) drugs, vitamins and supplements, (2) the independent pharmacy distribution market and (3) the specialty pharmacy market.
Integration of acquisitions entails a number of risks including the diversion of management’s attention to the assimilation
of the operations of acquired businesses; difficulties in the integration of operations and systems; the realization of potential
operating synergies; the retention of the personnel of the acquired companies; accounting, regulatory or compliance issues that
could arise; challenges in retaining the customers of the combined businesses; and a potential material adverse impact on operating
results. If we are not able to successfully integrate our acquisitions, we may not obtain the advantages and synergies that the
acquisitions were intended to create, which may have a material adverse effect on our business, results of operations, financial
condition and cash flows, our ability to develop and introduce new products and the market price of our stock. In addition, in
connection with acquisitions, we could experience disruption in our business, technology and information systems, customer or employee
base, including diversion of management’s attention from our continuing operations. There is also a risk that key employees
of companies that we acquire or key employees necessary to successfully commercialize technologies and products that we acquire
may seek employment elsewhere, including with our competitors. Furthermore, In addition, we will require additional financing in
order to fund future acquisitions, which may or may not be attainable. In addition, if we acquire businesses or products, or enter
into other significant transactions, we expect to experience significant charges to earnings for merger and related expenses. These
costs may include substantial fees for investment bankers, attorneys, accountants and financial printing costs and severance and
other closure costs associated with the elimination of duplicate or discontinued products, operations and facilities. Charges that
we may incur in connection with acquisitions could adversely affect our results of operations for particular quarterly or annual
periods. Finally, we may use shares of our common stock to finance some or the entire purchase price of an acquisition, which may
result in a downward trend in our stock price, especially if our results of operations are negatively impacted by such acquisition(s).



We currently
rely on a third-party contract manufacturing organizations to manufacture and supply our RapiMed® products. If our manufacturer
fails to perform adequately or fulfill our needs, we may be required to incur significant costs and devote significant efforts
to find a new manufacturer.We do not own facilities for the manufacturing of our RapiMed® products, and we will rely upon
third-party contract manufacturing organizations to manufacture and supply our RapiMed® products. The manufacture of pharmaceutical
products in compliance with the FDA's current good manufacturing practices, or cGMPs, requires significant expertise and capital
investment, including the development of advanced manufacturing techniques and process controls. Manufacturers of pharmaceutical
products often encounter difficulties in production, including difficulties with production costs and yields, quality control,
including stability of the product candidate and quality assurance testing, shortages of qualified personnel, as well as compliance
with strictly enforced cGMP requirements, other federal and state regulatory requirements and foreign regulations. If our manufacturer
was to encounter any of these difficulties or otherwise fail to comply with their obligations to us or under applicable regulations,
our ability to fulfill orders for our RapiMed® products would be jeopardized. Any delay or interruption in the supply of RapiMed®
products, depending upon the period of delay, may require us to find a new manufacturer and could cause us to lose orders and otherwise
have a material adverse effect on our sales of RapiMed® products.



We currently rely on a single manufacturer
for the production of RapiMed® products to be sold outside of the United States; we do not have a manufacturer for such products
to be sold in the United States. Further, although we have finalized terms of a manufacturing and supply agreement, we have yet
to sign that agreement with our manufacturer. Although there are alternative manufacturers we could use for the production of our
RapiMed® products, it could be expensive and take a significant amount of time to arrange for alternative manufacturers, which
would adversely affect our business.



We do not own the
formula used for the RapiMed® products to be sold outside of the United States, which formula is owned by the manufacturer
we will be using. If we are unable to continue to use that manufacturer, our sales of RapiMed® products outside of the United
States could be negatively affected. Although we own the registered trademark for RapiMed®, we do not own the formula
or other intellectual property with respect to the formula of the RapiMed® products being manufactured for us for sale outside
of the United States. Such intellectual property is owned by the manufacturer, although we do expect to own the formula and other
intellectual property for the RapiMed® products to be manufactured for sale in the United States. We have finalized terms of
our agreement with the manufacturer for the RapiMed® products to be sold outside of the United States and we expect to have
this agreement signed in the second quarter of 2014. However, if we fail to get the agreement signed with that manufacturer or
if the agreement is subsequently terminated for any reason or the manufacturer is unable to perform its duties under this agreement
(such as bankruptcy, regulatory issues or capacity issues), we would have to find a new manufacturer and/or develop or use another
formula for the production of RapiMed® products. Not only would we not be able to fill overseas orders for RapiMed® products,
which would negatively affect our revenues, but the process to find a new manufacturer and/or develop or use another formula would
be costly and time consuming and we may not have the financial resources to find a new manufacturer and/or new formula.





16







We could suffer
reputational and financial damage in the event of product recalls. We may be held liable if any illness or injury caused by
any product we distribute to independent pharmacies, any RapiMed® product we develop or market or by any preparation from
our specialty pharmacy or if any of the foregoing are found to be unsuitable for use. In addition to any reputational damage we
would suffer, we cannot guarantee that our product liability insurance or that of any of our suppliers would fully cover potential
liabilities (although we are named as an additional insured on the product liability insurance policies of our suppliers). In
the event of litigation, any adverse judgments against us would have a material adverse effect on our financial condition, including
our cash balances, and results of operations.



Our
ability to operate effectively could be impaired if we were to lose the services of our key personnel, or if it were unable to
recruit key personnel in the future. Our near-term success will depend to a significant extent on the skills and efforts of
Robert Schneiderman and Jeffrey Andrews. The Company plans to enter into employment agreements with Messrs. Schneiderman, and Andrews
sometime in the future. We expect our cash flow from operations to grow significantly during 2014, primarily from the marketing
of our RapiMed® products in China by a third party licensee, our independent pharmacy distribution business and our specialty
pharmacy operations. We expect this increased cash flow will be sufficient to pay our executive officer their respective salaries.
However, should our quarterly sales not continue to grow as expected and we do not maintain our expenses at current levels,
our operational cash flow may not be able to support the payment of the salaries of our executive officers
and other sources of funding would be required; and there is no guarantee that funding can be raised. The loss of one
or more current key employees could have a material adverse effect on our business even if replacements were hired. Our success
in the future also depends on our ability to attract and retain additional qualified employees in the future. Competition for such
personnel is intense, and we will compete for qualified personnel with numerous other employers, many of whom have greater financial
and other resources than we do. We plan to incentivize employees to engage in a long-term relationship with us through
awarding equity as part of overall compensation.



Risks Related to Our Industry



Changes in the U.S.
healthcare environment could have a material adverse impact on our results of operations. In recent years, the U.S. healthcare
industry has changed significantly in an effort to reduce costs. These changes include increased use of managed care, cuts in Medicare
and Medicaid reimbursement levels, consolidation of pharmaceutical and medical-surgical supply distributors, and the development
of large, sophisticated purchasing groups. Some of these changes, such as adverse changes in government funding of healthcare services,
legislation or regulations governing the delivery or pricing of pharmaceuticals and healthcare services or mandated benefits, may
cause healthcare industry participants to reduce the amount of our products and services they purchase or the price they are willing
to pay for our products and services. Changes in the healthcare industry’s or our pharmaceutical suppliers’ pricing,
selling, inventory, distribution or supply policies or practices could also significantly reduce our revenues and net income. Healthcare
and public policy trends indicate that the number of generic drugs will increase over the next few years as a result of the expiration
of certain drug patents. While this is expected to be a positive development for us, changes in pricing of certain generic drugs
could have a material adverse impact on our revenues and our results of operations.



Regulation of our
distribution business could impose increased costs or delay the introduction of new products, which could negatively impact our
business. The healthcare industry is highly regulated. As a result, we and our suppliers and distributor are subject to various
local, state and federal laws and regulations, which include the operating and security standards of the Drug Enforcement Administration
(DEA), the FDA, various state boards of pharmacy, state health departments, the U.S. Department of Health and Human Services, the
Centers for Medicare and Medicaid Services, and other comparable agencies. The process and costs of maintaining compliance with
such operating and security standards could impose increased costs, delay the introduction of new products and negatively impact
our business. For example, there have been increasing efforts by various levels of government agencies, including state boards
of pharmacy and comparable government agencies, to regulate the pharmaceutical distribution system in order to prevent the introduction
of counterfeit, adulterated and/or mislabeled drugs into the pharmaceutical distribution system. Certain states have adopted or
are considering laws and regulations that are intended to protect the integrity of the pharmaceutical distribution system, while
other government agencies are currently evaluating their recommendations. In addition, the Drug Quality and Security Act, signed
into law on November 27, 2013, establishes a track-and-trace pedigree system for drugs which will be phased in over a ten year
period. These pedigree tracking laws and regulations will increase the overall regulatory burden and costs associated with our
independent pharmacy distribution business, and would have a material adverse impact on our operating expenses and our results
of operations.



Risks Related to Our Stock



Until our evolving
business plan generates sufficient cash flow from operations to cover our expenses, we will need to raise additional capital by
sales of our common stock and we may issue shares of our common stock for payment of services, which may adversely affect the market
price of our common stock and your rights in us may be reduced. In 2013 we
moved away from providing these pharmaceutical distribution services as our main source of income, and we focused on generating
revenue through (1) the marketing, sale and distribution of our RapiMed® products, (2) our independent pharmacy distribution
model and(3) entry into the specialty pharmacy market. However, we have to use all
of our available cash to get these new lines of business up and running. Until our operations generate sufficient cash flow to
cover our expenses,need to raise funds by issuing additional debt or equity securities. During 2013, we issued 35,387,867
shares of common stock for the conversion of debt securities and for the payment of services provided. If we must continue to raise
funds by the sale of equity or convertible debt securities and/or issue shares of our common stock (or securities convertible,
exchangeable or exercisable for common stock), our existing stockholders may experience dilution, and the new equity or debt securities
may have rights, preferences and privileges senior to those of our existing stockholders. If we incur additional debt, it may increase
our leverage relative to our earnings or to our equity capitalization, requiring us to pay additional interest expenses and potentially
lower our credit ratings. We may not be able to market such issuances on favorable terms, or at all, in which case, we may not
be able to develop or enhance our products, execute our business plan, take advantage of future opportunities, or respond to competitive
pressures or unanticipated customer requirements.





17







State securities
laws may limit secondary trading, which may restrict the states in which and conditions under which you can sell the shares offered
by this prospectus.Secondary trading in our common stock will not be possible in any state until the common stock is qualified
for sale under the applicable securities laws of the state or there is confirmation that an exemption, such as listing in certain
recognized securities manuals, is available for secondary trading in the state. If we fail to register or qualify, or to obtain
or verify an exemption for the secondary trading of, the common stock in any particular state, the common stock could not be offered
or sold to, or purchased by, a resident of that state. In the event that a significant number of states refuse to permit secondary
trading in our common stock, the liquidity for the common stock could be significantly impacted thus causing you to realize a loss
on your investment.



Our board of directors
has the power to designate a series of preferred stock without shareholder approval that could contain conversion or voting rights
that adversely affect the voting power of holders of our common stock and may have an adverse effect on our stock price.Our
Certificate of Incorporation provide for the authorization of 10,000,000 shares of “blank check” preferred stock. Pursuant
to our Certificate of Incorporation, our Board of Directors is authorized to issue such “blank check” preferred stock
with rights that are superior to the rights of stockholders of our common stock, at a purchase price then approved by our Board
of Directors, which purchase price may be substantially lower than the market price of shares of our common stock, without stockholder
approval. In March 2011, our Board of Directors authorized 2,990,252 shares of Series A Preferred Stock for a private placement
of such shares for an aggregate purchase price of $1,043,000. Though we currently do not have any plans to issue any additional
shares of preferred stock, such issuance could give the holders of such preferred stock voting control of the Company which would
have a negative effect on the voting power of the holders of our common stock and may cause our stock price to decline.



The sale of shares
of common stock issuable upon the conversion of our outstanding shares of our Series A Preferred Stock and outstanding convertible
notes could have a negative impact on the market price of our stock if sold. We have2,990,252 shares of Series
A Preferred Stock that are convertible into 5,980,504 shares of common stock and we have outstanding convertible notes that could
be converted into 16,241,852 shares of common stock (representing, together, approximately17% of the outstanding stock
on a fully diluted basis). A substantial portion of the shares of common stock issuable upon the conversion of the Series A Preferred
Stock and the outstanding convertible notes are eligible to be sold to the public under Rule 144. If our common stock does not
trade with large enough share volume, the sales of the common stock issued upon the conversion of the Series A Preferred Stock
and the convertible notes may cause the price of our stock to drop significantly. Additionally, the holder of the Series A Preferred
Stock has registration rights for the shares of common stock issuable upon the conversion of the Series A Preferred Stock. If the
Series A Preferred stockholder exercises such registration rights, such stockholder could sell a large number of shares of our
common stock which could cause a significant drop in our stock price.



The outstanding
shares of our Series A Preferred Stock are entitled to rights and privileges in regard to distribution of assets and protective
provisions which may result in actions adverse to the holders of our common stock. So long as there are shares of Series A
Preferred Stock outstanding, the holders of such security are entitled to an annual dividend of 8% of the original purchase price,
as well as priorities to our distribution of cash and other assets. The holder of Series A Preferred Stock also has veto power
over certain corporate matters, such as redeeming or repurchasing capital stock or any merger, consolidation or share exchange
that would result in a change of control. The rights of the Series A Preferred Stockholder will continue until all of the shares
are converted into our common stock (either voluntarily or upon an underwritten IPO in which we have gross proceeds of at least
$25 million and a price per share of at least $0.872). The holder of such rights of the Series A Preferred Stock may have interests
adverse to the common stockholders and the exercise of such rights may have a negative impact on the value of our common stock
or the amount of cash or other assets our common stockholders may receive in connection with a distribution or merger, consolidation
or share exchange.





18







We lack legal funds
to pay dividends for the foreseeable future and, as a result, we will not be able to pay any dividends during such period, including
dividends owed to the Series A Preferred Stockholder, which we will have to accrue until paid. The Series A Preferred
Stock that we issued on April 1, 2011 is reported as a derivative liability. The $1,043,000 invested in such Series
A Preferred Stock was not recorded in the Shareholders' Deficit section of our balance sheet, but rather is shown as a liability. Consequently,
for the year ended December 31, 2013, we had a stockholders’ deficit of $3,617,393 (rather than stockholders’ deficit
of $2,574,393 if we had booked such investment in the Shareholders’ Deficit section of the balance sheet). Additionally,
for the fiscal year ended December 31, 2013, we had a net loss available to common stockholders of approximately $11.2 million. Because
we had a loss for 2013 and we have - stockholders’ deficit on our balance sheet, under Section 174 of the Delaware General
Corporation Law our directors cannot declare a dividend that exceeds our stockholders’ deficit without incurring personal
liability. Unless we have a profit in 2013, our board of directors will not be able to declare a dividend nor will we
be able to pay the full dividend owed to the Series A Preferred Stockholder which dividends will accrue on our balance sheet. We
will not be able to declare any dividends to our common stockholders until the accrued dividends owed to the Series A Preferred
Stockholder have been paid. If and when we have net profits, except for any dividends owed to the holder of our Series
A Preferred Stock, we anticipate that we will retain all of our future earnings for use in the development of our business and
for general corporate purposes. Any determination to pay dividends in the future will be at the discretion of our board
of directors. Accordingly, investors must rely on sales of their common stock after price appreciation, which may never occur,
as the only way to realize any future gains on their investments.



Our common stock
is expected to be considered “a penny stock” and, as a result, it may be difficult to trade a significant number of
shares of our common stock. The Securities and Exchange Commission (“SEC”) has adopted regulations that generally
define “penny stock” to be an equity security that has a market price of less than $5.00 per share, subject to specific
exemptions. When our common stock becomes eligible for quotation on the OTC markets (such as the bulletin board), we expect the
market price of our common stock to be less than $5.00 per share. As a result of our prior private placements and our forward stock
split, we have increased the number of shares outstanding by almost three-fold. Consequently, when our common stock becomes eligible
for quotation on the OTC markets it is likely that the market price for our common stock will remain less than $5.00 per share
for the foreseeable future and, therefore, may be a “penny stock” according to SEC rules. This designation requires
any broker or dealer selling these securities to disclose certain information concerning the transaction, obtain a written agreement
from the purchaser and determine that the purchaser is reasonably suitable to purchase the securities. These rules may restrict
the ability of brokers or dealers to sell our common stock and may affect the ability of investors hereunder to sell their shares.
In addition, because we are seeking to have our common stock trade on the OTC markets, investors may find it difficult to obtain
accurate quotations of the stock and may experience a lack of buyers to purchase such stock or a lack of market makers to support
the stock price.



|ITEM 1B. | UNRESOLVED STAFF COMMENTS
|-------- | -------------------------



Not applicable.



|ITEM 2. | PROPERTIES
|------- | ----------



In July 2013, we entered
into a Virtual Office Rental Agreement under which we have use of office space at Corporate
Office Centre Tysons II, 1650 Tysons Boulevard, Suite 1580, Tysons Corner, VA 22102, at which we also haveand telecommunications
and secretarial and administrative services. This office space is our principal place of business. This space is being
leased on a month to month basis at $110 per month. We expect that this space shall be sufficient for the next 36 months.



|ITEM 3. | LEGAL PROCEEDINGS
|------- | -----------------



We are not currently
a party in any legal proceedings.



|ITEM 4. | MINE SAFETY DISCLOSURE
|------- | ----------------------



Not applicable.





19







PART II





|ITEM 5. | MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
|------- | ------------------------------------------------------------------------------------------------------------



Market Information



Our
common stock has been traded on the OTC Electronic Bulletin Board since August 2012 under the symbol “SCRC”. Prior
to August 2012, our common stock was traded on an exchange or any other established market.



The
following table reflects the high and low quarterly bid prices for the fiscal years ended December 31, 2012 and December 31, 2013. This
information was provided to us by the Financial Industry Regulatory Authority and the Internet. These quotations reflect inter-dealer
prices, without retail mark-up or mark-down or commissions. These quotations may not necessarily reflect actual transactions.



|Period       |  | High Bid |        |  | Low Bid
|------------ |  | -------- | ------ |  | -------
|1st Qtr 2013 |  |          | $0.405 |  |        
|2nd Qtr 2013 |  |          | $0.47  |  |        
|3rd Qtr 2013 |  |          | $1.05  |  |        
|4th Qtr 2013 |  |          | $0.42  |  |        



|Period       |  | High Bid |        |  | Low Bid
|------------ |  | -------- | ------ |  | -------
|1st Qtr 2012 |  |          | –      |  |        
|2nd Qtr 2012 |  |          | –      |  |        
|3rd Qtr 2012 |  |          | $0.51  |  |        
|4th Qtr 2012 |  |          | $0.483 |  |        



Our Transfer Agent



We
have appointed Olde Monmouth Stock Transfer Company, with offices at 200 Memorial Parkway, Atlantic Highlands, New Jersey 07716,
phone number 732-872-2727, as transfer agent for our shares of common stock. The transfer agent is responsible for all record-keeping
and administrative functions in connection with our shares of common stock.



Dividend Policy



The
Series A Preferred Stock is paid a dividend at annual rate of 8% of the purchase price, which dividend is paid at the end of each
fiscal quarter. Such dividends are cumulative.



The
Series A Preferred Stock, which we issued on April 1, 2011 is reported as mezzanine equity because the Series A Preferred
Stock has liquidation preferences which are outside the control of the Company. The $1,043,000 invested in such Series A
Preferred Stock was not recorded in the Shareholders' Deficit section of our balance sheet, but rather is shown as a
liability. Consequently, for the year ended December 31, 2013, we had a stockholders’ deficit of $3,470,827 (rather
than stockholders’ deficit of $2,427,827 if we had booked such investment in the Shareholders’ Deficit section of
the balance sheet). Additionally, for the fiscal year ended December 31, 2013, we had a net loss of approximately $11.2
million. Because we had a loss for 2013 and we have a retained deficit on our balance sheet, our directors cannot declare
dividends under Section 174 of the Delaware General Corporation Law without incurring personal liability. Unless we have a
profit in 2014, our board of directors will not be able to declare a dividend nor will we be able to pay the dividend owed to
the Series A Preferred Stockholder which dividends will accrue on our balance sheet.



We
have never declared or paid any cash dividends on our shares of common stock, and despite the retained deficit on our balance sheet,
we do not anticipate paying any dividend on our common stock in the foreseeable future.



Except
for any dividends owed to the holder of our Series A Preferred Stock (as described above), we anticipate that we will retain all
of our future earnings to finance our operations and expansion. The payment of cash dividends in the future will be
at the discretion of our Board of Directors (subject to the approval of the holder of the Series A Preferred Stock) and will depend
upon our earnings levels, capital requirements, any restrictive loan covenants and other factors the Board considers relevant. The
Series A Preferred Stock is paid a dividend at annual rate of 8% of the purchase price, which dividend is paid at the end of each
fiscal quarter. Each quarterly payment of such dividend is approximately $20,860.



In
addition to the Board approval, we cannot declare or pay any dividends on our common stock (other than in shares of our own common
stock) unless we first pay to the Series A Preferred Stockholder a dividend equal to (i) all quarterly dividends on the Series
A Preferred Stock that have accrued but that we have not paid to the Series A Preferred Stockholder plus (ii) the amount of the
common stock dividend that the Series A Preferred Stockholder would get if he converted all of his shares of Series A Preferred
Stock into our common stock. Accordingly, investors must rely on sales of their common stock after price appreciation,
which may never occur, as the only way to realize any future gains on their investments.





20







Holders of Common Stock



As
of April 8, 2014, the shareholders' list of our shares of common stock showed 162 registered
shareholders and 125,610,436 shares of our common stock issued and outstanding. We
also have 2,990,252 shares of Series A Preferred Stock issued and outstanding, which are convertible into 5,980,504 shares of common
stock.



Securities authorized for issuance under
equity compensation plans



We
currently do not have any equity compensation plans.



Recent Sales of Unregistered Securities



From
May 2010 through April 2011, we issued promissory notes in the aggregate principal amount of $794,000 to four (4) investors. Of
this amount, we issued promissory notes aggregating $50,000 to Robert Schneiderman, our Chief Executive Officer, and notes aggregating
$30,000 to Harry James Production DBA R S and Associates a company owned by Mr. Schneiderman. In March 2012, our CEO
and president agreed to amend the maturity date and interest rate on his $50,000 promissory notes and the $30,000 promissory notes
held by Harry James Production DBA R S and Associates. The maturity date on these notes has been extend from September
30, 2012 until January 30, 2014. The interest rate on the notes has been decreased from 2% monthly to 1% monthly effective
on October 1, 2012. The remaining promissory notes in the aggregate amount of $714,000 were issued to Jim and Joanne
Speers ($514,000) and Leon Hurst ($200,000). These notes provide for monthly interest only payments of 1% of principal payable,
at the lenders’ option, in cash or in shares of our common stock (based on a valuation of $0.50 per share). Upon maturity,
outstanding principal is payable and may be converted to common stock of the Company at $0. 25 per share at the option of the lenders.
The notes have a one (1) year term and mature at various dates from May 2011 through January 2014. The convertible notes were issued
to such investors in reliance on the exemption under Section 4(2) of the Securities Act. The convertible notes qualified for exemption
under Section 4(2) of the Securities Act since the issuances by us did not involve a public offering. The offering was not a “public
offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering,
manner of the offering and number of shares offered. The recipients of the convertible notes were accredited investors and acknowledged
the restricted nature of the notes they acquired. Based on an analysis of the above factors, we have met the requirements to qualify
for exemption under Section 4(2) of the Securities Act for this transaction.



On
March 12, 2012, each of Mr. Hurst and Jim and Joanne Speers converted $125,000 in principal of their notes into 1,000,000 shares
of our common stock.



In
November 2010 and February 2011, we issued an aggregate of 50,000 shares of our common stock to Four Seasons Financial Group as
fees for assistance provided to us in capital raising efforts, which assistance has been completed (and is no longer being provided).
These shares had a market value of $12,500 at the time of issuance, and they were issued in reliance on the exemption under Section
4(2) of the Securities Act. These shares of our common stock qualified for exemption under Section 4(2) of the Securities Act since
the issuance shares by us did not involve a public offering. The offering was not a “public offering” as defined in
Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and
number of shares offered. Based on an analysis of the above factors, we have met the requirements to qualify for exemption under
Section 4(2) of the Securities Act for this transaction.



In February
2011, we issued 100,000 shares to Jim and Joanne Speers in connection with the purchase by such investors of $200,000 in convertible
notes from us (as described above). The shares of common stock were issued to such investors in reliance on the exemption under
Section 4(2) of the Securities Act. The shares of our common stock qualified for exemption under Section 4(2) of the Securities
Act since the issuances by us did not involve a public offering. The offering was not a “public offering” as defined
in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering
and number of shares offered. The recipients of the shares were accredited investors and acknowledged the restricted nature of
the shares they acquired. Based on an analysis of the above factors, we have met the requirements to qualify for exemption under
Section 4(2) of the Securities Act for this transaction.



On April 1, 2011 we closed on the sale of 2,990,252 shares of
our Series A Preferred Stock to a single accredited investor for a purchase price of $1,043,000. The sale of shares was exempt
under Section 4(2) of the Securities Act as an offer and sale not involving a public offering. As of the date of this prospectus,
each share of Series A Preferred Stock is convertible into two shares of our common stock. The conversion ratio of the Series A
Preferred Stock is subject to adjustment (as described below) The Series A Preferred Stock is paid a dividend at annual rate of
8% of the purchase price, which dividend is paid at the end of each fiscal quarter. Such dividends are cumulative. Of the seven
members of our board of directors, the holder of the Series A Preferred Stock, as a single class, gets to elect one (1) director
to the board and will vote with the common stockholders to elect four (4) directors (the common stockholders will elect, as a single
class, two (2) directors). The Series A Preferred Stockholder will have approval right over certain corporate actions, namely our
liquidation or dissolution, any merger, share exchange or asset sale that results in a change of control, the payment of any dividends
or the redemption of stock (except for stock dividends, change of control transaction and termination of employment or service).
The Series A Preferred Stock is convertible into 5,980,505 shares of our common stock (based on a conversion price of $0.1744,
which was adjusted as a result of the forward stock split effected on April 15, 2011. The conversion price of the Series A Preferred
Stock will be adjusted for any issuances of stock by us at a price per share less than $0.1744 (subject to certain exemptions such
as securities issued under an employee stock option plan or securities issued in business transactions approved by our board).
The Series A Preferred Stock has priority to assets over the common stockholders in the event of liquidation, dissolution or any
merger, share exchange or consolidation in which we are not the surviving entity or there is a change in control of us). These
rights of the Series A Preferred Stockholder continue until all of the shares of Series A Preferred Stock are converted into our
common stock. These shares of our Series A Preferred Stock qualified for exemption under Section 4(2) of the Securities
Act since the issuance shares by us did not involve a public offering. The offering was not a “public offering” as
defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering
and number of shares offered. Based on an analysis of the above factors, we have met the requirements to qualify for exemption
under Section 4(2) of the Securities Act for this transaction.





21







In
April 2011, we sold 5,200,000 shares of our common stock to four purchasers for an aggregate purchase price of $176,000. Each
of the purchasers was a corporation formed outside of the United States with a business address located outside of the United States.
This transaction was exempt from the registration provisions of the Securities Act pursuant to Regulation S as an offshore transaction
with non-U.S. persons (as such term is defined in Rule 902 of Regulation S). As of March 14, 2012, we have received the remaining
balance of the $176,000.



In
May 2011, we sold 28,000 shares of its common stock to 56 purchasers for an aggregate purchase price of $5,600. Each of the purchasers
was a non-U.S. citizen with a residence address located outside of the United States. This transaction was exempt from the registration
provisions of the Securities Act pursuant to Regulation S as an offshore transaction with non-U.S. persons (as such term is defined
in Rule 902 of Regulation S).



On
June 4, 2011, the Company issued 100,000 shares of restricted common stock to Sarav Patel, an officer, director and major shareholder
of Marlex, pursuant to a consulting agreement. The shares were valued at $10,000, which was the value of the services to be performed.
Under the consulting agreement, Mr. Patel will assist the Company in developing our supply chain management business by introducing
and promoting the Company with private sector out-patient surgery centers, hospitals and other health care facilities. These
shares of our common stock qualified for exemption under Section 4(2) of the Securities Act since the issuance shares by us did
not involve a public offering. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial
number of persons involved in the deal, size of the offering, manner of the offering and number of shares offered. Based on an
analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act for
this transaction.



On
June 6, 2011, the Company issued 50,000 shares of restricted common stock to Lincoln Associates, Inc. pursuant to a consulting
agreement. The shares were valued at $5,000, which valuation was determined by our board of directors. Under the consulting agreement,
Lincoln Associates will assist the Company in developing our supply chain management business by introducing and promoting the
Company with military out-patient surgery centers, military hospital and other health care facilities. These shares
of our common stock qualified for exemption under Section 4(2) of the Securities Act since the issuance shares by us did not involve
a public offering. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number
of persons involved in the deal, size of the offering, manner of the offering and number of shares offered. Based on an analysis
of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act for this transaction.



During the six
months ended June 30, 2011, we issued (i) 180,000 shares of our common stock to non-employees for services rendered during the
six month period ended June 30, 2011 or to be rendered. These services were valued at $22,500 and (ii) 520,000 shares of our common
stock in connection with services provided by members of the board of directors, for which we charged $52,000 to our operations
for such period. These shares of our common stock qualified for exemption under Section 4(2) of the Securities Act since
the issuance shares by us did not involve a public offering. The offering was not a “public offering” as defined in
Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and
number of shares offered. Based on an analysis of the above factors, we have met the requirements to qualify for exemption under
Section 4(2) of the Securities Act for this transaction.



On
July 21, 2011, the Company issued 104,000 shares of restricted common stock to Curing Capital, Inc. pursuant to a letter agreement.
Under the agreement, Curing Capital Inc. will assist the Company to raise up to $17,000,000 and to provide the Company with financial
advisory services. These shares of our common stock qualified for exemption under Section 4(2) of the Securities Act
since the issuance shares by us did not involve a public offering. The offering was not a “public offering” as defined
in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and
number of shares offered. Based on an analysis of the above factors, we have met the requirements to qualify for exemption under
Section 4(2) of the Securities Act for this transaction.



On
December 30, 2011, we issued (i) an aggregate of 84,000 shares of common stock to our five outside directors for their attendance
at board and committee meetings during 2011, which shares were valued at $8,400, (ii) 200,004 shares of common stock to a corporation
controlled by our Chief Executive Officer as payment of salary for the fourth quarter in lieu of cash, which shares were valued
at $35,000 and (iii) 200,000 shares of common stock to Northern Value Partners, LLC for financial consulting services, which shares
were valued at $20,000 and (iv) 25,000 shares to our outside counsel for his work on our registration statement that was declared
effective in November 2011, which shares were valued at $2,500. The shares of the Company’s common stock
issued to our outside directors, the affiliate of our Chief Executive Officer, our legal counsel and Northern Value Partners qualified
for exemption under Section 4(2) of the Securities Act since the issuance of shares by the Company did not involve a public offering.
The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved
in the offering, the size of the offering, the manner of the offering and the number of shares offered.



22







In
March 2012, we sold 300,000 shares of our common stock for an aggregate purchase price of $30,000. These share were
sold to an existing shareholder who qualifies as an accredited investor under Rule 501 of Regulation D. The sale of
the 300,000 shares qualified for exemption under Section 4(2) of the Securities Act since the issuance of shares by the Company
did not involve a public offering. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial
number of persons involved in the offering, the size of the offering, the manner of the offering and the number of shares offered.



During
the year ended December 31, 2012, the Company issued 1,345,000 restricted shares of its common stock to non-employees for services
rendered during the year or to be rendered. These services were valued at $231,100 and the Company charged its operations $122,906
in fiscal year 2012. The unamortized amount of prepaid services at December 31, 2012 is $108,194. These
shares of our common stock qualified for exemption under Section 4(2) of the Securities Act since the issuance shares by us did
not involve a public offering. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial
number of persons involved in the deal, size of the offering, manner of the offering and number of shares offered. Based on an
analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act for
this transaction.



During
the year ended December 31, 2012, the Company issued 124,000 restricted shares of its common stock in connection with services
provided by members of the board of directors during the fiscal year 2012. The Company charged its operations $34,480 in fiscal
year 2012. The shares of the Company’s common stock issued to our outside directors qualified
for exemption under Section 4(2) of the Securities Act since the issuance of shares by the Company did not involve a public offering.
The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved
in the offering, the size of the offering, the manner of the offering and the number of shares offered.



The
Company issued 114,288 restricted shares of its common stock to a corporation controlled by the Company’s President and CEO
for payment of his salary in lieu of cash compensation payments for services rendered during the twelve months period ended December
31, 2012. These services were valued at $20,000 and the Company charged this amount to operations in fiscal year 2012. The
shares of the Company’s common stock issued to the affiliate of our Chief Executive Officer qualified for exemption under
Section 4(2) of the Securities Act since the issuance of shares by the Company did not involve a public offering. The offering
was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the offering,
the size of the offering, the manner of the offering and the number of shares offered.



In
October 2012, we issued 150,000 restricted shares of common stock to Olympic Capital Group (“OCG”) for OCG’s
services under a consulting agreement. These services were valued at $56,850 and the Company charged such amount to its operations
in fiscal 2012. The shares of the Company’s common stock issued to OCG qualified for exemption under Section 4(2) of the
Securities Act since the issuance of shares by the Company did not involve a public offering. The offering was not a “public
offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the offering, the size of the
offering, the manner of the offering and the number of shares offered.



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
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.



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.



On
February 18, 2013, the Company received a net amount $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 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.





23







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.



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 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 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.



In October, November and December 2013, we issued an aggregate
of 1,003,571 shares of common stock to Tonaquint, Inc. for the conversion of an aggregate of $207,735 in principal amount of a
convertible note held by Tonaquint.



In October and December 2013, we issued an aggregate of 1,366,964
shares of common stock to JMJ Financial for the conversion of an aggregate of $299,457 in principal amount of a convertible note
held by JMJ Financial.



In October, November and December 2013, we issued an aggregate
of 600,838 restricted shares of common stock to a note holder as payment of
royalties due under the note.  The royalty payment was in the amount of $102,159.



In October, November and December 2013, we issued an aggregate
of 62,250 restricted shares of common stock to a note holder as payment of
royalties due under the note.  The royalty payment was in the amount of $8,798.



In October, November and December 2013, we issued an aggregate
of 1,003,442 restricted shares of common stock to Vista Capital Investments, LLC for the conversion of an aggregate of $163,960
in principal amount of a convertible note held by Vista Capital Investments.



In October, November and December 2013, we issued an aggregate
of 827,926 restricted shares of common stock to GEL Properties, LLC for the conversion of an aggregate of $140,717 in principal
amount of a convertible note held by GEL Properties.



On October 7,
2013 and November 21, 2013, we issued an aggregate of 24,444 restricted shares of common stock to Nick Torrens under a consulting
agreement with regard to public relations services.  The shares were valued at $3,289.



On October 15,
2013, we issued an aggregate of 1,000,000 restricted shares of common stock to Black Cat Consulting, Inc. under a consulting agreement
with regard to investor relations services.  The shares were valued at $140,000.



On October 16,
2013, we issued an aggregate of 32,000 restricted shares of common stock to our directors for their attendance at board
and/or committee meetings. We took a charge of $5,440 for the issuance of these shares.



On October 29, 2013 and November 14, 2013, we issued an aggregate
of 597,756 restricted shares of common stock to IBC Funds LLC for the conversion of an aggregate of $165,288 in principal amount
of a convertible note held by IBC Funds.



On December 4, 2013, we issued 841,426 shares of restricted
common stock to Seaside 88, LP pursuant to a Stock Purchase Agreement entered into on November 4, 2013. The purchase price of the
shares was $88,374.



On December 16, 2013,
we issued 313,479 restricted shares of common stock to Redwood Management LLC for the conversion of $40,752 in principal amount
of a convertible note held by Redwood Management.



On December 16, 2013, we issued 250,000 restricted shares of
common stock to Sean Fitzgibbons under a consulting agreement with regard to investor relations services. These shares were valued
at $32,500.



On December 18, 2013, we issued 738,071 restricted shares of
common stock to Caesar Capital Group LLC for the conversion of $88,569 in principal amount of a convertible note held by Caesar
Capital Group.



On December 23, 2013, we issued an aggregate of 20,000 restricted
shares of common stock to our directors for their attendance at board and/or committee meetings. We took a charge of $2,800 for
the issuance of these shares.



On December 27, 2013,
we issued 498,647 restricted shares of common stock to Group 10 Holdings, LLC for the conversion of $69,811 in principal amount
of a convertible note held by Group 10 Holdings.





24









The shares of
our common stock issued to consultants, upon the conversion of principal of notes, issued in payment of royalties and/or issued
to members of our board of directors qualified for exemption under Section 4(2) of the Securities Act since such issuances of shares
by us did not involve a public offering. The offering was not a “public offering” as defined in Section 4(2) due to
the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of shares offered.
Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities
Act for this transaction.



|ITEM 6. | SELECTED FINANCIAL DATA
|------- | -----------------------



Not
applicable.



|ITEM 7. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------



Caution Regarding Forward-Looking Information



This document contains forward-looking
statements which may involve known and unknown risks, uncertainties and other factors that may cause ScripsAmerica, Inc. actual
results and performance in future periods to be materially different from any future results or performance suggested by these
statements. These factors include, but are not necessarily limited to those risks set forth in Item 1A of this form 10-K. Words
such as projects, believe, plan, anticipate and expect and similar expressions are intended to qualify as forward-looking statements.
ScripsAmerica Inc. cautions investors not to place undue reliance on forward-looking statements, which speak only to management’s
expectations on this date. We undertake no obligation to update any forward-looking statements even if actual results may differ
from projections.



The following discussion should be read
in conjunction with the financial information included elsewhere in this Annual Report on Form 10-K.



Overview



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



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



Evolving Business Model



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



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



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





25









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



To protect our position with respect to
the RapiMed® products we also terminated the Rapid Melt tablet agreement
with the Contract Packager. All development costs through the date of this cancellation agreement have previously been expensed
and paid. The Company subsequently entered into a manufacturing and supply contract directly with the manufacturer of this technology,
however, this agreement was subsequently terminated in 2013.



RapiMed Children’s Pain Reliever and Fever Reducer



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



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



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



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



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



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

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

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



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



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

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

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



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



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

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

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





26







Independent
Pharmacy Distribution



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



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



As of November
1, 2013, ScripsAmerica entered into an agreement with WholesaleRx, Inc., which that represents over 700 such independent pharmacy
operations and is a DEA and State-licensed to store and distribute controlled substances (which are drugs that have the potential
for abuse or dependence and are regulated under thefederal Controlled
Substances Act).WholesaleRxorders
the goods from the manufacturers and has them shipped to its warehouse facility. WholesaleRx thenships thegoods to the pharmacies in the bottles as received by the manufacturer. Upon receiving
orders from the pharmacies, goods will be sent to them COD which will eliminate any accounts receivable issues.Prior to
November 1, 2013, the Company and WholesaleRx had an oral agreement to pursuant to which the Company secured third party financing
to fund WholesaleRx’s purchase orders and the Company in consideration of which the Company would receive 12.5% of the WholesaleRx’s
“gross profit” for the prior month (which gross profit would consist of (i) sales to all customers minus (ii) cost
of goods sold, freight in (to WholesaleRx), credits and allowances). Under the November 1 Agreement, ScripsAmerica agreed to provide
purchase order financing to WholesaleRx and purchased a 20% equity stake in WholesaleRx. In consideration for providing financing
for WholesaleRx’s purchaser orders, and to cover the Company’s costs in administering the purchase order financing,
WholesaleRx has agreed to pay the Company on or before the 15th calendar day of each month 20% of the gross profit (as
described above) for the prior calendar month. If WholesaleRx is late in paying such 20% fee, then the amount owed will accrue
interest at the rate of 18% per annum until paid.



In December, 2013, the Company revised
an October 2013 purchase agreement to acquire 90% of the Membership Units in P.I.M.D.
International, LLC (“PIMD”), a start-up limited liability company based in, and proposing to do business in,
Florida. Although founded approximately 4 years ago, PIMD has had no sales, but has the necessary licenses for operation of a drug
wholesale operation. The purchase of the Membership Units in PIMD was subject to certain conditions precedent, of which the most
important was that the Company obtain the necessary licenses from Florida (and the DEA) for the ownership of a drug distribution
company like PIMD. However, it was determined that securing the licenses was going to require a substantially longer period of
time than the parties had anticipated. Consequently, in order to preserve the business opportunity, it was necessary to change
the structure of the relationship. Accordingly, the original purchase agreement was cancelled and voided. The funds already advanced
by ScripsAmerica to PIMD were converted to a loan and the relationship between PIMD and ScripsAmerica became a Sourcing and Marketing
Agreement



Under this Sourcing
and Marketing Agreement, which the Company entered into with PIMD in December 2013, the Company will assist PIMD by helping PIMD
to (1) secure advantageous sources of drugs and (2) secure marketing and sales assistance in selling the drugs. For these services,
the Company will receive a “Sourcing and Marketing Fee” which is 45% of the “Calculated Basis” to be calculated
under a formula in the Sourcing and Marketing Agreement. PIMD has no material sales in fiscal 2013 and no sales as of the three
months ended March 31, 2014, but should be operational by the end of June 2014. Under our agreement with PIMD, we have no authority
or control with respect to PIMD’s business - the purchase of the drugs and the sale of the drugs. Additionally, we do not
have any authority to bind PIMD for any transaction relating to the purchase, sale or transfer of pharmaceutical products.



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



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



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



27









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.



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



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



We also
recognize revenue from our contract packager on a net basis according to ASC 605-45, Revenue Recognition: Principal Agent Considerations.Since we are not deemed to be theprincipal in these sales transactions we do not report the transaction on a gross
basis in our statement of operations. These sales transactions relate to a contract that 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.



In addition,
commission fees are recognized when earned on shipments of generic pharmaceutical and OTC products by WholesaleRx, which is a DEA
and State-licensed to store and distribute controlled substances, pursuant to an agreement entered into as of November 1, 2013.
Under this written agreement with WholesaleRx, the Company will earn a 20% commission fees on the gross margin of products shipped
to independent pharmacies by WholesaleRx. From August 2013 to October 31, 2013, the Company had been receiving a 12.5% commission
fee on the gross margin of such shipments under an oral agreement with WholesaleRx.



Results of Operations



|                                                                             |  |      |             |   |  |  |       |      |  |  |            |   |  | (  ) = unfavorable
Change |    
|---------------------------------------------------------------------------- |  | ---- | ----------- | - |  |  | ----- | ---- |  |  | ---------- | - |  | ------------------------- | ---
|                                                                             |  | 2013 |             |   |  |  |       | 2012 |  |  |            |   |  | $ change                  |    
|Product revenue-net of contract adjustments                                  |  |      | 153,000     |   |  |  | 28    | %    |  |  | 3,763,000  |   |  |                           | 96 
|Revenue net, from contract packager                                          |  |      | 333,000     |   |  |  | 60    | %    |  |  | 152,000    |   |  |                           | 4  
|Commission fees - related party                                              |  |      | 70,000      |   |  |  | 13    | %    |  |  | –          |   |  |                           | 0  
|Net Sales                                                                    |  |      | 556,000     |   |  |  | 100   | %    |  |  | 3,915,000  |   |  |                           | 100
|Cost of Goods Sold                                                           |  |      | 496,000     |   |  |  | 89    | %    |  |  | 3,384,000  |   |  |                           | 86 
|Gross Profit                                                                 |  |      | 60,000      |   |  |  | 11    | %    |  |  | 531,000    |   |  |                           | 14 
|Operating Costs and Expenses:                                                |  |      |             |   |  |  |       |      |  |  |            |   |  |                           |    
|General and Administrative                                                   |  |      | 2,432,000   |   |  |  | 437   | %    |  |  | 1,861,000  |   |  |                           | 48 
|Share-base Comp issued for payment of services in General and Administrative |  |      | 3,792,000   |   |  |  | 682   | %    |  |  | 178,000    |   |  |                           | 5  
|Reserve expense for receivable - contract packager                           |  |      | 1,129,000   |   |  |  | 203   | %    |  |  | –          |   |  |                           | 0  
|Research and Development                                                     |  |      | –           |   |  |  | 0     | %    |  |  | 38,000     |   |  |                           | 1  
|Total Operating expenses                                                     |  |      | 7,353,000   |   |  |  | 1322  | %    |  |  | 2,077,000  |   |  |                           | 53 
|Operating Loss                                                               |  |      | (7,293,000  | ) |  |  | 1312  | %    |  |  | (1,546,000 | ) |  |                           | -39
|Other Income (expenses) :                                                    |  |      |             |   |  |  |       |      |  |  |            |   |  |                           |    
|Interest expense                                                             |  |      | (333,000    | ) |  |  | -60   | %    |  |  | (225,000   | ) |  |                           | -6 
|Loss from derivative issued with debt greater carrying value                 |  |      | (1,180,000  | ) |  |  | -212  | %    |  |  | –          |   |  |                           | 0  
|Loss on revaluation of derivatives                                           |  |      | (1,289,000  | ) |  |  | -232  | %    |  |  | (7,000     | ) |  |                           | 0  
|Financing costs                                                              |  |      | (972,000    | ) |  |  | -175  | %    |  |  | –          |   |  |                           | 0  
|Amortization of debt discount                                                |  |      | (785,000    | ) |  |  | -141  | %    |  |  | (41,000    | ) |  |                           | -1 
|Gain on extinguishment                                                       |  |      | 637,000     |   |  |  | 115   | %    |  |  | –          |   |  |                           | 0  
|Income from equity investments                                               |  |      | 2,000       |   |  |  | 0     | %    |  |  | –          |   |  |                           | 0  
|Total Other Income / (expenses)                                              |  |      | (3,920,000  | ) |  |  | -705  | %    |  |  | (273,000   | ) |  |                           | -7 
|Income (Loss) before taxes                                                   |  |      | (11,213,000 | ) |  |  | -2017 | %    |  |  | (1,819,000 | ) |  |                           | -46
|Tax Expense                                                                  |  |      | –           |   |  |  | 0     | %    |  |  | 43,000     |   |  |                           | 1  
|Net loss                                                                     |  |      | (11,213,000 | ) |  |  | -2017 | %    |  |  | (1,862,000 | ) |  |                           | -48



28









Revenues, net:The following table
sets forth selected statement of operations data as a percentage of total revenue for fiscal years ending December 31, 2013 and
2012.



|Products sold                                                        |  | 2013 |            |   | % to total |  |     | 2012 |  |  | % to total |   |  | Change |    
|-------------------------------------------------------------------- |  | ---- | ---------- | - | ---------- |  | --- | ---- |  |  | ---------- | - |  | ------ | ---
|Prescription drug products                                           |  |      | 185,000    |   |            |  | 3   | %    |  |  | 2,949,000  |   |  |        | 53 
|OTC & non prescription products                                      |  |      | 117,000    |   |            |  | 2   | %    |  |  | 1,461,000  |   |  |        | 26 
|Revenue, from contract packager                                      |  |      | 6,434,000  |   |            |  | 88  | %    |  |  | 1,173,000  |   |  |        | 21 
|Revenue, from pharmaceutical partner                                 |  |      | 599,000    |   |            |  | 8   | %    |  |  | –          |   |  |        | 0  
|Gross Revenue                                                        |  |      | 7,335,000  |   |            |  | 100 | %    |  |  | 5,583,000  |   |  |        | 100
|Discounts / Charge backs                                             |  |      | (150,000   | ) |            |  | -2  | %    |  |  | (647,000   | ) |  |        | -12
|Adjustment to sales for contract packager and pharmaceutical partner |  |      | (6,629,000 | ) |            |  | -90 | %    |  |  | (1,021,000 | ) |  |        |    
|                                                                     |  |      |            |   |            |  |     |      |  |  |            |   |  |        |    
|Net Revenues                                                         |  |      | 556,000    |   |            |  |     |      |  |  | 3,915,000  |   |  |        |    



In 2012, the majority of the Company’s
revenue was generated from the sales of generic pharmaceutical prescription orders under our pharmaceutical distribution services
business. In fiscal year 2013 the Company generated net sales revenue of approximately $556,000 as compared to net sales revenue
of approximately $3,915,000 for 2012, a decrease of approximately $3,359,000, or 86%. The decline in sales was mainly a result
the Company’s decision to exit sales to McKesson due to increase charge back costs and the discontinued sales to Cutis Pharmaceuticals
and MedVet which we had significant sales a year ago. Revenue from the U.S. government contract
through our former Contract Packager did not replace the lost sales volume partly because the U.S. government
sales are recorded net of costs. The Company sales for fiscal year 2013 would have been approximately $2.2 million higher if
the sales for U.S. government were recorded at gross and were not recognized on the net basis
for sales associated with the U.S. government contract with our former Contract Packager. In
August 2013 we began earning revenue from our arrangements with independent pharmacies pursuant to an oral agreement with WholesaleRx,
a pharmaceutical distributor, under which we earn a commission of 12.5% on the gross margin of generic pharmaceutical and OTC product
sales shipped to independent pharmacies by WholesaleRx. On November 1, 2013, we entered into a Master Agreement with WholesaleRx
which increased the commission to 20%. WholesaleRx sales were approximately $599,000 for five months of shipments in fiscal year
2013, for which we earned a commission of approximately $70,000.



For the twelve months period ended December
31, 2013 U.S. government sales accounted for 60% of our net revenue and McKesson accounted for
27% of our net revenue (versus 4% and 74%, respectively, of net revenue for the same period in 2012). Cutis Pharmaceuticals and
MedVet accounted for another 22% of our net revenue in 2012. Commissions of approximately $70,000 in 2013 accounted for the other
12% of our revenue.



Gross Profit:Gross profit for fiscal
year 2013 was approximately $60,000, which was 11% of our net sales as compared to a gross profit equal to 14% net sales in 2012.
The decline of approximately $471,000, or 88%, in gross profit from fiscal year 2012 was mainly due to the sales decline of approximately
$3.4 million due to the Company’s decision not to continue its relationship with McKesson. Sales for prescription drug products
and OTC products declined 93% from the prior year. The sales on our U.S. government contract
which has only a 7% margin also contributed to the decline in our gross margin. Also impacting our gross margin percentage was
the royalty expenses included in cost of goods for 2013 in the amount to approximately $286,000 as compared to approximately $53,000
in 2012.



Operating Expenses



Our 2013 operating expenses consist of Selling, General and
Administrative expenses excluding share-based compensation issued for services in the amount of approximately $2.4 million, share-based
compensation issued for services in the amount of approximately $3.8 million and provision for receivable for our contract packager
receivable in the amount of approximately $1.1 million.





29







Our principal Selling, General and Administrative costs include
the following:



|                                                   |  |      |           |  |  |  |     |      |  |  |           |  |  |           | (  ) = unfavorable |  
|-------------------------------------------------- |  | ---- | --------- |  |  |  | --- | ---- |  |  | --------- |  |  | --------- | ------------------ | -
|Principal operating cost consist of :              |  | 2013 |           |  |  |  |     | 2012 |  |  |           |  |  | $  Change |                   
|Human resources                                    |  |      | 355,000   |  |  |  | 6   | %    |  |  | 364,000   |  |  |           | 18                 | %
|Sales Marketing                                    |  |      | 421,000   |  |  |  | 7   | %    |  |  | 443,000   |  |  |           | 22                 | %
|Professional fees: Legal & accounting              |  |      | 351,000   |  |  |  | 6   | %    |  |  | 171,000   |  |  |           | 8                  | %
|Consulting                                         |  |      | 890,000   |  |  |  | 14  | %    |  |  | 187,000   |  |  |           | 9                  | %
|Investor relations and Marketing                   |  |      | 3,112,000 |  |  |  | 49  | %    |  |  | 59,000    |  |  |           | 3                  | %
|General expense                                    |  |      | 1,095,000 |  |  |  | 17  | %    |  |  | 815,000   |  |  |           | 40                 | %
|Total Selling, General & Administrative            |  |      | 6,224,000 |  |  |  | 100 | %    |  |  | 2,039,000 |  |  |           | 100                | %
|Share-based compensation included in S,G & A above |  |      | 3,792,000 |  |  |  |     |      |  |  | 178,000   |  |  |           |                    |  
|Adjusted total Selling, General & Administrative   |  |      | 2,432,000 |  |  |  |     |      |  |  | 1,861,000 |  |  |           |                    |  





Selling,
General and Administrative.For the year ended December 31, 2013, selling, general and administrative expenses
(“S,G&A”) increased approximately $4.2 million to approximately $6.2 million as compared to approximately
$2.0 million for fiscal year 2012, which includes approximately $4.0 million of non-cash expenses resulting from the issuance
of our Company’s common stock for payment of services. The changes in S,G&A expenses was mainly a result of (a) an
increase in selling costs (see chart above for dollar change versus 2012) mainly due to the distribution of samples
associated with our selling efforts to promote the RapiMed® rapidly disintegrating tablet, which also included costs
associated for trade shows and advertising, (b) an increase in professional fees, consisting mainly of legal costs,
accounting fees and general consulting fees, (c) an increase in consulting costs consisting of costs associated
with financing and debt raising costs, as well as expertise advise for potential projects, (d) an increase in investor
relations and public relations costs which include costs associated with market awareness of the Company’s stock, press
releases, assistance in capital raising and fees for obtaining funding, (e) a small decline in human resource expenses which
included salary and benefits and board of directors costs and (f) an increase in general expense which includes D&O
insurances, telephone, computer expenses, and general overhead and other office type expenses.



Share-based compensation issued for
services:Due our cash flow issues in 2013 and 2012 we issued common stock for payment of service to various vendor. The following
table list what area of Selling, General and Administrative we issue our common stock for:



|                                        |  |      |           |  |      |  |         |           | (  ) = unfavorable | 
|--------------------------------------- |  | ---- | --------- |  | ---- |  | ------- | --------- | ------------------ | 
|                                        |  | 2013 |           |  | 2012 |  |         | $  Change |                   
|Consulting                              |  |      | 892,000   |  |      |  | 143,000 |           |                    | 
|Investor relations and Marketing        |  |      | 2,900,000 |  |      |  | 35,000  |           |                    | 
|Total Selling, General & Administrative |  |      | 3,792,000 |  |      |  | 178,000 |           |                    | 



Provision for
receivable from our contract packager: In the second quarter of 2013, the Company fully reserved and expensed $1,210,999
for the remaining balance of loans and receivables from its former Contract Packager because they were deemed uncollectable.
Under the settlement agreement the Company and its former Contract Packager entered into on September 6, 2013 we have
received $81,631 in cash payments as of December 31, 2013. Because collectibility is uncertain, we release the reserve
as cash is received. The settlement agreement stipulates repayment of a total of $408,154 over the next 15 months.



Research and Development.The Company’s
expenditures for research and development cost declined approximately $38,000, for the year ended December 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 at the end of 2011.





30







Total Other Expenses.Other expenses
for the year ended December 31, 2013 increased by approximately $3.6 million to approximately $3.9 million from approximately $273,000
in 2012.



The dollar changes for fiscal year 2013
versus 2012 for other expenses consist of the following:



|                                                             |  |  |            |   |  |  |          | (  ) = unfavorable
    Change | 
|------------------------------------------------------------ |  |  | ---------- | - |  |  | -------- | ----------------------------- | 
|Other expenses :                                             |  |  | 2013       |   |  |  | 2012     |                               | 
|Interest expense                                             |  |  | (333,000   | ) |  |  | (225,000 | )                             | 
|Loss from derivative issued with debt greater carrying value |  |  | (1,180,000 | ) |  |  | –        |                               | 
|Loss on revaluation of derivatives                           |  |  | (1,289,000 | ) |  |  | (7,000   | )                             | 
|Financing costs                                              |  |  | (972,000   | ) |  |  | –        |                               | 
|Amortization of debt discount                                |  |  | (785,000   | ) |  |  | (41,000  | )                             | 
|Gain on extinguishment                                       |  |  | 637,000    |   |  |  | –        |                               | 
|Income from equity investments                               |  |  | 2,000      |   |  |  | –        |                               | 
|Total Other expenses                                         |  |  | (3,920,000 | ) |  |  | (273,000 | )                             | 



Other expenses consist of interest expense,
amortization of debt discount, change in fair value of derivative liabilities and gain on extinguishment of debt. A significant
portion, approximately $1.3 million, of the total increase in other expenses was due to the value change in our derivative liabilities
from our convertible notes payable. The increase in the revaluation of derivative liabilities at December 31, 2013 relates partially
to the Company having sufficient trading activity to utilize the actual volatility of the Company’s stock as an assumption
when computing the fair value of derivative liabilities commencing in January 2013. The Company had previously estimated the volatility
assumption by averaging the volatility of the equity security of three similar entities which resulted in a lower volatility. The
increase in value of the volatility assumption has led to a higher valuation of derivative liabilities associated with the convertible
notes payable.



Interest expense
in 2013 consist of the following: a) interest on our convertible debts, this amount was approximately $239,000, of this
amount we made cash payments of $140,000 in 2013 the balance was an accrued expenses associated with our convertible notes
payable, b) interest cost associated with a term loan of $500,001 was approximately $37,000, and approximately $15,000 for
fiscal year 2013 and 2012, respectively, c) interest costs associated with the Company’s line of credit with a bank was
approximately $4,000 for 2013 as compared to approximately $750 for the same period in 2012, d) Interest cost associated with
our purchase order financing was approximately $73,000 for 2013 and approximately $36,000 for 2012, included in the 2013 total
is $48,000 from related party. Our total interest expense for 2013 was approximately $333,000 as compared to approximately
$225,000 in 2012.



We incurred a loss from derivatives values
issued with our variable convertible notes payable because the derivative value was greater than the carrying value of the notes
payable this amount of approximately $1,180,000 in 2013.



The loss on derivative liability was approximately
$1,289,000 for 2013 compared to $7,000 for the same period in 2012. The change is a result of our stock volatility discussed above.



With an extinguishment of debt from paying
off convertible notes early we incurred gains of approximately $637,000.



We also incurred financing fees because
we issued common stock greater than the value associate with debt in the amount of approximately $972,000 in 2013.



Income taxes (benefit).Total income
taxes expense for fiscal December 31, 2013 was none as compared to a tax expense of $43,000 for 2012. For 2013 and 2012 the Company
incurred losses that increased the current deferred tax benefit but since the likelihood of not being able to recover the deferred
tax benefit a valuation allowance of 100% of the tax benefit was applied. In 2012 we recorded a valuation allowance to our deferred
tax asset of $597,591 offsetting potential tax benefit. Prior to 2012 we did not have a reserve allowance.



Net Loss
Applicable to Common Shares.The Company recorded a net loss of approximately $11,213,000 in fiscal year 2013, compared
to a net loss of approximately $1,862,000 for 2012, an increase in our net loss of approximately $9,351,000 as compared to
prior year. This increase in net loss is mainly due to our significant reduction in our sales resulting in a decline of
approximately $3.4 million causing a profit margin decline of approximately $2.9 million in 2013 versus 2012. Also
contributing to the loss was an increase in our SG&A expense of approximately $4.2 million, as described above. We also
incurred an expense of $1.1 million for write-off of our receivable with our former Contract Packager for possibility on
non-collections. Other income/expenses increased approximately $3.6 million in 2013 as compared to 2012 as described above.
Research and development cost declined approximately $381,000 from the 2012 spending. The Company accrued a preferred stock
dividend of $83,440 in both 2013 and 2012, resulting in a loss of income available to common shareholders of $11,296,000 and
$1,945,000 for 2013 and 2012, respectively. Basic and diluted loss per common share were $0.17 and $0.04 for the fiscal years
2013, and 2012, respectively.





31







Liquidity and Capital Resources



Summary



Since our inception in 2008, we have generated
significant losses from operations and we anticipate that we will continue to generate significant losses from operations for the
foreseeable future. We have funded our operations primarily through the
private placement of equity and debt securities. For the two year period ended December 31, 2013, we received $2,056,000 in net
proceeds from the issuance of debt securities, $561,000 in net proceeds from the issuance of shares of our common stock,  $1,317,000
in proceeds from purchase order financing from a related party and $500,000 from a 4 year term loan also from a related party.At
December 31, 2013, the Company had approximately $47,000 in cash and incurred a loss from operations of approximately $11.2 million,
of which approximately $6.9 million of the loss was due to non-cash charges.  The Company’s cash expenditures are projected
to be approximately $135,000 a month on a continuing operating basis.  Included in these cash expenditures are approximately
$13,000 a month in interest costs.  After taking into consideration our 2014 interim results to date and current projections
for the remainder of 2014, management believes that the Company’s cash flow from operations, coupled with recent financings
are not sufficient to support the working capital requirements, debt service, applicable debt maturity requirements, and operating
expenses through December 31, 2014.



During 2013, and in the first quarter of
2014, the Company only generated net revenue of approximately $200,000 from the establishment of the new distribution model (independent
pharmacies), the compounding pharmacy business, and the rapid disintegrating technology products. This raises substantial doubt
regarding the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern
is highly dependent upon (i) management’s ability to equal or exceed its planned operating cash flows, (ii) maintain continued
availability on its line of credit and (iii) the ability to obtain alternative financing to fund capital requirements and/or debt
obligations coming due and operating expenses. The accompanying financial statements do not include any adjustments that may result
from the outcome of this uncertainty. Although the Company has successfully obtained various funding
and financing in the past, future financing and funding options may be challenging in the current environment.



We completed
the development of a pediatric pain relief rapid orally disintegrating 80 mg and 160 mg tablets
for OTC products. In the second quarter of 2014, we expect to sign a supply agreement (the terms of which have already been finalized)
with a generic manufacturer for the production of these rapid orally disintegrating products for marketing, sale and distribution
outside of the United States.In January 2014, the Company formed a joint venture entity, Global Pharma Hub, Inc., for the
licensing, marketing and distribution of our pediatric RapiMed® acetaminophen outside of the United States. Our initial market
is in China. On March 10, 2014, we received a $200,000 purchase
order for ourchildren’s pain relief rapid orally disintegrating80mg tablets
from Global Pharma Hub for the China market.However, we estimate that we will need approximately $1.5 million of incremental
funding to launch RapiMed® products in the United States. The funding for launching the rapid orally disintegrating products
in the U.S. is expected to come from the sale of equity securities, or debt financing.  However, such financing has not yet
been secured.



At December 31, 2013, the Company had total
current assets of approximately $1.5 million and total current liabilities of approximately $3.2 million resulting in negative
working capital of approximately $1.7 million. The Company's current assets consisted of approximately $47,000 in cash, approximately
$1,113,000 in receivables and approximately $330,000 in prepaid expenses. Current liabilities at December 31, 2013 consist of current
portion of long term debt from related party of approximately $123,000, convertible notes payable of approximately $290,000, purchase
order financing of approximately $1,037,000, accounts payable of approximately $232,000, line of credit payable of approximately
$99,000, stock to be issued of approximately $274,000 and a derivative liability of approximately $1,133,000.



During the twelve month period ended December
31, 2013 we supplemented our liquidity needs primarily from financing activities. Our revenue did not cover our operational costs
and our debt requirements. The Company raised approximately $2,549,000 in cash through the following: approximately $1,580,000
from proceeds of convertible notes, the sale of common stock which raised approximately $531,000, and borrowing of approximately
$438,000 under our PO financing agreement with a related party. Approximately $551,000 of these funds were used for payments on
convertible notes payable, payments on our purchase order financing, payments on note payable to a related party, and payments
to the factor.



The following table summarizes our cash flows from operating
investing and financing activities for the fiscal years ending December 31, 2013 and 2012:



|                                                 |  | 2013 |            |   | 2012 |  |            | Change | 
|------------------------------------------------ |  | ---- | ---------- | - | ---- |  | ---------- | ------ | 
|Total cash provided by (used in):                |  |      |            |   |      |  |            |        | 
|Operating activities                             |  |      | (1,804,000 | ) |      |  | (2,471,000 | )      | 
|Investing activities                             |  |      | (150,000   | ) |      |  | 6,000      |        | 
|Financing activities                             |  |      | 1,988,000  |   |      |  | 2,011,000  |        | 
|Increase (decrease) in cash and cash equivalents |  |      | 34,000     |   |      |  | (454,000   | )      | 





32







After taking into consideration our interim
results and current projections, management believes that the Company’s cash flow from operations, coupled with recent financings
will not be sufficient to support the working capital requirements, debt service and applicable debt maturity requirements for
the twelve month period ending December 31, 2014.  This raises substantial doubt regarding the Company’s ability to
continue as a going concern. The Company’s ability to continue as a going concern is highly dependent upon (i) management’s
ability to achieve its planned operating cash flows, (ii) maintain continued availability on its line of credit and (iii) the ability
to obtain alternative financing to fund capital requirements and/or debt obligations coming due. The accompanying financial statements
do not include any adjustments that may result from the outcome of this uncertainty. Although the Company
has successfully obtained various funding and financing in the past, future financing and funding options may be challenging in
the current environment and cannot be expected just based on past results.



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



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



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



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



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



ScripsAmerica
entered into an oral agreement in August 2013 with a pharmaceutical distributor that represents over 700 such independent operations.
and is a DEA and State-licensed to store and distribute controlled substances (which are drugs that have the potential for abuse
or dependence and are regulated under thefederal Controlled Substances
Act).WholesaleRxorders
the goods from the manufacturers and has them shipped to its warehouse facility. WholesaleRx thenships thegoods to the pharmacies in the bottles as received by the manufacturer. Upon receiving
orders from the pharmacies, goods will be sent to them COD which will eliminate any accounts receivable issues.Prior to
November 1, 2013, the Company and WholesaleRx had an oral agreement to pursuant to which the Company secured third party financing
to fund WholesaleRx’s purchase orders and the Company in consideration of which the Company would receive 12.5% of the WholesaleRx’s
“gross profit” for the prior month (which gross profit would consist of (i) sales to all customers minus (ii) cost
of goods sold, freight in (to WholesaleRx), credits and allowances). Under the November 1 Agreement, ScripsAmerica agreed to provide
purchase order financing to WholesaleRx and purchased a 20% equity stake in WholesaleRx. In consideration for providing financing
for WholesaleRx’s purchaser orders, and to cover the Company’s costs in administering the purchase order financing,
WholesaleRx has agreed to pay the Company on or before the 15th calendar day of each month 20% of the gross profit (as
described above) for the prior calendar month. If WholesaleRx is late in paying such 20% fee, then the amount owed will accrue
interest at the rate of 18% per annum until paid.



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



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





33







Operating Activities



Net cash used by operating activities was
approximately $1.8 million for fiscal year 2013, as compared to cash used by operating activities of approximately $2.5 million
for fiscal year 2012, which was a decrease in cash used by operations of approximately $692,000. The use of cash in 2013 and 2012
resulted primarily from our net loss adjusted for non-cash charges and changes in components of working capital. Our use of issuing
common stock for services had a significant impact the Company reducing use of cash from operating activities in 2013 compared
to 2012.



Investing Activities



In 2013 the Company made two investments:



| | 1. | We loaned $272,000 to Implex Corporation for Implex’s acquisition of the
                                                                Membership Units in P.I.M.D. International, LLC
                                                                (“PIMD”), a start-up limited liability company based in, and proposing to do business in, Florida.
                                                                Although founded approximately 4 years ago, PIMD has had no sales, but has the necessary licenses for operation of a drug
                                                                wholesale operation. The purchase of the Membership Units in PIMD was subject to certain conditions precedent, of which the
                                                                most important was that the Company obtain the necessary licenses from Florida (and the DEA) for the ownership of a drug
                                                                distribution company like PIMD. Since this is considered a variable interest entity we have consolidated this receivable for
                                                                our loan and PIMD’s loan payable is eliminated in our consolidated balance sheet.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2. | In November and December 2013, we invested $150,000 for a 14%
                                                                interest in WholesaleRx, Inc., which that represents over 700 independent pharmacy operations and is a DEA and State-licensed
                                                                to store and distribute controlled substances (which are drugs that have the potential for abuse or dependence and are
                                                                regulated under thefederal Controlled Substances
                                                                Act).WholesaleRxorders
                                                                the goods from the manufacturers and has them shipped to its warehouse facility. WholesaleRx thenships thegoods to the pharmacies in the bottles as received by the manufacturer. Upon
                                                                receiving orders from the pharmacies, goods will be sent to them COD which will eliminate any accounts receivable issues.Prior
                                                                to November 1, 2013, the Company and WholesaleRx had an oral agreement to pursuant to which the Company secured third party
                                                                financing to fund WholesaleRx’s purchase orders and the Company in consideration of which the Company would receive
                                                                12.5% of the WholesaleRx’s “gross profit” for the prior month (which gross profit would consist of (i)
                                                                sales to all customers minus (ii) cost of goods sold, freight in (to WholesaleRx), credits and allowances). ScripsAmerica
                                                                agreed to provide purchase order financing to WholesaleRx. In consideration for providing financing for
                                                                WholesaleRx’s purchaser orders, and to cover the Company’s costs in administering the purchase order
                                                                financing.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Recent Investing Events



On January 29, 2014, Implex Corporation,
which is owned by our legal counsel, Richard C. Fox, entered into a stock purchase agreement with Dmitriy Naydenko to acquire the
specialty pharmacy Main Avenue Pharmacy, Inc., located in New Jersey, for $550,000. The purchase price will be paid in installments
and the shares will be held by an escrow agent until the final payment is made. Under the purchase agreement, the final agreement
is to be made on July 11, 2014 (unless extended by the parties). For the management services provided by the ScripsAmerica under
this Business Management Agreement, Implex will pay us a combined monthly Management and Financing Fee. This combined fee will
be equal to 97% of the Calculation Basis (receipts from paid invoices less Implex’s monthly draw and various expenses of
Main Avenue Pharmacy). Since ScripsAmeica will have controlling interest in Implex, we plan to consolidate activities of Main Ave
into our financial statements in first quarter 2014.



Financing Activities



Net cash provided
by financing activities was approximately $1,988,000 for fiscal year 2013 compared to approximately $2,011,000 in 2012.
Financing activities for fiscal year 2013 consisted of the following: the Company (a) sold shares of common stock for gross
proceeds of $531,000, (b) sold convertible notes payables for gross proceeds of $1,580,000, (c) borrowed $438,000 on a
Purchase Order agreement with related party, (d) paid down the balance on convertible notes in the amount of $288,000, (e)
paid down $112,000 on a four year term loan,  (f) made a payment from factor in the amount of $142,000, (g) net proceeds
of $59,000 under an existing line of credit, and (h) a distribution of equity in our PIMD subsidiary of approximately
$120,000.



Recent Financial Events



From January 1, 2014 until April 10, 2014,
we received $1,009,067 in cash in a private subscription sale in which we issued 19,207,420 shares of common stock.



In January and
February 2014 we received cash proceeds of $206,621 from Seaside 88, L.P. for the issuance of an aggregate of 2,270,740
restricted shares of common stock.





34







Commitments



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



The holder of a $320,000
note payable are entitled to a to 1.8% royalty payment on the first $10 million of sales of a generic prescription drug under
distribution contracts with Federal government agencies and 0.09%on the next $15 million of
such sales. Payments for royalties will be paid quarterly 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 in the
second quarter of 2013, the Company issued 58,278 shares of its common stock as payment for the royalty expense. In additions
a holder of a $50,000 note payable (see note 10), 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. In the second quarter the Company issued 29,139 shares of its common stock for payment of royalty expense
and the Company has recorded a royalty expense of $30,600 and $213,945 for the three months and nine months period ended September
30, 2013, respectively.



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



The Company had an initial closing under the securities purchase
agreement on November 4, 2013, at which the Company sold to Seaside 1,152,514 restricted shares of its common stock for gross proceeds
of $200,537, of which $7,500 was used to pay the legal fees for Seaside and $19,303 was paid for a finder’s fee. The Company
also had closings on (i) December 4, 2013, at which the Company sold to Seaside 841,426 restricted shares of common stock for gross
proceeds of $90,926 of which $2,500 was used to pay the legal fees for Seaside. (ii) January 6, 2014, at which the Company sold
to Seaside 928,670 restricted shares of common stock for gross proceeds of $69,093 of which $2,500 was used to pay the legal fees
for Seaside and (iii) February 4, 2014, at which the Company sold to Seaside 1,342,070 restricted shares of common stock for gross
proceeds of $142,527 and (iv) on February 24, 2014 the Company issued 1,615,550 restricted shares of common stock for financing
fees which were accrued and expense in 2013.



In May 2013, the Company signed a “Development, Manufacturing
and Supply Agreement” with a pharmaceutical manufacturer to develop and manufacture our 80mg and 160mg Acetaminophen RapiMed®
rapid orally disintegrating tablets. The initial term of the agreement is two years with an option to a one five year contract
extension. In addition to development and scale up costs, the Company will pay up to $150,000 to license the technology during
the first two years. In order to maintain exclusivity rights for the technology the Company must purchase a minimum of 10,000,000
tablets each of the 80mg and 160mg tablets in the first year and 16,500,000 tablets for both 80mg 160mg in the second year. After
the second year annual volume requirements need to be achieved for the Company to maintain exclusivity of the license. In 2014,
the Company terminated this agreement with the pharmaceutical manufacturer due to the manufacturer’s deteriorating financial
condition.



Previously, the Company had entered into
a Product Development, Manufacturing and Supply Agreement with Marlex Pharmaceuticals, Inc. (the “Contract Manufacturer”
or “Marlex”) in March 2010. The Contract Manufacturer was to develop rapid melt tablets in accordance with the specifications
of the agreement with the Company responsible for all associated costs with the proprietary rights owned by the Company. The Company
and the Contract Manufacturer agreed upon a projected product cost to be paid to the Contract Manufacturer as well as 7% of gross
profits for the term of the agreement. The Company can terminate this agreement and did so in the third quarter 2013 (see note
8). All development costs through the date of notice have previously been expensed and paid.



On October 15, 2013 the Board of Directors approved revise compensation
for the CEO, Robert Schneiderman and the CFO, Jeffrey Andrews, contingent on the Company raising $4 million via equity, debt or
a combination of both. Contingent on raising the $4 million compensation would be as follows: CEO annual salary $200,000, CFO annual
salary $192,000, both would receive 50,000 options quarterly at 120% of market price on the date granted with a one year vesting
period.





35







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



In July of 2013, the Company entered into
a memorandum of understanding (“MOU”) with a Forbes Investments Ltd (“Forbes”) to provide future services.
Upon the signing of this MOU agreement the Company issued 350,000 shares of our Company’s common stock to two parties of
this agreement. The value of the common stock at issuance was $154,000 and this amount was recorded to prepaid and was expensed
to selling, general and administrative through balance of 2013. The MOU agreement has a 12 month exclusivity clause, a two-way
break-up fee of $50,000 in cash or securities at 50% of market rate upon 30 day running average of termination. Upon successfully
completing the goal of this agreement the two parties are entitled to each receive 200,000 shares of ScripsAmerica’s common
stock and also shall be entitled to receive 25,000 shares of our common stock per $250,000 financing arranged from any source up
to $5 million during the first 12 months of this agreement. In January 2014 licensing agreements were entered into (see note 21
in financial statements Global Pharma Hub) and the 400,000 shares of ScripsAmerica’s common stock was issued at a value of
$52,000.



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



In January 2013, the Company entered into
consulting agreement with Implex Corporation, a consulting firm owned by the Company’s legal counsel. The initial agreement
terms are for six months and the agreement shall automatically be renewed for a successive month period(s) until one party gives
written notice to terminate the agreement thirty days prior to the next termination date. Fees are $25,000 per month and such fees
shall be paid in shares of the Company’s common stock rather than cash so as to permit the Company to conserve cash. During
2013 the Company issued to Implex Corporation 824,956 shares of common stock at a fair value of $253,996.



During the fiscal year 2013 the Company
purchased product from two suppliers, and in 2012 the Company purchased 100% of its product packaging from its Contract Packager.
A disruption in the availability of product packaging from the Company’s suppliers could cause a possible loss of sales,
which could affect operating results adversely.



During the year ended
December 31, 2013, the Company derived approximately $413,000, or 73%, of its revenue from two customers, of this total one customer
accounted for 61% and the other accounted for 12%. During the year ended December 31, 2012, the Company derived approximately
$3,524,000 or 90% of its revenue from two customers, of this total one customer accounted for 74% and the other accounted for
16%.



Equity
investments



WholesaleRx



As
of December 31, 2013, the Company has a 14% non-controlling ownership interest in WholesaleRx, Inc., which represents over 700
such independent pharmacy operations and is a DEA and State-licensed to store and distribute controlled substances (which are drugs
that have the potential for abuse or dependence and are regulated under thefederal Controlled Substances Act).WholesaleRxorders the goods from the manufacturers and has them shipped to its warehouse facility. WholesaleRx
thenships thegoods to the pharmacies
in the bottles as received by the manufacturer. Upon receiving orders from the pharmacies, goods will be sent to them COD which
will eliminate any accounts receivable issues.Prior to November 1, 2013, the Company and WholesaleRx had an oral agreement
to pursuant to which the Company secured third party financing to fund WholesaleRx’s purchase orders and the Company in consideration
of which the Company would receive 12.5% of the WholesaleRx’s “gross profit” for the prior month (which gross
profit would consist of (i) sales to all customers minus (ii) cost of goods sold, freight in (to WholesaleRx), credits and allowances).
Under the November 1 Agreement, ScripsAmerica agreed to provide purchase order financing to WholesaleRx and purchased a 20% equity
stake in WholesaleRx. In consideration for providing financing for WholesaleRx’s purchaser orders, and to cover the Company’s
costs in administering the purchase order financing, WholesaleRx has agreed to pay the Company on or before the 15th
calendar day of each month 20% of the gross profit (as described above) for the prior calendar month. If WholesaleRx is late in
paying such 20% fee, then the amount owed will accrue interest at the rate of 18% per annum until paid



Per the November 1, 2013 agreement with
WholesaleRx the Company agreed to make an equity investment of $400,000 for 12,000 shares, which represents 20% ownership interest
in WholesaleRx. The subscription amount to be paid in three installments ($150,000 upon execution of the agreement, $125,000 paid
in January 2014 and $125,000 on February 15, 2014, which has not been made as of April 10, 2014).





36







Variable
Interest Entities (VIE)



P.I.M.D International, LLC



The Company is the primary beneficiary
of P.I.M.D. International, LLC (“PIMD”), a start-up limited
liability company based in, and proposing to do business in, Florida. Our determination PIMD investment is a variable interest
entity (VIE) was based on the facts ScripsAmerica receives a majority of its expected profits and losses. We also will provide
be the primary financing for inventory purchases through related parties. Our loan receivable of $272,000 and PIMD’s loan
payable was eliminated in the accompanying consolidated financial statements. The assets and liabilities and revenues and expenses
of PIMD have been included in the accompanying consolidated financial statements. The 10% outside ownership is shown as non-controlling
interest. At November 1, 2013, PIMD’s beginning capital was $41,000 and they had accumulated deficit of $49,607. During December
2013 the un-controlling interest made a distributed $104,930 making the total equity attributed to non-controlling interest to
be a deficit of $10,622.



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



Under this Sourcing and Marketing Agreement,
which the Company entered into with PIMD in December 2013, the Company will assist PIMD by helping PIMD to (1) secure advantageous
sources of drugs and (2) secure marketing and sales assistance in selling the drugs. For these services, the Company will receive
a “Sourcing and Marketing Fee” which is 45% of the “Calculated Basis” to be calculated under a formula
in the Sourcing and Marketing Agreement.



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



Off-Balance Sheet Arrangements



We currently have no off-balance sheet arrangements.



Critical Accounting Policies and estimates



Principles
of Consolidation - The consolidated financial statements include the accounts of the
Company and all of its subsidiary in which a controlling interest is maintained. All significant inter-company accounts and transactions
have been eliminated in consolidation. Investments in entities in which the Company does not have a controlling financial interest,
but over which we have significant influence are accounted for using the equity method. Investments in which we do not have the
ability to exercise significant influence are accounted for using the cost method. For those consolidated subsidiaries where Company
ownership is less than 100%, the outside stockholders’ interests are shown as non-controlling interest. Our equity investment
is classified in Investments on the balance sheet.



37







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



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



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



Commission
fees are recognized when earned on shipments of generic pharmaceutical and OTC products by our pharmaceutical partner, which is
a DEA and State-licensed to store and distribute controlled substances. Per our agreement with our pharmaceutical partner, the
Company will earn a 20% commission on the gross profit (sales less cost of goods sold, freight in and credits and allowances) of
products shipped to independent pharmacies on or after November 1, 2013 and 12.5% commission on gross profit of products shipped
to independent pharmacies prior to November 1, 2013.



Research and Development-
Expenditures for research and development (“R & D”) associated with contract research and development provided
by third parties are expensed, as incurred. The Company had charges of $0 and $37,524 for research and development expenses for
the years ended December 31, 2013 and 2012, respectively.



Accounts Receivable Trade, net-Accounts
receivable are stated at estimated net realizable value net of the sales allowance due to charge backs. The Chargeback reserve
at December 31, 2013 was zero because we did not have any receivable associated with McKesson and we no longer sell product to
McKesson. 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 December 31, 2013 and 2012 no allowance for doubtful accounts was
deemed necessary.



The Company
entered into an accounts receivable factoring facility agreement in June 2012. 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 to provide for an allowance for charge backs, for a net accounts receivable balance of $290,531.



Receivable – Contract Packager- The Company has receivables from Marlex Pharmaceuticals, Inc. (Contract Packager), in the amount of $1,088,598 and $1,579,051
at December 31, 2013 and 2012, respectively. As of December 31, 2013, this receivable consists of PO financing, revenue earned
for U.S. government sales and monthly payments due under the settlement agreement entered into
on September 6, 2013 (see Note 10). The 2012 receivable consists of the following: a) receivables relating to sales with a government
agency in the amount of $772,809, b) the Company’s payment of $600,000 to a vendor for the product to be manufactured on
behalf of our Contract Packager, and c) the Company’s advance of $206,241 to our Contract Packager for the purchase of product
inventory. In the second quarter of 2013, the Company fully reserved and expensed $1,210,999 which was the remaining balance. Per
the September 6, 2013 settlement agreement, the company is entitle to recover $408,150 consequently the unrecoverable amount have
been eliminated and since collectable is still not certain the remaining receivable is fully reserved as of December 31, 2013.



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



Income Taxes-The Company provides for income taxes using the 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 to reduce deferred tax assets to the amounts expected to be realized. The Company had a full valuation
allowance of $2,015,200 and $597,591 against deferred tax assets at December 31, 2013 and 2012, respectively.





38







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 December 31, 2013 and 2012.



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



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



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



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



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



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



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



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



The carrying values of accounts receivable, inventory,
accounts payable and accrued expenses, royalty payable, obligation due factor, and notes payable approximate their fair values
due to their short-term maturities. The carrying value of the Company’s long-term debt approximates fair value due to the
borrowing rates currently available to the Company for loans with similar terms. See note 13 for fair value of derivative liabilities.



Stock-Based Compensation–
Compensation expense is recognized for the fair value of all share-based payments issued to employees. As of December 31, 2013,
the Company has issued 2,015,000 employee stock options that would require calculating the fair value using a pricing model such
as the Black-Scholes pricing model, see note 15 for fair value. As of December 31, 2012, the Company had not issued any employee
stock options that would require calculating the fair value using a pricing model such as the Black-Scholes pricing model.





39







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.
|- |  | -----------------------------



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, options, convertible notes payable and Series A convertible preferred shares. Common
stock equivalents are not included in the computation of diluted earnings per share when the Company reports a loss because to
do so would be anti-dilutive. For details on number of common stock equivalents see Note 18 below.



|ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|-------- | ----------------------------------------------------------



Not
applicable.



















40









|ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|------- | -------------------------------------------





SCRIPSAMERICA, INC.

CONSOLIDATED FINANCIAL STATEMENTS





Contents



|                                                               | Page      
|-------------------------------------------------------------- | ----------
|Report of Independent Registered Public Accounting firm        | F-1       
|                                                               |           
|Consolidated Financial Statements - December 31, 2013 and 2012 |           
|                                                               |           
|Consolidated Balance Sheets                                    | F-2       
|Consolidated Statements of Operations                          | F-3       
|Consolidated Statements of Changes in Stockholders’ Deficit    | F-4       
|Consolidated Statements of Cash Flows                          | F-5       
|                                                               |           
|Consolidated Notes to Financial Statements                     | F-6 - F-28









41













REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM





To the Board of Directors and

Stockholders of ScripsAmerica, Inc.



We have audited the accompanying consolidated balance sheet
of ScripsAmerica, Inc. (the “Company”) as of December 31, 2013, and the related consolidated statement of operations,
stockholders’ deficit, and cash flows for the year then ended. We have also audited the accompanying balance sheet of the
Company as of December 31, 2012, and the related statement of operations, stockholders’ deficit and cash flows for the year
then ended. ScripsAmerica, Inc.’s management is responsible for these financial statements. Our responsibility is to express
an opinion on these financial statements based on our audits.



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



In our opinion, the 2013 consolidated financial statements referred
to above present fairly, in all material respects, the financial position of ScripsAmerica, Inc. as of December 31, 2013, and the
results of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted
in the United States of America. Also, in our opinion, the 2012 financial statements referred to above present fairly, in all material
respects, the financial position of ScripsAmerica, Inc. as of December 31, 2012, and the results of its operations and its cash
flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.



The accompanying consolidated financial statements have been
prepared assuming the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements,
the Company has incurred an operating loss and net loss of $7.3 million and $11.2 million, respectively during the year ended December
31, 2013, a working capital deficit of $1.7 million and has negative cash flows from operations of $1.8 million. These factors
raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regards to
these matters are discussed in Note 2. The consolidated financial statements do not include any adjustments that might result from
the outcome of these uncertainties. If the Company is unable to successfully refinance and raise additional capital to fund ongoing
operations there would be a material adverse effect to the consolidated financial statements.







/s/ FRIEDMAN LLP



East Hanover, New Jersey



April 15, 2014





F-1







SCRIPSAMERICA, INC.

Consolidated Balance Sheets



|                                                                                                                                                                           |  | December 31, |            
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | -----------
|                                                                                                                                                                           |  | 2013         |            
|ASSETS                                                                                                                                                                     |  |              |            
|Current Assets                                                                                                                                                             |  |              |            
|Cash                                                                                                                                                                       |  | $            | 47,293     
|Accounts receivable trade, net of allowance for charge backs of $105,443                                                                                                   |  |              | –          
|Receivable - contract packager, net of allowance of $408,150 and $0, respectively                                                                                          |  |              | 1,088,598  
|Receivable - related party                                                                                                                                                 |  |              | 24,223     
|Prepaid expenses and other current assets                                                                                                                                  |  |              | 329,673    
|Total Current Assets                                                                                                                                                       |  |              | 1,489,787  
|                                                                                                                                                                           |  |              |            
|Property and Equipment                                                                                                                                                     |  |              | –          
|                                                                                                                                                                           |  |              |            
|Other Assets                                                                                                                                                               |  |              |            
|Investments                                                                                                                                                                |  |              | 276,956    
|Other Assets                                                                                                                                                               |  |              | 14,720     
|                                                                                                                                                                           |  |              | 291,676    
|TOTAL ASSETS                                                                                                                                                               |  | $            | 1,781,463  
|                                                                                                                                                                           |  |              |            
|LIABILITIES AND STOCKHOLDERS' DEFICIT                                                                                                                                      |  |              |            
|Current Liabilities                                                                                                                                                        |  |              |            
|Line of credit                                                                                                                                                             |  | $            | 99,222     
|Accounts payable and accrued expenses                                                                                                                                      |  |              | 226,570    
|Purchase order financing - related party                                                                                                                                   |  |              | 1,037,494  
|Obligation due to factor                                                                                                                                                   |  |              | –          
|Royalty payable                                                                                                                                                            |  |              | 5,302      
|Royalty payable - related party                                                                                                                                            |  |              | –          
|Stock to be issued                                                                                                                                                         |  |              | 273,947    
|Current portion of long-term debt - related party                                                                                                                          |  |              | 122,529    
|Convertible notes payable - net of discount $259,396 and $50,918 respectively                                                                                              |  |              | 289,839    
|Derivative liability                                                                                                                                                       |  |              | 1,133,393  
|Total Current Liabilities                                                                                                                                                  |  |              | 3,188,296  
|                                                                                                                                                                           |  |              |            
|Non-Current Liabilities                                                                                                                                                    |  |              |            
|Preferred stock dividends payable                                                                                                                                          |  |              | 187,740    
|Convertible notes payable - related parties                                                                                                                                |  |              | 120,738    
|Convertible notes payable - net of discounts $168,273 and 0 respectively                                                                                                   |  |              | 628,795    
|Long-term debt, less current portion - related party                                                                                                                       |  |              | 230,287    
|Total Non-Current Liabilities                                                                                                                                              |  |              | 1,167,560  
|                                                                                                                                                                           |  |              |            
|Total Liabilities                                                                                                                                                          |  |              | 4,355,856  
|                                                                                                                                                                           |  |              |            
|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; 91,792,839 and 56,404,972 shares issued and outstanding as of December 31, 2013 and 2012, respectively |  |              | 91,794     
|Additional paid-in capital                                                                                                                                                 |  |              | 10,046,457 
|Accumulated deficit                                                                                                                                                        |  |              | (13,609,078
|Total Stockholders' Deficit of ScripsAmerica, Inc.                                                                                                                         |  |              | (3,470,827 
|                                                                                                                                                                           |  |              |            
|Deficit Attributed to Noncontrolling interest                                                                                                                              |  |              | (146,566   
|Total Stockholders' Deficit                                                                                                                                                |  |              | (3,617,393 
|TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT                                                                                                                                |  | $            | 1,781,463  



See accompanying notes to consolidated
financial statements.

F-2









SCRIPSAMERICA, INC.

Consolidated Statements of Operations



|                                                                                          |  | For the Years Ended December 31, |            
|----------------------------------------------------------------------------------------- |  | -------------------------------- | -----------
|                                                                                          |  | 2013                             |            
|Net revenues                                                                              |  |                                  |            
|Product revenues - net of contract adjustments                                            |  | $                                | 152,650    
|Revenues net, from contract packager                                                      |  |                                  | 333,638    
|Commission fees - related party                                                           |  |                                  | 69,902     
|Total net revenues                                                                        |  |                                  | 556,190    
|                                                                                          |  |                                  |            
|Cost of Goods Sold                                                                        |  |                                  |            
|Product                                                                                   |  |                                  | 210,540    
|Royalty expense                                                                           |  |                                  | 285,547    
|                                                                                          |  |                                  | 496,087    
|                                                                                          |  |                                  |            
|Gross Profit                                                                              |  |                                  | 60,103     
|                                                                                          |  |                                  |            
|Selling, General and Administrative Expenses                                              |  |                                  | 2,432,540  
|                                                                                          |  |                                  |            
|Selling, General and Administrative Expenses share-based compensation issued for services |  |                                  | 3,791,909  
|                                                                                          |  |                                  |            
|Provision for contract packager receivable                                                |  |                                  | 1,129,368  
|                                                                                          |  |                                  |            
|Research and Development                                                                  |  |                                  | –          
|                                                                                          |  |                                  |            
|Total Operating Expenses                                                                  |  |                                  | 7,353,817  
|                                                                                          |  |                                  |            
|Loss from Operations                                                                      |  |                                  | (7,293,714 
|                                                                                          |  |                                  |            
|Other Income (Expenses), net                                                              |  |                                  |            
|Interest expense                                                                          |  |                                  | (332,947   
|Loss from derivatives issued with debt greater than carrying value                        |  |                                  | (1,179,737 
|Financing costs                                                                           |  |                                  | (971,840   
|Loss on revaluation of derivatives                                                        |  |                                  | (1,288,623 
|Amortization of debt discount                                                             |  |                                  | (785,170   
|Gain on extinguishment of debt                                                            |  |                                  | 636,670    
|Income from equity investments                                                            |  |                                  | 1,956      
|                                                                                          |  |                                  | (3,919,691 
|                                                                                          |  |                                  |            
|Loss Before Provision  for Income taxes                                                   |  |                                  | (11,213,405
|                                                                                          |  |                                  |            
|Provision for Tax Expense                                                                 |  |                                  | –          
|                                                                                          |  |                                  |            
|Net Loss                                                                                  |  |                                  | (11,213,405
|                                                                                          |  |                                  |            
|Loss attributed to noncontrolling interest                                                |  |                                  | (18,309    
|                                                                                          |  |                                  |            
|Net Loss Attributable to ScripsAmerica, Inc.                                              |  |                                  | (11,195,096
|                                                                                          |  |                                  |            
|Preferred Stock Dividend                                                                  |  |                                  | (83,440    
|                                                                                          |  |                                  |            
|Net Loss Attributable to Common Shareholders                                              |  | $                                | (11,278,536
|                                                                                          |  |                                  |            
|Loss Per Common Share                                                                     |  |                                  |            
|Basic and Diluted                                                                         |  | $                                | (0.17      
|                                                                                          |  |                                  |            
|Weighted Average Number of Common Shares                                                  |  |                                  |            
|Basic and Diluted                                                                         |  |                                  | 68,119,715 



See accompanying notes to consolidated
financial statements.



F-3







SCRIPSAMERICA, INC.

Consolidated Statements of Changes in
Stockholders' Deficit

For the Years
Ended December 31, 2013 and 2012



|                                                                    |  | Common Stock |            |   | Subscription |   |        | Additional Paid-In |  |   | Retained Earnings |   |  | Stockholders' Deficit |            |   | Deficit       |   |             | Total Stockholders' | 
|------------------------------------------------------------------- |  | ------------ | ---------- | - | ------------ | - | ------ | ------------------ |  | - | ----------------- | - |  | --------------------- | ---------- | - | ------------- | - | ----------- | ------------------- | 
|                                                                    |  | Shares       |            |   | Amount       |   |        | Receivable         |  |   | Capital           |   |  | (Deficit)             |            |   | ScripsAmerica |   |             | Noncontrolling      | 
|Balance
    - January 1, 2012                                       |  |              | 52,521,684 |   |              | $ | 52,522 |                    |  | $ | (170,800          | ) |  | $                     | 494,487    |   |               | $ | (385,270    | )                   | 
|                                                                    |  |              |            |   |              |   |        |                    |  |   |                   |   |  |                       |            |   |               |   |             |                     | 
|Payment received
    for stock subscription                         |  |              | –          |   |              |   | –      |                    |  |   | 170,800           |   |  |                       | –          |   |               |   | –           |                     | 
|Common stock
    issued for cash                                    |  |              | 300,000    |   |              |   | 300    |                    |  |   | –                 |   |  |                       | 29,700     |   |               |   | –           |                     | 
|Common stock
    issued for services - BOD                          |  |              | 124,000    |   |              |   | 124    |                    |  |   | –                 |   |  |                       | 34,356     |   |               |   | –           |                     | 
|Common stock
    issued for services - employees                    |  |              | 114,288    |   |              |   | 114    |                    |  |   | –                 |   |  |                       | 19,886     |   |               |   | –           |                     | 
|Common stock
    issued for conversion of convertible Notes payable |  |              | 2,000,000  |   |              |   | 2,000  |                    |  |   | –                 |   |  |                       | 248,000    |   |               |   | –           |                     | 
|Common stock
    issued for services - non employees                |  |              | 1,345,000  |   |              |   | 1,345  |                    |  |   | –                 |   |  |                       | 229,755    |   |               |   | –           |                     | 
|Dividends for
    convertible preferred stock                       |  |              | –          |   |              |   | –      |                    |  |   | –                 |   |  |                       | –          |   |               |   | (83,440     | )                   | 
|Warrants issued
    for services                                    |  |              | –          |   |              |   | –      |                    |  |   | –                 |   |  |                       | 34,588     |   |               |   | –           |                     | 
|Net
    Loss                                                        |  |              |            |   |              |   |        |                    |  |   |                   |   |  |                       |            |   |               |   | (1,861,832  | )                   | 
|                                                                    |  |              |            |   |              |   |        |                    |  |   |                   |   |  |                       |            |   |               |   |             |                     | 
|Balance
    - December 31, 2012                                     |  |              | 56,404,972 |   |              | $ | 56,405 |                    |  | $ | –                 |   |  | $                     | 1,090,772  |   |               | $ | (2,330,542  | )                   | 
|                                                                    |  |              |            |   |              |   |        |                    |  |   |                   |   |  |                       |            |   |               |   |             |                     | 
|Common stock
    issued for cash                                    |  |              | 4,854,952  |   |              |   | 4,855  |                    |  |   | –                 |   |  |                       | 526,253    |   |               |   | –           |                     | 
|Common stock
    issued for services - Directors                    |  |              | 136,000    |   |              |   | 136    |                    |  |   | –                 |   |  |                       | 35,064     |   |               |   | –           |                     | 
|Common stock
    issued for conversion of Convertible Notes payable |  |              | 11,456,639 |   |              |   | 11,457 |                    |  |   | –                 |   |  |                       | 2,765,834  |   |               |   | –           |                     | 
|Common stock
    issued for services - non employees                |  |              | 9,177,027  |   |              |   | 9,177  |                    |  |   | –                 |   |  |                       | 3,377,935  |   |               |   | –           |                     | 
|Common stock
    issued for debt and payables                       |  |              | 8,690,000  |   |              |   | 8,690  |                    |  |   | –                 |   |  |                       | 1,294,810  |   |               |   | –           |                     | 
|Common stock
    issued for royalty payment                         |  |              | 1,339,616  |   |              |   | 1,340  |                    |  |   | –                 |   |  |                       | 345,463    |   |               |   | –           |                     | 
|Common stock
    retired for services previously provided           |  |              | (600,000   | ) |              |   | (600   | )                  |  |   | –                 |   |  |                       | (75,900    | ) |               |   | –           |                     | 
|Common stock
    issued for warrants in a cashless conversion       |  |              | 333,633    |   |              |   | 334    |                    |  |   | –                 |   |  |                       | (334       | ) |               |   | –           |                     | 
|Dividends for
    convertible preferred stock                       |  |              | –          |   |              |   | –      |                    |  |   | –                 |   |  |                       | –          |   |               |   | (83,440     | )                   | 
|Common stock
    options issued for services - Directors            |  |              | –          |   |              |   | –      |                    |  |   | –                 |   |  |                       | 246,731    |   |               |   | –           |                     | 
|Common stock
    options issued for services                        |  |              | –          |   |              |   | –      |                    |  |   | –                 |   |  |                       | 439,829    |   |               |   | –           |                     | 
|Noncontrolling
    interest beginning balance                       |  |              | –          |   |              |   | –      |                    |  |   | –                 |   |  |                       | –          |   |               |   | –           |                     | 
|Distribution
    taken from noncontrolling interest                 |  |              | –          |   |              |   | –      |                    |  |   | –                 |   |  |                       | –          |   |               |   | –           |                     | 
|Net
    Loss                                                        |  |              | –          |   |              |   | –      |                    |  |   | –                 |   |  |                       | –          |   |               |   | (11,195,096 | )                   | 
|                                                                    |  |              |            |   |              |   |        |                    |  |   |                   |   |  |                       |            |   |               |   |             |                     | 
|Balance
    - December 31, 2013                                     |  |              | 91,792,839 |   |              | $ | 91,794 |                    |  | $ | –                 |   |  | $                     | 10,046,457 |   |               | $ | (13,609,078 | )                   | 





See accompanying
notes to consolidated financial statements.



F-4







SCRIPSAMERICA, INC.

Consolidated Statements of Cash Flows



|                                                                              |  | For the Years Ended December 31, |            
|----------------------------------------------------------------------------- |  | -------------------------------- | -----------
|                                                                              |  | 2013                             |            
|Cash Flows from Operating Activities                                          |  |                                  |            
|Net Loss                                                                      |  | $                                | (11,213,405
|Adjustments to reconcile net loss to net cash used by operating activities:   |  |                                  |            
|Income from equity method investee                                            |  |                                  | (1,956     
|Amortization of discount on convertible notes payable                         |  |                                  | 785,170    
|Loss from derivatives issued with debt                                        |  |                                  | 1,179,737  
|Amortization of loan fees                                                     |  |                                  | 263,973    
|Common stock issued for services                                              |  |                                  | 3,191,812  
|Common stock issued for payment of royalty fees                               |  |                                  | 346,803    
|Common stock issued for finance fees                                          |  |                                  | 761,818    
|Options issued for services                                                   |  |                                  | 439,829    
|Options issued for services - Directors                                       |  |                                  | 246,731    
|Change in derivative liability                                                |  |                                  | 1,288,623  
|Change in deferred Income tax provision                                       |  |                                  | –          
|Reserve on receivable - Contract packager                                     |  |                                  | 1,385,000  
|Recovery of bad debt                                                          |  |                                  | (81,632    
|Gain on extinguishment of debt                                                |  |                                  | (636,670   
|Allowance for chargebacks                                                     |  |                                  | (11,399    
|Loss for property and equipment disposal                                      |  |                                  | 69,650     
|Change in operating assets and liabilities                                    |  |                                  |            
|Accounts receivable - trade                                                   |  |                                  | 253,485    
|Accounts receivable – related party                                           |  |                                  | 24,222     
|Receivable - Contract packager                                                |  |                                  | (667,336   
|Prepaid expenses and other current assets                                     |  |                                  | 143,134    
|Accounts payable and accrued expenses                                         |  |                                  | 428,157    
|Cash used in operating activities                                             |  |                                  | (1,804,254 
|Cash Flows from Investing Activities                                          |  |                                  |            
|Purchase of Investment                                                        |  |                                  | (150,000   
|Proceeds from note receivable                                                 |  |                                  | –          
|Cash provided by investing activities                                         |  |                                  | (150,000   
|Cash Flows from Financing Activities                                          |  |                                  |            
|Proceeds under bank line of credit, net                                       |  |                                  | 59,164     
|Proceeds from Issuance of common stock                                        |  |                                  | 531,108    
|Proceeds for stock to be issued                                               |  |                                  | 50,925     
|Proceeds from convertible notes payable                                       |  |                                  | 1,579,867  
|Proceeds (Payments) from convertible notes payable - related party            |  |                                  | (9,262     
|Proceeds from note payable - related party                                    |  |                                  | –          
|Proceeds from PO financing from related party, net                            |  |                                  | 437,964    
|Payments to factor, net                                                       |  |                                  | (141,725   
|Payments on convertible notes payable                                         |  |                                  | (288,336   
|Payments on note payable - related party                                      |  |                                  | (112,021   
|Payments to members of noncontrolling interest                                |  |                                  | (119,650   
|Collection of stock subscription receivable                                   |  |                                  | –          
|Cash provided by financing activities                                         |  |                                  | 1,988,034  
|                                                                              |  |                                  |            
|Net Increase (Decrease) in Cash                                               |  |                                  | 33,780     
|                                                                              |  |                                  |            
|Cash - Beginning of
    year                                                  |  |                                  | 13,513     
|                                                                              |  |                                  |            
|Cash - End of year                                                            |  | $                                | 47,293     
|                                                                              |  |                                  |            
|Supplemental Disclosures of Cash Flow Information                             |  |                                  | –          
|Cash Paid:                                                                    |  |                                  |            
|Interest                                                                      |  | $                                | 192,732    
|Noncash financing and investing activities:                                   |  |                                  |            
|Accrued Preferred Dividend payable                                            |  |                                  | 83,440     
|Conversion of note payable for common stock                                   |  |                                  | 979,554    
|Reduction in loan receivable from contract packager in exchange for inventory |  |                                  | –          
|Purchase order direct financing in exchange for inventory                     |  |                                  | –          
|Purchase of manufacturing equipment                                           |  |                                  | –          
|Stock issued for inventory advance                                            |  |                                  | 275,010    



See accompanying notes to consolidated
financial statements.



F-5







|SCRIPSAMERICA, INC.                        |                           
|------------------------------------------ | --------------------------
|Notes to Consolidated Financial statements | December 31, 2013 and 2012









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



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



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



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









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



At December 31, 2013, the
Company had approximately $47,000 in cash and incurred a loss from operations of approximately $7.3 million, of which
approximately $5.1 million of the loss was due to non-cash charges and also had an accumulated deficit of $13.6 million.
Further business with our largest customer in 2012 was stopped during 2013 which reduced our revenue by $3.3 million from
2012. After taking into consideration our 2014 interim results to date and current projections for the remainder of 2014,
management believes that the Company’s cash flow from operations, coupled with recent financings are not sufficient to
support the working capital requirements, debt service, applicable debt maturity requirements, and operating expenses through
December 31, 2014. The Company’s ability to continue as a going concern is highly dependent upon (i) management’s
ability to re-establish its business model and equal or exceed its planned operating cash flows (ii), maintain continued
availability on its line of credit and the ability to obtain additional financing or capital to fund its debt service
obligations coming due and operating expenses.



These conditions raise substantial
doubt regarding the Company’s ability to continue as a going concern. The accompanying financial statements do not include
any adjustments that may result from the outcome of this uncertainty. Although the Company has successfully
obtained various funding and financing in the past, future financing and funding options may be challenging in the current environment
and cannot be expected based on past results.



We
completed the development of a children’s pain relief rapid orally disintegrating 80 mg
and 160 mg tablets for OTC products. In the second quarter of 2013, we signed a supply agreement with a generic manufacturer for
the production of these rapid orally disintegrating products.In January 2014, the Company formed a joint venture entity,
Global Pharma Hub, Inc., for the licensing, marketing and distribution of our pediatric RapiMed® acetaminophen in China. On
March 10, 2014, we received a$200,000 purchase order for ourchildren’s pain
relief rapid orally disintegrating80mg tablets from Global Pharma Hub for the China market.However, we estimate that we will need approximately $1.5 million of incremental funding to launch RapiMed® products
in the United States. The funding for launching the rapid orally disintegrating products in the U.S. is expected to come from the
sale of equity securities, or debt financing.  However, such financing has not yet been secured.







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



A summary of significant
accounting policies follows:



a.Principles of Consolidation - The consolidated financial statements include the
accounts of the Company and all of its subsidiary in which a controlling interest is maintained. All significant
inter-company accounts and transactions have been eliminated in consolidation. Investments in entities in which the Company
does not have a controlling financial interest, but over which we have significant influence are accounted for using the
equity method. Investments in which we do not have the ability to exercise significant influence are accounted for using the
cost method. For those consolidated subsidiaries where Company ownership is less than 100%, the outside stockholders’
interests are shown as non-controlling interest. Our equity investment is classified in Investments on the balance
sheet.





F-6







|SCRIPSAMERICA, INC.                        |                           
|------------------------------------------ | --------------------------
|Notes to Consolidated Financial statements | December 31, 2013 and 2013





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



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



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



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



Commission
fees are recognized when earned on shipments of generic pharmaceutical and OTC products by our pharmaceutical partner, which is
a DEA and State-licensed to store and distribute controlled substances. Per our agreement with our pharmaceutical partner, the
Company will earn a 20% commission on the gross profit (sales less cost of goods sold, freight in and credits and allowances) of
products shipped to independent pharmacies on or after November 1, 2013 and 12.5% commission on gross profit of products shipped
to independent pharmacies prior to November 1, 2013.



d.Research and
Development- Expenditures for research and development (“R & D”) associated with contract research
and development provided by third parties are expensed, as incurred. The Company had charges of $0 and $37,524 for research
and development expenses for the years ended December 31, 2013 and 2012, respectively.



e.Accounts
Receivable Trade, net-Accounts receivable are stated at estimated net realizable value net of the sales
allowance due to charge backs. The Chargeback reserve at December 31, 2013 was zero because we did not have any receivable
associated with McKesson and we no longer sell product to McKesson. 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 December 31, 2013 and 2012 no allowance for doubtful accounts was deemed
necessary.



The
Company entered into an accounts receivable factoring facility agreement in June 2012. 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 to provide for an allowance for charge backs, for a net accounts receivable balance
of $290,531.



f. 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. In December 2013, it was discovered
that a potential supplier of product who physically had the equipment which we had purchased in 2012, had gone bankrupt. It was
determined that the equipment was unrecoverable and, consequently, we wrote-off the assets and expensed $69,650 to the statement
of operations.





F-7









|SCRIPSAMERICA, INC.                        |                           
|------------------------------------------ | --------------------------
|Notes to Consolidated Financial statements | December 31, 2013 and 2012



g. Receivable –
Contract Packager- The Company has receivables from Marlex Pharmaceuticals, Inc. (Contract Packager), in the amount of
$1,088,598 and $1,579,051 at December 31, 2013 and 2012, respectively. As of December 31, 2013, this receivable consists of PO
financing, revenue earned for U.S. government sales and monthly payments due under the settlement
agreement entered into on September 6, 2013 (see Note 10). The 2012 receivable consists of the following: a) receivables relating
to sales with a government agency in the amount of $772,809, b) the Company’s payment of $600,000 to a vendor for the product
to be manufactured on behalf of our Contract Packager, and c) the Company’s advance of $206,241 to our Contract Packager
for the purchase of product inventory. In the second quarter of 2013, the Company fully reserved and expensed $1,210,999 which
was the remaining balance. Per the September 6, 2013 settlement agreement, the Company is entitled to recover $408,150 of which
$81,632 has been recovered during 2013. Consequently the reserved amount has been offset against the allotment and since collectability
is still not certain on the remaining receivable, we have fully reserved it as of December 31, 2013.



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



i.Customer,
Product, and Supplier Concentrations -For the first four months of 2013 and the entire 2012
fiscal year we sold our products directly to a wholesale drug distributor who, in turn, supplies products to pharmacies,
hospitals, governmental agencies, and physicians. The Company used one Contract Packager exclusively for all of its
warehouse, customer service, distribution, and labeling services for the first four months of 2013 and entire 2012 fiscal
year. In September 2013, the Company added a second supplier of products.



In 2013, we entered into an
agreement with a company that represents over 700 pharmacy independent operations. Under this agreement, this partner company will
order the goods from the manufacturers and have them shipped to our pharmaceutical partner, which is DEA and State-licensed to
store and distribute controlled substances. The goods will be shipped to the pharmacies in the bottles as received by the manufacturer.



j. 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 December
31, 2013 and 2012.



k. Income Taxes-The
Company provides for income taxes using the 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 to reduce deferred tax assets to the amounts expected to be realized.
The Company had a full valuation allowance of $2,015,200 and $597,591 against deferred tax assets at December 31, 2013 and
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 December 31, 2013 and 2012.



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





F-8







|SCRIPSAMERICA, INC.                        |                           
|------------------------------------------ | --------------------------
|Notes to Consolidated Financial statements | December 31, 2013 and 2012



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.



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



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



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



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



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



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



The carrying values of accounts receivable, inventory,
accounts payable and accrued expenses, royalty payable, obligation due factor, and notes payable approximate their fair values
due to their short-term maturities. The carrying value of the Company’s investments approximate fair value because the investments
were made in 2013 and the carrying value includes the Company’s share of the investee’s earnings from the date of acquisition.
(See Note 8.) The carrying value of the Company’s long-term debt approximates fair value due to the borrowing rates currently
available to the Company for loans with similar terms. See note 13 for fair value of derivative liabilities.



n. Advertising Expenses-The Company expenses advertising costs as incurred. The Company incurred advertising expenses in
the amount of $371,786 and $62,875 for the years ended December 31, 2013 and 2012, respectively.



o. 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 financial statements.



p. Stock-Based
Compensation– Compensation expense is recognized for the fair value of all share-based payments issued to
employees. As of December 31, 2013, the Company has issued 1,320,000 employee stock options that would require calculating
the fair value using a pricing model such as the Black-Scholes pricing model, see note 15 for fair value. As of December 31,
2012, the Company had 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,
|- |  | --------------------------------------------





F-9







|SCRIPSAMERICA, INC.                        |                           
|------------------------------------------ | --------------------------
|Notes to Consolidated Financial statements | December 31, 2013 and 2012



|· |  | 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.
|- |  | -----------------------------



q. Cost
of Goods Sold–In fiscal year 2012 and for the first half of fiscal year 2013, the Company
purchases all of its products from one supplier, MarlexPharmaceuticals Inc., a related partyat various contracted prices. Raw materials were 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 (see notes 6 and 10 below). Beginning is
August 2013 we added a second source for supplying our pharmaceutical product needs. These purchases are also financed based
on confirmed purchase orders via a revolving finance agreement, provided by a related party.



r.
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, options, convertible notes payable and
Series A convertible preferred shares. Common stock equivalents are not included in the computation of diluted earnings per
share when the Company reports a loss because to do so would be anti-dilutive. For details on number of common stock
equivalents see Note 18 below.



s. Reclassification -Certain amounts in the financial statements as of and for the year ended December 31, 2012 have been reclassified for comparative
purposes to conform to the presentation in the financial statements as of and for the year ended December 31, 2013.



t. New Accounting Pronouncements
–



On July 18, 2013, the Financial
Accounting Standards Board (“FASB”) issued ASU No. 2013-11, “ Presentation of an Unrecognized Tax Benefit
When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists ” (“ASU 2013-11”).
ASU 2013-11 states that an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial
statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss or a tax credit carryforward,
except as follows. The unrecognized tax benefit should be presented in the financial statements as a liability and should not be
combined with deferred tax assets to the extent (i) a net operating loss carryforward, a similar tax loss or a tax credit carryforward
is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that
would result from the disallowance of a tax position, or (ii) the tax law of the applicable jurisdiction does not require the entity
to use, and the entity does not intend to use, the deferred tax assets for such purpose. The amendments in ASU 20103-11 are effective
prospectively for interim and annual reporting periods beginning after December 15, 2013. The adoption of ASU 2013-11 is not expected
to have a material impact on our financial position, results of operations or cash flows.



In December 2011, the FASB
issued ASU No. 2011-11, “Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities,” and
in January 2013 issued ASU No. 2013-01, “Clarifying the Scope of Disclosures About Offsetting Assets and Liabilities.”
These standards create new disclosure requirements regarding the nature of an entity’s rights of setoff and related arrangements
associated with its derivative instruments, repurchase agreements, and securities lending transactions. Certain disclosures of
the amounts of certain instruments subject to enforceable master netting arrangements would be required, irrespective of whether
the entity has elected to offset those instruments in the statement of financial positions. ASU 2011-11 and ASU 2013-01 are effective
for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. The adoption
of ASU 2011-11 did not have a material impact on the Company’s financial position or results of operations.



Management does not believe
there would have been a material effect on the accompanying financial statements had any other recently issued, but not yet effective,
accounting standards been adopted in the current period.





|4 - | Accounts Receivable Trade, 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 2013 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 fiscal year ended December 31, 2013 and 2012, were $5,069
and $48,948 respectively.







F-10







|SCRIPSAMERICA, INC.                        |                           
|------------------------------------------ | --------------------------
|Notes to Consolidated Financial statements | December 31, 2013 and 2012





As of December 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 balance sheet.



|5 - | Revenues Net, From Contract Packager and Commission Fees
|--- | --------------------------------------------------------



In September 2012, the Company
announced that our Contract Packager, secured an 8-year, $79 million pharmaceutical distribution contract with the U.S.
government. On September 30, 2012, our Contract Packager began shipping its first order on this distribution contract with
the U.S. government.



The Company had a Joint Operating
Agreement with the Contract Packager which was superseded by an agreement entered into on September 6, 2013 (see Note 10). Under
this September 6th agreement, the Company is entitled to receive a percentage of the Contract Packager’s profit,
as defined, net of financing charges and royalties. Since we are not deemed to be theprincipal in these sales transactions
we do not report these sales transactions on a gross basis in our condensed statements of operations. The revenue is reported separately
in the condensed statements of operations as revenues net, from Contract Packager. The gross sales and cost of sales from this
U.S. government contacts were:



|                                       |  | December 31, |          
|-------------------------------------- |  | ------------ | ---------
|                                       |  | 2013         |          
|                                       |  |              |          
|Sales from U.S. government contract    |  | $            | 6,433,644
|Cost on U.S. government, per agreement |  |              | 6,100,006
|Revenues net, from contract packager   |  | $            | 333,638  



In August 2013, we entered into
an agreement with a pharmaceutical partner which began shipping generic pharmaceutical and OTC products to independent pharmacies.
Under the master agreement with our pharmaceutical partner, we received a commission of 12.5% on gross margins of pharmaceutical
products shipped prior to November 1, 2013 and 20% on the gross margin of pharmaceutical products shipped after November 1, 2013.
During 2013, this commission structure generated commission revenue of $69,902.





|6 - | Receivable
and Other Assets-Contract Packager
|--- | ---------------------------------------------



| |  | Beginning in fiscal year 2011, the Company loaned money to the 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 December 31, 2013, and 2012 was $717,503 and $743,503 respectively. On September 14, 2012 the Company entered into a
letter of intent agreement to purchase the Contract Packager. Upon closing of the purchase of the Contract Packager, the loan receivable
would be eliminated. Management had determined that the outstanding balance should be fully reserved as of December 31, 2012 and
was written off in the quarter ending September 30, 2013.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | As of December 31, 2013, the outstanding receivable balance is $1,088,598 which consists of a receivable
for PO financing, revenue earned on U.S. government sales and monthly payments.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | 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 recorded a reserved against
this deposit since there was uncertainty concerning the royalty agreement with its Contract Packager, as this amount may never
be applied to future royalty payments or otherwise recovered (see Note 17). This deposit was written off in the quarter ending
September 30, 2013 (see Note 8).
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





F-11







|SCRIPSAMERICA, INC.                        |                           
|------------------------------------------ | --------------------------
|Notes to Consolidated Financial statements | December 31, 2013 and 2012



|7 - | Receivable– related party
|--- | -------------------------



WholesaleRx in which we have a 14% investment where we recognized Commission
fees when earned on shipments of generic pharmaceutical and OTC products by our pharmaceutical partner, which is a DEA and State-licensed
to store and distribute controlled substances. The receivable consists of PO financing, and revenue earned for commission sales
agreement entered into in November 1, 2013. The balances at December 31, 2013 is $24,223 . No reserve for un-collectability was
deemed.



|8 - | Equity Investments
|--- | ------------------



WholesaleRx



As
of December 31, 2013, the Company has a 14% non-controlling ownership interest in WholesaleRx, Inc., which represents over 700
such independent pharmacy operations and is a DEA and State-licensed to store and distribute controlled substances (which are drugs
that have the potential for abuse or dependence and are regulated under thefederal Controlled Substances Act).WholesaleRxorders the goods from the manufacturers and has them shipped to its warehouse facility. WholesaleRx
thenships thegoods to the pharmacies
in the bottles as received by the manufacturer. Upon receiving orders from the pharmacies, goods will be sent to them COD which
will eliminate any accounts receivable issues.Prior to November 1, 2013, the Company and WholesaleRx had an oral agreement
to pursuant to which the Company secured third party financing to fund WholesaleRx’s purchase orders and the Company in consideration
of which the Company would receive 12.5% of the WholesaleRx’s “gross profit” for the prior month (which gross
profit would consist of (i) sales to all customers minus (ii) cost of goods sold, freight in (to WholesaleRx), credits and allowances).
Under the November 1 Agreement, ScripsAmerica agreed to provide purchase order financing to WholesaleRx and purchased a 20% equity
stake in WholesaleRx. In consideration for providing financing for WholesaleRx’s purchaser orders, and to cover the Company’s
costs in administering the purchase order financing, WholesaleRx has agreed to pay the Company on or before the 15th
calendar day of each month 20% of the gross profit (as described above) for the prior calendar month. If WholesaleRx is late in
paying such 20% fee, then the amount owed will accrue interest at the rate of 18% per annum until paid.



Per the November 1, 2013 agreement
with WholesaleRx the Company agreed to make an equity investment of $400,000 for 12,000 shares, which will represent 20% ownership
interest in WholesaleRx. The subscription amount is to be paid in three installments ($150,000 upon execution of the agreement,
$125,000 on December 31, 2013 (and was paid in January 2014) and $125,000 on February 15, 2014, which has not been made as of April
10, 2014).



This investment is accounted
for under the equity method because the Company exercises significant influence but does not exercise control. Our initial investment
of $275,000 was increased for the equity earnings of our 14% interest in WholesaleRx to $276,956. WholesaleRx’s unaudited
financial information as of December 31, 2013 is as follows: (i) Current assets are approximately $137,000 of which inventory was
valued at $72,000; (ii) Total assets were approximately $160,000; (iii) Total liabilities were approximately $19,000; and (iv)
Stockholders’ equity was approximately $141,000.



P.I.M.D International, LLC



The Company is the primary beneficiary
of P.I.M.D. International, LLC (“PIMD”), a start-up limited
liability company based in, and proposing to do business in, Florida and Variable Interest Entity (VIE. Our determination PIMD
investment is a variable interest entity (VIE) was based on the fact PIMD’s equity at risk is insufficient to finance its
activities. The Company would be considered the primary beneficiary of the VIE as it has both of the following characteristics:
(a) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (b) the
obligation to absorb losses of the VIE that could potentially be significant or the right to receive benefits from the VIE that
could potentially be significant. ScripsAmerica receives a majority of its expected profits and losses. We also will provide be
the primary financing for inventory purchases through related parties. Our loan receivable of $272,000 with Implex Corporation
and PIMD’s loan payable was eliminated in the accompanying consolidated financial statements. The assets and liabilities
and revenues and expenses of PIMD have been included in the accompanying consolidated financial statements. At November 1, 2013,
PIMD’s beginning capital was $41,000 and they had accumulated deficit of $49,607. During December 2013 the non-controlling
interest made a distribution of $119,650, making the total equity attributed to non-controlling interest to be a deficit of $146,566.



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



F-12







|SCRIPSAMERICA, INC.                        |                           
|------------------------------------------ | --------------------------
|Notes to Consolidated Financial statements | December 31, 2013 and 2012



Under this Sourcing and Marketing
Agreement, which the Company entered into with PIMD in December 2013, the Company will assist PIMD by helping PIMD to (1) secure
advantageous sources of drugs and (2) secure marketing and sales assistance in selling the drugs. For these services, the Company
will receive a “Sourcing and Marketing Fee” which is 45% of the “Calculated Basis” to be calculated under
a formula in the Sourcing and Marketing Agreement.



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



Main Avenue Pharmacy, Inc.
agreement with Implex Corporation a related party



On January 29, 2014, Implex Corporation,
which is owned by our legal counsel, Richard C. Fox, entered into a stock purchase agreement with the owner to acquire the
specialty pharmacy Main Avenue Pharmacy, Inc., located in Clifton, New Jersey, for $550,000. The purchase price will be paid in
installments and the shares will be held by an escrow agent until the final payment is made. Under the purchase agreement, the
final agreement is to be made on July 11, 2014 (unless extended by the parties). Since ScripsAmerica will have significant controlling
interest via related party relationships and will be the primary beneficiary the company will consolidate financial activities
of Main Avenue Pharmacy In. in first quarter 2014.



For details of this transactions
see note 20.



|9 - | Prepaid
Expenses and Other Current Assets
|--- | -----------------------------------------



|Prepaid expenses and other current assets consist of the following : |  |              |        
|-------------------------------------------------------------------- |  | ------------ | -------
|                                                                     |  | December 31, |        
|                                                                     |  | 2013         |        
|Prepayment for product to be manufactured                            |  |              | 275,000
|Prepaid insurances                                                   |  |              | 25,400 
|Deferred financing costs, net                                        |  |              | 27,575 
|Prepaid consulting                                                   |  |              | –      
|Prepaid other                                                        |  |              | 1,698  
|TOTAL PREPAID EXPENSES AND OTHER CURRENT ASSETS                      |  |              | 329,673



|10 - | Cancellation of Material Definitive Agreement – Contract Packager
|---- | -----------------------------------------------------------------



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



This agreement provides Marlex
with financing through a related party, Development 72 LLC, for the continuance of its pharmaceutical distribution contract with
the U.S. government and for Marlex to make 15 monthly payments to the Company with respect to
prior shipments under the U.S. government contract (which had had stopped in May 2013 due to
a dispute but have resumed in September 2013). The Company’s percentage of the profits under the U.S.
government contract had been revised in terms of the rate and the number of bottles of product sold to the U.S.
government for which the Company would receive revenue.





F-13







|SCRIPSAMERICA, INC.                        |                           
|------------------------------------------ | --------------------------
|Notes to Consolidated Financial statements | December 31, 2013 and 2012



To protect our position with respect
to the RapiMed® products we also terminated the Product Development, Manufacturing and Supply Agreement with the Contract Packager.
All development costs through the date of the cancellation of this agreement have previously been expensed and paid. The Company
subsequently entered into a manufacturing and supply contract directly with the manufacturer of this technology for the RapiMed®
products; however, that agreement was terminated in the first quarter of 2014.



Pursuant to the September 6th settlement
agreement, the principals of the Contract Packager returned 500,000 shares of common stock of the Company which were previously
valued at $50,000, and which they had received under consulting agreements and another 400,000 shares of common stock of the Company
issued to them that would be held as security for the payments due to the Company under this September agreement. In September
2013, the Company retired the 500,000 shares and reversed the consulting expense previously incurred through additional paid in
capital.



|11 - | Related Party Transactions
|---- | --------------------------



In January 2013, the Company entered
into consulting agreement with Implex Corporation, a consulting firm owned by the Company’s legal counsel. The initial agreement
terms are for six months and the agreement shall automatically be renewed for a successive month period(s) until one party gives
written notice to terminate the agreement thirty days prior to the next termination date. Fees are $25,000 per month and such fees
shall be paid in shares of the Company’s common stock rather than cash so as to permit the Company to conserve cash. During
2013 the Company issued to Implex Corporation 824,956 shares of common stock at a fair value of $259,996.



During fiscal year 2013, the
Company paid $120,000 in consulting fees and $23,231 for interest expense on loans to a consulting firm owned by the Company’s
CEO and a note payable owned to the wife of the CEO. The Company also paid $178,000 in consulting fees to a consulting firm owned
by the Company’s Chief Financial Officer.



During fiscal year 2012, the Company
received payment of $6,055 from a stockholder, who is also an officer of the Company. As of December 31, 2012 and 2011, the outstanding
balance is $0 and $6,055, respectively, and is classified as notes receivable - related party- net.



In 2012, the Company paid $120,000
in consulting fees and interest expense on loans to a consulting firm owned by the Company’s CEO. The Company issued 114,288
shares of common stock valued at $20,000 to the consulting firm owned by the CEO for services provided, and the Company accrued
$5,000 for services provided in 2012 and accrued $4,000 for interest expense on a note payable to the wife of the CEO. The Company
also paid $180,000 in consulting fees to a consulting firm owned by the Company’s Chief Financial Officer.



See note 12 for related party
debt



See note 19 for purchase order
financing with related party



|12 - | Debt
|---- | ----



Debt consists
of the following as of December 31, 2013 and 2012:



|                                                       |  | December 31, 2013 |           |  | December 31, 2012 | 
|------------------------------------------------------ |  | ----------------- | --------- |  | ----------------- | 
|                                                       |  |                   |           |  |                   | 
|Line of credit                                         |  |                   | 99,223    |  |                   | 
|Debt with related party                                |  |                   | 352,816   |  |                   | 
|12% Fixed rate Convertible notes payable               |  |                   | 574,778   |  |                   | 
|12% Fixed rate Convertible notes payable-related party |  |                   | 120,738   |  |                   | 
|8% variable convertible notes payable                  |  |                   | 116,334   |  |                   | 
|10% variable convertible notes payable                 |  |                   | 179,291   |  |                   | 
|12% variable convertible notes payable                 |  |                   | 48,230    |  |                   | 
|Total notes payable                                    |  |                   | 1,491,410 |  |                   | 
|Less current maturities                                |  |                   | 511,590   |  |                   | 
|Long-term maturities                                   |  |                   | 979,820   |  |                   | 
|                                                       |  |                   |           |  |                   | 
|Debt discounts consist of the following:               |  |                   |           |  |                   | 
|8% variable convertible notes payable                  |  |                   | 286,166   |  |                   | 
|10% variable convertible notes payable                 |  |                   | 100,709   |  |                   | 
|12% variable convertible notes payable                 |  |                   | 40,794    |  |                   | 
|                                                       |  |                   | 427,669   |  |                   | 



F-14









|SCRIPSAMERICA, INC.                        |                           
|------------------------------------------ | --------------------------
|Notes to Consolidated Financial statements | December 31, 2013 and 2012



Line of Credit



In October 2013, the Company’s
line of credit from Wells Fargo Bank was renewed. This line of credit will allow the Company to borrow up to a maximum of $100,000,
at an interest rate of prime plus 6.25% (of 9% at December 31, 2013). The line is secured by a personal guarantee by the Company’s
CEO. The outstanding borrowings under this line of credit at December 31, 2013 and 2012 were $99,222 and $40,059, respectively.
The Company incurred interest expense under this line of credit of approximately $3,725 and $580 for the years ended December 30,
2013 and 2012, respectively.



Debt with related party



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



In addition to the monthly
loan repayments, during the 48 month period ending August 15, 2016, and regardless if the loan is prepaid in full, the Company
will pay to Development 72 a royalty equal to one percent (1%) of all revenues that the Company receives from the Company’s
sale or distribution of its RapiMed® rapid orally disintegrating formulation products. The royalty payments will be made quarterly
and are subject to a fee for late payment or underpayment Development 72 is a related party because the manager of Development
72, Andrius Pranskevicius, is a member of the Company’s board of directors. There were no sales during 2013 and 2012 related
to and therefore no royalties expensed or owed.



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



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



Interest expense associated
with this note for the fiscal, 2013, was $37,289. The outstanding balance at December 31, 2013 and 2012, was $352,816 and $464,837,
respectively with the current liability balance of $122,529 and $112,021, respectively.





F-15







|SCRIPSAMERICA, INC.                        |                           
|------------------------------------------ | --------------------------
|Notes to Consolidated Financial statements | December 31, 2013 and 2012



12% Fixed rate Convertible
notes payable



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



In December 2013, the Company and the lenders mutually
agreed to change the conversion rate for loans issued in 2012 from $.25 per share to $.17 per share and also agree to extend the
maturity date from January 30, 2014 to January 30, 2015. In addition, for some of these loans by mutual consent the interest rate
was decreased from 2% per month to 1% per month. The Company determined that the resulting modification of the these notes were not
substantial in accordance with ASC 470-50, “Modification and Extinguishments.” During fiscal year 2013 the following
activity occurred relating various notes in this category: the Company received $418,200 in cash for several new convertible promissory
notes, the Company made $115,522 in principal payments, $229,400 of principal was converted into new notes with new terms which
are disclose in the variable convertible description, $230,000 of principal was retired via a liability exchange for stock. The
Company recorded interest expense for fiscals years 2013 and 2012, of $77,250 and $86,164, respectively.



12% Fixed rate Convertible
notes payable-related party



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



In December 2013, the Company
and the lender mutually agreed to change the conversion rate from $.25 per share to $.17 per share and also agree to extend the
maturity date from January 30, 2014 to January 30, 2015. In 2012 by mutually consent the interest rate was changed from 2% per
month to 1% per month effective October 1, 2012. As of December 31, 2013 and 2012 the principal balance is $80,000. The Company
recorded interest expense for fiscals years 2013 and 2012, of $9,600 and $16,000, respectively.



In 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 $0.17 per share, at the
option of the lender. There is no required principal payment on the note until maturity which is January 30, 2015. The
principal portion of the note can be converted into common stock at any time during the term of the loan at the rate of $0.17
per share at the option of the lender. The note can be extended by mutual consent of the lender and the Company. In December
2013, the Company and the lender mutually agreed to change the conversion rate from $.25 per share to $.17 per share and also
agree to extend the maturity date from January 30, 2014 to January 30, 2015. The Company determined that the resulting
modification of these notes were not substantial in accordance with ASC 470-50, “Modification and Extinguishments.”
Our Contact Packager also 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. In December 2013 the Company made a cash principal
payment in the amount of $9,262. As of December 31, 2013 and 2012 the principal balance is $40,738 and $50,000, respectively.
The Company recorded interest expense for fiscal years 2013 and 2012, of $6,000 and $16,000, respectively. As of December 31,
2012, the Company has accrued $10,500 in royalties. In fiscal 2013 the Company issued 224,944 shares of its common stock for
payment of royalty expense and recorded a royalty expense of $57,580. Collateral for this loan also includes 200,000 shares
of the Company’s common stock.



6% Variable Convertible
notes payable



During fiscal year 2013, the
Company entered into three securities purchase agreement with a lender pursuant to which the leader purchased a 6% convertible
note. The Company received $95,300 in cash for three 6% convertible note payable with a principal amounts totaling 110,000. These
notes did not include a discount, but $14,700 was paid directly to a third party on the Company’s behalf. The accrued interest
and principal were due one year from the issuance date. 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.



During fiscal year 2013 the
lender converted $110,000 of principal into 1,235,868 shares of our common stock valued at $246,941. In connection with these conversion
the Company recorded a gain on extinguishment of $40,026 after taking into consideration the carrying value of the note and the
corresponding embedded derivative liability related to the note on the conversion date.





F-16







|SCRIPSAMERICA, INC.                        |                           
|------------------------------------------ | --------------------------
|Notes to Consolidated Financial statements | December 31, 2013 and 2012



8% Variable Convertible
notes payable



During fiscal year 2012, the
Company entered into two securities purchase agreement with lenders pursuant to which the leader purchased a 8% convertible note.
The Company received $110,000 in cash for two 8% convertible note payable with a principal amounts totaling $115,750. These notes
did not include a discount, but $5,750 was paid directly to a third party on the Company’s behalf. The accrued interest and
principal were due six months and eight months from the issuance date. Since these notes had 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 we recorded
the associated embedded derivative as a discount. The conversion price for one loan was equal to 35% 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 for the second loan was equal to 42% 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.



During fiscal year 2013 the
Company paid the sum of $167,365 to the holders of these notes for the principal of $115,750, accrued interest. These payments
included a prepayment penalty charge of $51,615. The company extinguished the debt and the embedded derivative of which resulted
in a gain on extinguishment of $103,170.



Also during fiscal year 2013 the Company entered into
six new securities purchase agreements with various lenders to which the lenders purchased a 8% convertible note. The Company received
$462,000 in cash for these 8% convertible notes payable with principal amounts equaling $547,500, some of these notes included
a 10% discount the discount amounts equal $27,500 and fees totaling $58,000 were paid directly to third parties for legal and finder
fees. The maturity dates for these notes range from six months to nineteen months from date of issuance. The conversion price for
these notes is equal to a 40% to 65% discount to the lowest closing trading prices or an average of trading prices of the Company’s
common stock at the close of trading during a 5 to 10 trading day period prior the date of the notice of conversion. For some of
these note there is a prepayment charge range from 150% to 125% of the principal amount and accrued interest before a set period
of time.



Since these notes have a convertible
features with a significant discount and could result in the note principal being converted to a variable number of the Company’s
common 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 ranges between
161.6% to 200.7%, risk-free interest rate ranges between .07% to .12% and expected life of 12 to 11 months. The fair value of the
derivative at the date issued amounted to $1,329,815 and was revalued at December 31, 2013 to be $606,112. The debt discount associated
with this derivative is being amortized over the life of the notes.



In addition to obtaining new
borrowings in 2013 lenders converted $237,526 of principal into 2,902,496 shares of our common stock valued at $971,103. Along
with these stock conversions the Company paid the sum of $37,410 to the holders of these notes for the principal of $22,174, and
accrued interest. These payments included a prepayment penalty charge of $15,236. The company extinguished the debt and the embedded
derivative which resulted in a gain on extinguishment of $238,015.



As of December 31, 2013 and
2012 the principal balance is $402,500 and $115,750 and the unamortized debt discount is $286,166 and $50,918, respectively. The
Company recorded interest expense for fiscals years 2013 and 2012, of $112,593 and $36,809, respectively. The Company would have
been required to issue 6,044,978 of common stock if the lenders converted on December 31, 2013. The Fair value of the derivative
liability at December 31, 2013 and 2012 is $606,112 and $94,477, respectively



10% Variable Convertible
notes payable



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





F-17







|SCRIPSAMERICA, INC.                        |                           
|------------------------------------------ | --------------------------
|Notes to Consolidated Financial statements | December 31, 2013 and 2012



Since these notes have a convertible
features with a significant discount and could result in the note principal being converted to a variable number of the Company’s
common 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 ranges between
161.6% to 200.7%, risk-free interest rate ranges between .07% to .12% and expected life of 12 to 11 months. The fair value of the
derivative at the date issued amounted to $631,361 and was revalued at December 31, 2013 to be $383,337. The debt discount associated
with this derivative is being amortized over the life of the notes.



In addition to obtaining new
borrowings in 2013 lenders converted $203,702 of principal into 2,654,353 shares of our common stock valued at $1,073,185. Along
with these stock conversions the Company paid the sum of $53,339 to the holders of these notes for the principal of $52,468. These
payments included a prepayment penalty charge of $871. The company extinguished the debt and the embedded derivative which resulted
in a gain on extinguishment of $204,091.



As of December 31, 2013 and
2012 the principal balance is $280,000 and the unamortized debt discount is $100,709. The Company recorded interest expense for
fiscal years 2013 of $178,547. The Company would have been required to issue 4,484,138 of common stock if the lenders converted
on December 31, 2013. The Fair value of the derivative liability at December 31, 2013, is $383,337.



12% Variable Convertible
notes payable



During fiscal year 2013 the Company entered into seven
new securities purchase agreements with various lenders to which the lenders purchased a 12% convertible note. The Company received
$233,200 in cash for these 12% convertible notes payable with principal amounts equaling $263,000, some of these notes included
a 10% discount the discount amounts equal $15,000 and fees totaling $14,800 were paid directly to third parties for legal and finder
fees. The maturity dates for these notes range from three months to twelve months from date of issuance. The conversion price for
these notes are equal to a range of 42.5% to 60% discount to the lowest closing trading prices or an average of trading prices
of the Company’s common stock at the close of trading during a 5 to 20 trading day period prior the date of the notice of
conversion. For some of these note there is a prepayment charge range from 25% to 125% of the principal amount and accrued interest
before a set period of time. We did not incur any penalty costs during 2013 for conversion of 12% variable notes payable.



Since these notes have a convertible
features 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 ranges used were
between 161.6% to 187.9%, risk-free interest rate ranges between .07% to .12% and expected life of 12 to 11 months. The fair value
of the derivative at the date issued amounted to $407,104 and was revalued at December 31, 2013 to be $143,944. The debt discount
associated with this derivative is being amortized over the life of the notes.



In addition to obtaining new
borrowings in 2013 lenders converted $198,326 of principal into 3,028,466 shares of our common stock valued at $655,239. The company
extinguished the debt and the embedded derivative which resulted in a gain on extinguishment of $124,500.



As of December 31, 2013, the
principal balance is $89,025 and the unamortized debt discount is $40,795. The Company recorded interest expense for fiscal years
2013 of $116,348. The Company would have been required to issue 1,512,736 of common stock if the lenders converted on December
31, 2013. The Fair value of the derivative liability at December 31, 2013, is $143,944.



|13 - | Derivative Financial Instruments
|---- | --------------------------------



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



|As of :                  |  | December 31, 2012 |               |  | December 31, 2013 | 
|------------------------ |  | ----------------- | ------------- |  | ----------------- | 
|Volatility               |  |                   | 61.7% - 63.7% |  |                   | 
|Expected life (in years) |  |                   | .5 – 2.5      |  |                   | 
|Risk-free interest rate  |  |                   | .12% - .35%   |  |                   | 
|Dividend yield           |  |                   | 0.00%         |  |                   | 





F-18







|SCRIPSAMERICA, INC.                        |                           
|------------------------------------------ | --------------------------
|Notes to Consolidated Financial statements | December 31, 2013 and 2012



These derivative financial instruments
are indexed to an aggregate of 13,176,251 shares and 702,852 shares of the Company’s common stock as of December 31,
2013 and December 31, 2012, respectively, and are carried at fair value using level 2 inputs. The balance at December 31,
2013 and December 31, 2012 was $1,333,393 and $94,477, respectively.



Activity during the current period
is as follows:



|Derivative liabilities at December 31, 2011   |  | $ | –          |  
|--------------------------------------------- |  | - | ---------- | -
|                                              |  |   |            |  
|New derivative liabilities issued in
    2012 |  |   | 87,724     |  
|Extinguishment                                |  |   | –          |  
|Revalue at reporting period                   |  |   | 6,753      |  
|Derivative liabilities at December 31, 2012   |  | $ | 94,477     |  
|New derivative liabilities issued in 2013     |  |   | 2,590,688  |  
|Extinguishment                                |  |   | (2,840,395 | )
|Revalue at reporting period                   |  |   | 1,288,623  |  
|Derivative liabilities at December 31, 2013   |  | $ | 1,133,393  |  



The significant fluctuations in
the revaluation of derivative liabilities at December 31, 2013 relate partially to the Company having sufficient trading activity
to utilize the actual volatility of the trading of the Company’s common stock as an assumption when computing the fair value
of derivative liabilities which were deemed to be sufficient trading activity commencing in January 2013. The Company had previously
estimated the volatility assumption by averaging the volatility of three similar entities which resulted in a lower volatility.
The increase in value of the volatility assumption has led to a higher valuation of derivative liabilities associated with the
convertible notes payable, disclosed in Note 12.



|14 - | 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 $1,043,000 to a related party. The
Series A Preferred stock has the following rights, preferences, powers, privileges, and restrictions: (a) 8% dividend (appropriately
adjusted to reflect any stock splits); the dividends shall accrue and are payable quarterly when the Company has positive equity
and earnings per Delaware General Corporation Law. (b) Preferential payments of the assets available for distribution to its stockholders
by reason of their ownership in an amount equal to the Series A Preferred stock Original Issue price ($.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 December 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 and as of April 10, 2014 has not exercise his right to do so.
(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 a 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 consolidated balance sheets. Because we also had losses for 2012 and 2013 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 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 $3,470,827 at December
31, 2013. Since we did not generate net income in fiscal years 2013 and 2012, our board of directors will not be able to declare
a dividend nor will we be able to pay the dividend owed to the Series A Preferred Stockholder, and as such, dividends will be accrued.
As of December 31, 2013 we have accrued $187,740 which is classified as a long-term liability in the 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.





F-19







|SCRIPSAMERICA, INC.                        |                           
|------------------------------------------ | --------------------------
|Notes to Consolidated Financial statements | December 31, 2013 and 2012



|15 - | 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.



Issuances during 2013



The Company issued 4,854,952 restricted
shares of common stock for cash proceeds of $531,108 in various private subscription agreements during the fiscal year 2013. A
significant portion of these issuances where part of securities purchase agreement with Seaside 88, L.P., the details of the transactions
are as follows:



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



The Company had an initial closing
under the securities purchase agreement on November 4, 2013, at which the Company sold to Seaside 1,152,514 restricted shares of
its common stock for gross proceeds of $200,537, of which $7,500 was used to pay the legal fees for Seaside and $19,303 was paid
for a finder’s fee. The Company also had closings on (i) December 4, 2013, at which the Company sold to Seaside 841,426 restricted
shares of common stock for gross proceeds of $90,926 of which $2,500 was used to pay the legal fees for Seaside. (ii) January 6,
2014, at which the Company sold to Seaside 928,670 restricted shares of common stock for gross proceeds of $69,093 of which $2,500
was used to pay the legal fees for Seaside and (iii) February 4, 2014, at which the Company sold to Seaside 1,342,070 restricted
shares of common stock for gross proceeds of $142,527 and (iv) on February 24, 2014 the Company issued 1,615,550 restricted shares
of common stock for financing fees which were accrued and expense in 2013



During the fiscal year 2013, the
Company issued 9,177,027 restricted shares of its common stock to non-employees for services rendered during the year. These services
were valued at $3,387,112 and the Company charged its operations in fiscal year 2013.



During the fiscal year 2013, the
Company issued 333,633 restricted shares of its common stock in connection with conversion of 478,440 warrants in a cashless transaction.



During the fiscal year 2013, the
Company issued 136,000 restricted shares of its common stock in connection with payment provided by members of the board of directors
during the year. The Company charged its operations $35,200 in fiscal year 2013.



During the fiscal year 2013, the Company issued 1,339,616
restricted shares of its common stock to non-employees for payment of royalties. The payment of royalties was valued at $346,802.





F-20







|SCRIPSAMERICA, INC.                        |                           
|------------------------------------------ | --------------------------
|Notes to Consolidated Financial statements | December 31, 2013 and 2012





On November 18, 2013, the Company issued 8,690,000
unrestricted shares of its common stock in a debt payment agreement whereas debt financing company (Ironridge) purchased from ScripsAmerica
liabilities from our creditors previously incurred by the us. The liabilities and expenses paid on our behalf were valued at $755,658
and the Company recorded a Financing fee of $547,842.



During the fiscal year 2013, the Company issued 11,456,639
shares of its common stock for the conversion of approximately $1,805,000 of principal and interest of our convertible notes payable.



The Company retired 600,000 shares of its common stock
that was previously issued in 2012 and 2013. The value was determined to be $76,500. The Company received and retired 500,000 shares
from the Contract Packager as part of a settlement agreement (see Note 9). These shares were valued at $50,000 in 2012 when issued
and we reversed the consulting expense for this value. 100,000 shares issued in September 2013 were also returned and retired during
the third quarter 2013.



Issuances during 2012



The Company issued 300,000 restricted
shares of common stock for cash proceeds of $30,000 during the fiscal year 2012.



In March 2012, the Company received
payment for the balance of the outstanding subscription stock receivable, $170,800. This payment is related to an April 29, 2011
transaction where the Company agreed to issue 5,200,000 restricted shares of common stock to four purchasers for an aggregate purchase
price of $176,000. The stock subscription receivable was recorded as a, contra equity account, in the equity section of the balance.
The Company had received $5,200 in fiscal year 2011.



During the year ended December
31, 2012, the Company issued 1,345,000 restricted shares of its common stock to non-employees for services rendered during the
year or to be rendered. These services were valued at $231,100 and the Company charged its operations $122,906 in fiscal year 2012.
The unamortized amount of prepaid services at December 31, 2012 is $108,194.



During the year ended December
31, 2012, the Company issued 124,000 restricted shares of its common stock in connection with services provided by members of the
board of directors during the fiscal year 2012. The Company charged its operations $34,480 in fiscal year 2012.



The Company issued 114,288 restricted
shares of its common stock to the Company’s President and CEO for payment of his salary in lieu of cash compensation payments
for services rendered during the year ended December 31, 2012. These services were valued at $20,000 and the Company charged this
amount to operations in fiscal year 2012.



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



Warrants



On August 15, 2012, the Company
issued 228,572 common stock warrants to a third party for debt issue costs. These warrants have a strike price of $0.39, are 100%
vested and have a contractual life of 5 years, expiring on August 14, 2017. The Company calculated the fair value of the warrants
to be $34,588, using the Black-Scholes option pricing model. The fair value of $34,588 will be amortized over the life of the long
term debt. The Company recorded a $3,243 in interest expense related to the amortization of the warrants for the year ended December
31, 2012. The assumptions used in computing the fair value are a closing stock price of $0.39, expected term of 2.5 years utilizing
the “plain vanilla” method. Also since the Company does not have a history of stock prices over 5 years the Company
used the expected volatility of three peer entities within our sector whose share or option price are publicly available, per Staff
Accounting Bulletin topic 14 interpretations and guidance. The average of the three comparable companies was used to determine
that the expected volatility of 63.7 %, while the risk free rate was estimated to be .35%.





F-21







|SCRIPSAMERICA, INC.                        |                           
|------------------------------------------ | --------------------------
|Notes to Consolidated Financial statements | December 31, 2013 and 2012



Summary of our warrant activity and related information for 2013 and 2012



|                                            |  | Number of shares under warrants |               |   | Weighted Average Exercise price |   |      | Weighted Average Remaining Contractual term in Years |  |  | Aggregate Intrinsic Value | 
|------------------------------------------- |  | ------------------------------- | ------------- | - | ------------------------------- | - | ---- | ---------------------------------------------------- |  |  | ------------------------- | 
|Outstanding at December 31, 2011            |  |                                 | 478,440       |   |                                 | $ | 0.17 |                                                      |  |  | 4.3                       | 
|                                            |  |                                 |               |   |                                 |   |      |                                                      |  |  |                           | 
|Granted                                     |  |                                 | 228,572       |   |                                 | $ | 0.39 |                                                      |  |  | 4.6                       | 
|Exercised                                   |  |                                 | –             |   |                                 |   |      |                                                      |  |  |                           | 
|Cancelled/expired                           |  |                                 | –             |   |                                 |   |      |                                                      |  |  |                           | 
|                                            |  |                                 |               |   |                                 |   |      |                                                      |  |  |                           | 
|Outstanding at December 31, 2012            |  |                                 | 707,012       |   |                                 | $ | 0.24 |                                                      |  |  | 3.7                       | 
|                                            |  |                                 |               |   |                                 |   |      |                                                      |  |  |                           | 
|Granted                                     |  |                                 | –             |   |                                 |   |      |                                                      |  |  |                           | 
|Exercised                                   |  |                                 | (478,440      | ) |                                 | $ | 0.17 |                                                      |  |  |                           | 
|Cancelled/expired                           |  |                                 | –             |   |                                 |   |      |                                                      |  |  |                           | 
|                                            |  |                                 |               |   |                                 |   |      |                                                      |  |  |                           | 
|Outstanding at December 31, 2013            |  |                                 | 228,572       |   |                                 | $ | 0.39 |                                                      |  |  | 3.6                       | 
|                                            |  |                                 |               |   |                                 |   |      |                                                      |  |  |                           | 
|Vested and exercisable at December 31, 2013 |  |                                 | 228,572       |   |                                 |   |      |                                                      |  |  |                           | 
|                                            |  |                                 |               |   |                                 |   |      |                                                      |  |  |                           | 
|                                            |  |                                 |               |   |                                 |   |      |                                                      |  |  |                           | 
|                                            |  |                                 | 2012          |   |                                 |   |      |                                                      |  |  |                           | 
|Fair value per warrant                      |  |                                 | $0.15         |   |                                 |   |      |                                                      |  |  |                           | 
|Risk-free interest rate                     |  |                                 | .35%  -  1.3% |   |                                 |   |      |                                                      |  |  |                           | 
|Volatility                                  |  |                                 | 63.70%        |   |                                 |   |      |                                                      |  |  |                           | 
|Terms in years                              |  |                                 | 2.5           |   |                                 |   |      |                                                      |  |  |                           | 
|Dividend yield                              |  |                                 | 0%            |   |                                 |   |      |                                                      |  |  |                           | 



Options



On September 11, 2013 the Company
issued 2,000,000 options to a consultant for services provided. These options vested immediately and will expire 3 years from the
date of issuance. The option price is $.15 and the fair value of these warrants is $249,335 which was expensed to selling, general
and administrative.



On November 6, 2013 the Company
issued 1,000,000 options to a consultant for services provided. These options vested immediately and will expire 3 years from the
date of issuance. The option price is $.22 and the fair value of these warrants is $190,494 which was expensed to selling, general
and administrative.



On October 15, 2013, the Company
issued 1,320,000 options to members of the Board of directors for services provided. These options vested immediately and will
expire 3 years from date of issuance. The option price is $.15 and the fair value of these warrants is $166,373 which was expensed
to selling, general and administrative.



On December 18, 2013, the Company
issued 60,000 options to members of the Board of directors for services provided. These options vested immediately and will expire
3 years from date of issuance. The option price is $.13 and the fair value of these warrants is $6,464 which was expensed to selling,
general and administrative.



On December 31, 2013, the Company
issued 635,000 options to members of the Board of directors for services provided. These options vested immediately and will expire
3 years from date of issuance. The option price is $.14 and the fair value of these warrants is $73,893 which was expensed to selling,
general and administrative.



F-22









|SCRIPSAMERICA, INC.                        |                           
|------------------------------------------ | --------------------------
|Notes to Consolidated Financial statements | December 31, 2013 and 2012





|                                            |  | Number of shares under options |                 |  | Weighted Average Exercise price |   |      | Weighted Average Remaining Contractual term in Years |  |  | Aggregate Intrinsic Value | 
|------------------------------------------- |  | ------------------------------ | --------------- |  | ------------------------------- | - | ---- | ---------------------------------------------------- |  |  | ------------------------- | 
|Outstanding at December 31, 2012            |  |                                | –               |  |                                 | $ | –    |                                                      |  |  | 0                         | 
|                                            |  |                                |                 |  |                                 |   |      |                                                      |  |  |                           | 
|Granted                                     |  |                                | 5,015,000       |  |                                 | $ | 0.16 |                                                      |  |  | 3                         | 
|Exercised                                   |  |                                | –               |  |                                 |   |      |                                                      |  |  |                           | 
|Cancelled/expired                           |  |                                | –               |  |                                 |   |      |                                                      |  |  |                           | 
|                                            |  |                                |                 |  |                                 |   |      |                                                      |  |  |                           | 
|Outstanding at December 31, 2013            |  |                                | 5,015,000       |  |                                 | $ | 0.16 |                                                      |  |  | 2.8                       | 
|                                            |  |                                |                 |  |                                 |   |      |                                                      |  |  |                           | 
|Vested and exercisable at December 31, 2013 |  |                                | 5,015,000       |  |                                 |   |      |                                                      |  |  |                           | 
|                                            |  |                                |                 |  |                                 |   |      |                                                      |  |  |                           | 
|                                            |  |                                |                 |  |                                 |   |      |                                                      |  |  |                           | 
|                                            |  |                                | 2013            |  |                                 |   |      |                                                      |  |  |                           | 
|Option fair value                           |  |                                | $ 0.10 - $ 0.19 |  |                                 |   |      |                                                      |  |  |                           | 
|Risk-free interest rate                     |  |                                | .34%  -  .78%   |  |                                 |   |      |                                                      |  |  |                           | 
|Volatility                                  |  |                                | 190.06%         |  |                                 |   |      |                                                      |  |  |                           | 
|Terms in years                              |  |                                | 3               |  |                                 |   |      |                                                      |  |  |                           | 
|Dividend yield                              |  |                                | 0%              |  |                                 |   |      |                                                      |  |  |                           | 



|16 - | Income Taxes
|---- | ------------



As of December 31, 2013, the
Company had a net operating loss carryforward of approximately $5,927,000 available to reduce future federal and state taxable
income, expiring through 2033. We established valuation allowance of $2,015,200 and $597,591, or 100%, as of December 31, 2013
and 2012, respectively, of the deferred tax asset because of the uncertainty of the utilization of the operating losses in future
periods. The allowance increased $1,417,609 and $597,591 during 2013 and 2012, respectively.



Future ownership changes may limit the future utilization
of these net operating loss and research and development tax credit carry-forwards as defined by the Internal Revenue Code. We
performed an analysis and determined that the Net operating losses and research and development expenses are not limited under
Section 382. The net deferred tax asset has been fully offset by a valuation allowance due to our history of taxable losses and
uncertainty regarding our ability to generate sufficient taxable income in the future to utilize these deferred tax assets.



The Company files federal and
Delaware state income taxes. Currently, there are no tax examinations in progress, nor has the Company had any federal or state
examinations since its inception in 2008. All of the Company’s tax years are subject to federal and state tax examination.



Our provision for income taxes
at December 31, 2013 and 2012 consisted of the following





|                   |  | 2013 |   |  | 2012 |  
|------------------ |  | ---- | - |  | ---- | -
|Current            |  |      |   |  |      |  
|Federal            |  | $    | – |  |      | $
|State              |  |      | – |  |      |  
|                   |  |      |   |  |      |  
|Deferred           |  |      |   |  |      |  
|Federal            |  |      | – |  |      |  
|                   |  |      |   |  |      |  
|Income Tax Expense |  | $    | – |  |      | $



F-23









|SCRIPSAMERICA, INC.                        |                           
|------------------------------------------ | --------------------------
|Notes to Consolidated Financial statements | December 31, 2013 and 2012



The effective tax rates differ
from the statutory rates for 2012 and 2011 primarily due to the following:



|                                       |  | 2013   |            |   | 2012                          | 
|-------------------------------------- |  | ------ | ---------- | - | ----------------------------- | 
|                                       |  | Amount |            |   | Effective Tax Rate Percentage | 
|                                       |  |        |            |   |                               | 
|Federal income tax liability (benefit) |  | $      | (3,794,531 | ) |                               | 
|State taxes                            |  |        | –          |   |                               | 
|Permanent deductible expense           |  |        | 1,700,633  |   |                               | 
|Adjustment in valuation allowance      |  |        | 2,093,898  |   |                               | 
|Tax expense (benefit)                  |  | $      | –          |   |                               | 





The components of the net deferred tax assets (liabilities)
at December 31, 2013 and 2012 are as follows:



|                                |  | 2013 |           |  | 2012 |  
|------------------------------- |  | ---- | --------- |  | ---- | -
|Deferred Tax asset              |  |      |           |  |      |  
|Allowance for doubtful accounts |  | $    | 423,497   |  |      | $
|Net Operating Loss              |  |      | 1,591,703 |  |      |  
|Total Deferred Tax asset        |  |      | 2,015,200 |  |      |  
|Deferred Tax Liability          |  |      | –         |  |      |  
|                                |  |      |           |  |      |  
|Less Valuation Allowance        |  |      | 2,015,200 |  |      |  
|Total Deferred tax asset        |  | $    | –         |  |      | $



The Company periodically assesses
the likelihood that it will be able to recover its deferred tax assets and determines if a valuation allowance is necessary. We
consider all available evidence, both positive and negative, including historical levels of income, expectations and risks associated
with estimates of future taxable income. As a result of this analysis the Company concluded that it is more likely than not that
the Company will not recover the deferred tax asset and, accordingly, recorded a valuation allowance for the years ended December
31, 2013 and 2012.



|17 - | Commitments and Contingencies
|---- | -----------------------------



In May 2013, the Company signed
a “Development, Manufacturing and Supply Agreement” with a pharmaceutical manufacturer to develop and manufacture our
80mg and 160mg Acetaminophen RapiMed® rapid orally disintegrating tablets. The initial term of the agreement is two years with
an option to a one five year contract extension. In addition to development and scale up costs, the Company will pay up to $150,000
to license the technology during the first two years. In order to maintain exclusivity rights for the technology the Company must
purchase a minimum of 10,000,000 tablets each of the 80mg and 160mg tablets in the first year and 16,500,000 tablets for both 80mg
160mg in the second year. After the second year annual volume requirements need to be achieved for the Company to maintain exclusivity
of the license. In 2014, the Company terminated this agreement with the pharmaceutical manufacturer due to the manufacturer’s
deteriorating financial condition. There were no obligations due to the third party at December 31, 2013 and through the termination
date.



Previously, the Company had
entered into a Product Development, Manufacturing and Supply Agreement with Marlex Pharmaceuticals, Inc. (the “Contract Manufacturer”
or “Marlex”) in March 2010. The Contract Manufacturer was to develop rapid melt tablets in accordance with the specifications
of the agreement with the Company responsible for all associated costs with the proprietary rights owned by the Company. The Company
and the Contract Manufacturer agreed upon a projected product cost to be paid to the Contract Manufacturer as well as 7% of gross
profits for the term of the agreement. The Company can terminate this agreement and did so in the third quarter 2013 (see note
10). All development costs through the date of notice have previously been expensed and paid.



The holders of a $250,000 convertible
note which was converted into 2,000,000 shares of our common stock on March 12, 2012 are entitled to a 4% royalty from the sales
of our orally disintegrating rapidly dissolving 80mg and 160mg pain relief tablets. The royalty payments associated with this agreement
have no minimum guarantee amounts and royalty payments will end only if the product line of Acetaminophen rapidly dissolving 80mg
and 160mg tablets is sold to a third party. There have been no shipments through December 31, 2013 applicable to this royalty payment.





F-24







|SCRIPSAMERICA, INC.                        |                           
|------------------------------------------ | --------------------------
|Notes to Consolidated Financial statements | December 31, 2013 and 2012



The holder of a $320,000 note
payable are entitled to a to 1.8% royalty payment on the first $10 million of sales of a generic prescription drug under distribution
contracts with Federal government agencies and 0.09%on the next $15 million of such sales. Payments
for royalties will be paid quarterly and as of December 31, 2012, the Company had accrued $42,000 in royalties. During fiscal year
2013 the Company issued the holder of this note 1,114,672 shares of its common stock for payment of royalty expense. In addition
a holder of a $50,000 note payable, a related party, is entitled to a 0.9% on the first $25 million of sales of a generic prescription
drug under distribution contracts with Federal government agencies. The Company had accrued $10,500 in royalties as of December
31, 2012, and in fiscal year 2013 the Company issued 224,944 shares of its common stock for payment of royalty expense. The Company
has recorded a royalty expense of $304,290 for fiscal year 2013, respectively.



In July of 2013, the Company
entered into a memorandum of understanding (“MOU”) with a Forbes Investments Ltd (“Forbes”) to provide
future services. Upon the signing of this MOU agreement the Company issued 350,000 shares of our Company’s common stock to
two parties of this agreement. The value of the common stock at issuance was $154,000 and this amount was recorded to prepaid and
was expensed to selling, general and administrative through balance of 2013. The MOU agreement has a 12 month exclusivity clause,
a two-way break-up fee of $50,000 in cash or securities at 50% of market rate upon 30 day running average of termination. Upon
successfully completing the goal of this agreement the two parties are entitled to each receive 200,000 shares of ScripsAmerica’s
common stock and also shall be entitled to receive 25,000 shares of our common stock per $250,000 financing arranged from any source
up to $5 million during the first 12 months of this agreement. In January 2014 licensing agreements were entered into (see note
21 below Global Pharma Hub) and the 400,000 shares of ScripsAmerica’s common stock was issued at a value of $52,000.



On October 15, 2013 the Board of Directors approved
a revised compensation plan for our CEO, Robert Schneiderman and our CFO, Jeffrey Andrews, contingent on the Company raising $4
million via equity, debt or a combination of both. Contingent on raising the $4 million compensation would be as follows: CEO annual
salary $200,000, CFO annual salary $192,000, and both would receive 50,000 options quarterly at 120% of our market price on the
date granted with a one year vesting period.



On October 15, 2013, the Board
of Directors approved additional compensation to Board members in the form of issuance of stock options. Board members were granted
100,000 stock options for each year served commencing in 2012. The chairman of the Board was granted 135,000 stock options for
each year served. The effective date of the grants was October 7, 2013. The options vest immediately and the option exercise price
was 110% of the market price on the grant date. Additionally, directors will also receive 10,000 options for each board meeting
attended 5,000 options for each committee meeting attended. In fiscal year 2013 the Company issued 2,015,000 options that had a
fair value of $246,731 which were expensed to the statement of operations (see note 13 option).



Operating Lease -In
November our subsidiary PIMD (see note 19) entered into a 25 month operating lease for a distribution facility in Doral
Florida. The lease begins January 1, 2014 and expires January 31, 2016, monthly rent is $4,585 for the first thirteen months
with the first month free and $4,724 for the last twelve months. The total minimum lease payments are $111,714, for 2014, $50,441 for 2015, $56,548, and for 2016 the are $4,724.



|18 - | Earnings Per Common Share
|---- | -------------------------



The basic earnings per share
or loss per share is computed using the weighted average number of common shares outstanding. The assumed exercise of common stock
equivalents were excluded from the calculation of diluted net loss per common share for the years ended December 31 2013 and 2012
because their inclusion would have been anti-dilutive. As of December 31, 2013, common stock equivalents consisted of preferred
stock convertible into 5,980,504 shares, warrants convertible into 228,572 shares, options convertible into 5,015,000 shares and
notes payable convertible into 16,016,229 shares of common stock. As of December 31, 2012, common stock equivalents consisted of
preferred stock convertible into 5,980,504 shares, warrants convertible into 707,012 shares and notes payable convertible into
4,220,452 shares of common stock.



|                                             |  | For the Year Ended December 31, 2013 |            
|-------------------------------------------- |  | ------------------------------------ | -----------
|                                             |  | Income (Numerator)                   |            
|                                             |  |                                      |            
|Net Loss attributed to ScripsAmerica, Inc.   |  | $                                    | (11,195,096
|Preferred stock dividends                    |  |                                      | (83,440    
|Net Loss attributable to common stockholders |  | $                                    | (11,278,536
|                                             |  |                                      |            
|Basic loss per common share                  |  | $                                    | (11,278,536
|Diluted earnings per common share            |  | $                                    | (11,278,536





F-25







|SCRIPSAMERICA, INC.                        |                           
|------------------------------------------ | --------------------------
|Notes to Consolidated Financial statements | December 31, 2013 and 2012





|                                              |  | For the Year Ended December 31, 2012 |           
|--------------------------------------------- |  | ------------------------------------ | ----------
|                                              |  | Income (Numerator)                   |           
|                                              |  |                                      |           
|NetLoss                                       |  | $                                    | (1,861,832
|Preferred Stock Dividend                      |  |                                      | (83,440   
|Basic loss per common share                   |  | $                                    | (1,945,272
|Effect of dilutive securities - notes payable |  |                                      | –         
|                                              |  |                                      |           
|Diluted earnings per common share             |  | $                                    | (1,945,272



|19 - | Purchase
Order Financing with related party
|---- | -------------------------------------------



In June 2012, the Company entered
into a purchase order finance agreement with Development 72, a major stockholder of the Company which is controlled by a member
of the Board of Directors. The agreement will allow the Company to borrow up to $1.2 million on a case by case basis, at an interest
rate of 0.6% per 10 day period, 1.8% monthly and 21.6% annually. During the fiscal year 2013, the Company financed $5,114,321 of
its purchase orders and incurred an interest expense of $73,232. As of December 31, 2013 and 2012, the unpaid purchase order finance
balance was $1,037,494 and $578,280, respectively, and accrued fees and interest are $24,192 and $8,280, respectively



|20 - | Concentrations
|---- | --------------



During the fiscal year 2013 the
Company purchased product from two suppliers, and in 2012 the Company purchased 100% of its product packaging from its Contract
Packager. A disruption in the availability of product packaging from the Company’s suppliers could cause a possible loss
of sales, which could affect operating results adversely.



During the year ended December
31, 2013, the Company derived approximately $403,000, or 73%, of its revenue from two customers, of this total one customer accounted
for 61% and the other accounted for 12%. During the year ended December 31, 2012, the Company derived approximately $3,524,000
or 90% of its revenue from two customers, of this total one customer accounted for 74% and the other accounted for 16%.



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.



|21 - | Subsequent Events
|---- | -----------------



From January 1, 2014 to April
1 2014, the Company issued 33,817,597 shares of common stock for the following transactions: a) We issued 19,207,420 shares of
common stock in a private subscription sale , for $1,009,067 in cash, b) 642,703 shares for payment of royalty expense valued at
$79,233, c) 2,531,400 shares for services performed and to be performed, valued at $306,768, d) 6,622,504 shares for conversion
of $416,895 of principal for various convertible notes payable, of which the fair value of stock issued was $957,117, e) 32,000
shares were issued to members of the Board of Directors for services provided, and f) As part of our securities purchase agreement
with Seaside (see note 17) We issued the following shares in 2014:(i) January 6, 2014, sold to Seaside 928,670 restricted shares
of common stock for gross proceeds of $69,093 of which $2,500 was used to pay the legal fees for Seaside and (ii) February 4, 2014,
sold to Seaside 1,342,070 restricted shares of common stock for gross proceeds of $142,528 and (iii) on February 24, 2014 we issued
1,615,550 restricted shares of common stock for financing fees which were expensed in 2013. (iv) we issued 925,153 restricted shares
of common stock for gross proceeds of $58,200, g) on January we issued 887,7820 restricted shares for $125,381 in cash as part of
a settlement agreement with GEM see cancellation agreement below in this note for details



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





F-26









|SCRIPSAMERICA, INC.                        |                           
|------------------------------------------ | --------------------------
|Notes to Consolidated Financial statements | December 31, 2013 and 2012





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



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

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

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



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



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

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

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



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



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

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

| | 3. | $320,000 in purchase orders during the third 12 months.
| | -- | -------------------------------------------------------



Main Ave Pharmacy Management agreement:



On January 29, 2014, Implex Corporation,
which is owned by our legal counsel, Richard C. Fox, entered into a stock purchase agreement with the owner to acquire the
specialty pharmacy Main Avenue Pharmacy, Inc., located in Clifton, New Jersey, for $550,000. The purchase price will be paid in
installments and the shares will be held by an escrow agent until the final payment is made. Under the purchase agreement, the
final agreement is to be made on July 11, 2014 (unless extended by the parties).



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



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







F-27









|SCRIPSAMERICA, INC.                    |                           
|-------------------------------------- | --------------------------
|Notes to Notes to Financial statements | December 31, 2013 and 2012



For the management services
provided by the ScripsAmerica under this Business Management Agreement, Implex will pay us a combined monthly Management and Financing
Fee. This combined fee will be equal to 97% of the Calculation Basis (receipts from paid invoices less Implex’s monthly draw
and various expenses of Main Avenue Pharmacy). Since ScripsAmeica will have controlling interest in Implex management plans to
consolidate activities of Main Ave into our financial statements in first quarter 2014.



Cancellation
of GEM Agreement



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



On January 14, 2014, the Company
entered into a settlement agreement with GEM Global, 590 Partners, LLC and the GEM Group, pursuant to which, among other things,
the parties agreed to declare null and void and of no further effect the October 2013 financing agreement as well as any other
negotiated but unsigned documents between and/or among the parties. In addition, in connection with such voiding, the GEM Warrants
were cancelled and the Company issued to each of GEM Global and 590 Partners, LLC (i) a warrant exercisable to purchase 1,000,000
shares of common stock at an exercise price of $0.41, (ii) a warrant exercisable to purchase 750,000 shares of common stock at
an exercise price of $0.55 and (iii) a warrant exercisable to purchase 750,000 shares of common stock at an exercise price of $0.75
(collectively, the “New GEM Warrants”). All of the New GEM Warrants expire on January 14, 2019 and are only exercisable
on a cash basis (they do not contain any cashless exercise provisions) Additionally, the Company granted registration rights to
590 Partners and GEM Global to register the resale of the shares underlying the New GEM Warrants. The New GEM Warrants do have
price protection features. Additionally, in the event that the closing price of the Company’s common stock is equal to or
greater than 160% of the exercise price of the applicable New GEM Warrant for 22 consecutive trading days, then such New GEM Warrant
will automatically be cancelled 30 days after the Company delivers notice of such cancellation to GEM Global and 590 Partners.
However, each of GEM Global and 590 Partners may exercise their New GEM Warrant in full after the notice from the Company but prior
to the cancellation date.



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



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





F-28







|ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
|------- | -------------------------------------------------------------------------------------



None.



|ITEM 9A. | CONTROLS AND PROCEDURES
|-------- | -----------------------



(a) Evaluation of Disclosure Controls and
Procedures.



The
term “disclosure controls and procedures” (defined in SEC Rule 13a-15(e)) refers to the controls and other procedures
of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files under
the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported within required
time periods. “Disclosure controls and procedures” include, without limitation, controls and procedures designed to
ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is
accumulated and communicated to the company’s management, including its principal executive and principal financial officers,
or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.



The
Company’s management, with the participation of the Chief Executive Officer and the Chief Financial Officer, has evaluated
the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this annual
report (the “Evaluation Date”). Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial
Officer noted the deficiencies in internal controls identified is subsection (c) of this Item. Accordingly, the Company’s
Chief Executive Officer and Chief Financial Officer have concluded that, as of the Evaluation Date, such controls and procedures
were not effective.



(b) Changes in Internal Controls.



The
term “internal control over financial reporting” (defined in SEC Rule 13a-15(f)) refers to the process of a company
that is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles. The Company’s management, with
the participation of the Chief Executive Officer and Chief Financial Officer, has evaluated any changes in the Company’s
internal control over financial reporting that occurred during the fourth quarter of the year covered by this annual report, and
they have concluded that there was no change to the Company’s internal control over financial reporting that has materially
affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.



(c) Management’s Report
on Internal Control over Financial Reporting.



Management
of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as defined in
Rule 13a-15(f) under the Securities Exchange Act of 1934. We have assessed the effectiveness of those internal controls as of December
31, 2013, using the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) Internal Control –Integrated
(1992) Framework as a basis for our assessment.



Because
of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies and procedures may deteriorate. All internal control systems, no
matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only
reasonable assurance with respect to financial statement preparation and presentation.



A
material weakness in internal controls is a deficiency in internal control, or combination of control deficiencies, that adversely
affects the Company’s ability to initiate, authorize, record, process, or report external financial data reliably in accordance
with accounting principles generally accepted in the United States of America such that there is more than a remote likelihood
that a material misstatement of the Company’s annual or interim financial statements that is more than inconsequential will
not be prevented or detected. In the course of making our assessment of the effectiveness of internal controls over financial reporting,
we identified the following material weaknesses in our internal control over financial reporting:



a.
Deficiencies in Internal Control Structure Environment.The Company became a public corporation in November 2011. The
Company’s focus was on securing the financing necessary to initiate revenue production. In June 2010, the Board
engaged a full time Chief Financial Officer, who started in October 2010, and charged him with responsibility for establishing
a system of internal controls appropriate for a public company. During 2013, the Company’s revenue significantly decreased
and left inadequate resources for the Company’s Chief Financial Officer to establish a system of internal controls appropriate
for us as a public company.





42







b.
Inadequate staffing and supervision within the accounting operations of our company.The relatively small number of employees
who are responsible for accounting functions prevents the Company from segregating duties within its internal control system. The
inadequate segregation of duties is a weakness because it could lead to the untimely identification and resolution of accounting
and disclosure matters or could lead to a failure to perform timely and effective reviews. The Company’s plan
is to expand its accounting operations as the business of the Company expands.



The
Company believes that the financial statements fairly present, in all material respects, the Company’s balance sheets as
of December 31, 2013 and 2012 and the related statements of operations, stockholders’ deficit, and cash flows for the years
ended December 31, 2013 and 2012, in conformity with generally accepted accounting principles, notwithstanding the material weaknesses
we identified.



This
annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal
control over financial reporting. Management’s report was not subject to attestation by the Company’s registered
public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management’s
report in this annual report.



|ITEM 9B. | OTHER INFORMATION
|-------- | -----------------



None





PART III



|ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|-------- | ------------------------------------------------------



The name, age and business experience of
each of our directors and executive officers as of February __, 2011 are shown below.  Biographical information for each is
set forth following the table.



|NAME                           | AGE | POSITION                             | DATE APPOINTED                             
|------------------------------ | --- | ------------------------------------ | -------------------------------------------
|Robert Schneiderman (1)        | 71  | Chief Executive Officer, Director ** | May 12, 2008                               
|Jeffrey Andrews                | 62  | Chief Financial Officer              | October 10, 2010                           
|Brian Ettinger (1)             | 61  | Director; Chairman of the Board ***  | April 1, 2011 (Chairman since May 17, 2011)
|Brian Anderson (2)             | 62  | Director ***                         | May 24, 2011                               
|Dr. Joseph Camardo (2), (3)    | 61  | Director ***                         | April 1, 2011                              
|Dr. Michael Imperiale (2), (3) | 53  | Director ***                         | April 25, 2011                             
|Andrius Pranskevicius (1)      | 34  | Director *                           | April 1, 2011                              



(1) Member of Compensation Committee.

(2) Member of Audit Committee.

(3) Member of Nominating and Corporate Governance Committee.



*Appointed to the Board as the nominee selected by the Series
A Preferred Stockholder.

** Elected to the board by the Common stockholders.

*** Appointed to the Board as the nominee selected by the Series
A Preferred Stockholder and the Common stockholders.



The following summarizes
the occupation and business experience during the past five years for our officers and directors. Mr. Schneiderman was elected
to the board because he is one of our co-founders and built the foundation of our company. Mr. Brian Ettinger was appointed to
our board because he has prior experience as a director of a public company; he served as director and Chairman of the Board of
Global Resource Corp. (OTCBB: GBRC) from November 2009 to July 2010. Mr. Brian Anderson was appointed to our board because of his
extensive public accounting experience and because he is our “financial expert” on our audit committee. Drs. Camardo
and Imperiale were appointed to our board because of their significant pharmaceutical industry experience. Mr. Pranskevicius was
appointed to our board by Development 72, LLC, a limited liability company, which owns all of our outstanding shares of Series
A Preferred Stock and is controlled by Mr. Pranskevicius. Under our amended and restated articles of incorporation, the holder
the Series A Preferred Stock is entitled to elect one member to our board.





43







Robert Schneiderman
has served as our Chief Executive Officer and has been a director since May 12, 2008 (the date of our inception). Mr. Schneiderman
is one of our founding shareholders. From February 2002 until May 2008, Mr. Schneiderman owned and ran Harry James Production DBA
R S and Associates, a financial consulting firm. From August 1966 to January 2002, Mr. Schneiderman, worked at P. Robert Dann Inc.,
a prominent Philadelphia recruiting firm, during which he served as CEO from August 1966 to January 2002. Mr. Schneiderman is the
sole owner and employee of Harry James Production DBA R S and Associates, through which Mr. Schneiderman provides financial consulting
services. The Company is not the only client of Harry James Production DBA R S and Associates, which had other clients prior to
2011. The Company is not the only client of Harry James Production DBA R S and Associates, which had other clients prior to 2011.
The financial consulting work performed by Mr. Schneiderman consisted of (i) managing operations, marketing, strategy and financing;
(ii) creating our corporate culture by building the senior management team; (iii) raising capital; (iv) establishing corporate
strategy and vision; (v) determining which markets we will enter, against which competitors and with what product lines; (v) setting
budgets; (vi) forming strategic partnerships; (vii) communicating our business strategy and vision; and (viii) allocating our capital
to fund projects which support our strategy. Mr. Schneiderman received a B.S. from Temple University in 1964.



Jeffrey J. Andrews
has served as our Chief Financial Officer since October 2010. Prior to that time, Mr. Andrews was a financial consultant with Powell
Strategic Advisors, Inc., a financial consulting firm owned by Mr. Andrews, from February 2010 until October 2010, and he served
as the Chief Financial Officer, Treasurer and Secretary of Global Resources Corp., a public alternative energy company, from September
2006 until February, 2010 and as a director from September 2006 until his resignation on May 21, 2008. The Company is not the only
client of Powell Strategic Advisors, which had other clients prior to 2011. The financial consulting work performed by Mr. Andrews
consisted of (i) developing and analyzing business planning for capital expenditures, inventory management and strategic planning;
(ii) preparing budgets and forecasts; (iii) developing our financial reporting infrastructure; (iv) handling accounting, financial
reporting and compliance matters; and (v) assisting us with SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis.
Mr. Andrews graduated from Villanova University in May, 1974 with a B.S. in Accounting. He has been a C.P.A. in Pennsylvania since
1978. He commenced his accounting career as an Audit Manager for a regional firm, and over his career has served as the Controller,
Treasurer and/or CFO of various companies, and has had experience in corporate restructurings and reorganizations as well as IPO's
and SEC periodic reporting. From April, 1999 to June, 2002, Mr. Andrews served as CFO of Collectible Concepts Group, Inc., a public
company. From June 2002 to October 2004 Mr. Andrews was the Controller of Encapsulation Systems Inc., a medical device company.



Brian
Ettinger has served as a director and our Chairman of its Board of Directors since April 1, 2011.Since
January 1984, Mr. Ettinger has practiced law in Houston, Texas.  Mr. Ettinger’s law practice currently emphasizes representation
for international and domestic multi-industry businesses, including oil, natural gas and liquefied natural gas, addressing production
and exploration, rig equipment and oil services, contracts, negotiations, collections and business development.  Since April
1, 2012, he has served as General Counsel for Drilling Structures Services, Inc., a drilling rig manufacturer and steel fabricator
which has facilities in Houston, Texas and Columbia in the free trade zone. Since June 2012, Mr. Ettinger has served as General Counsel
for United LNG, LP, an international company involved in the production and exporting of liquefied natural gas. From
September 2011 to June 2012, Mr. Ettinger served as general counsel for Farouk Systems, Inc., an international beauty supply manufacturer and
company. Since 2002, Mr. Ettinger has served as the CEO and General Counsel for Worldwide Strategic Partners, Inc., a privately-held
energy consulting firm involved in domestic and international energy projects involving oil and gas production, exploration, alternative
fuels, waste to energy, biofuels, power and pipelines. Mr. Ettinger is a registered lobbyist for foreign governments,
sovereign owned energy companies, and international businesses, and he is also a qualified mediator and arbitrator for domestic
and international legal matters.Mr. Ettinger received a B.A. degree in Political Science
and Economics from LaSalle College in 1974 and a Juris Doctor degree from South Texas College of Law in 1983.



Brian Anderson
has served as our director since May 24, 2011. Since February 1, 2011, Mr. Anderson has been the Chief Operating Officer of The
Broadsmoore Group, a privately-held diversified merchant bank providing fully integrated business and investment services for private
equity, public market and real estate transactions. From November 2007 to December 2010, he was a Director in the fixed income
group at Oppenheimer & Co. Inc. From November 2007-December 2009 Mr. Anderson was the Chief Operating Officer at Vanquish Capital
Group, LLC, which operated a hedge fund, an investment advisor and a broker dealer. Mr. Anderson was a Director in the Capital
Markets Group at Washington Mutual from 2005 to 2007 where he specialized in structured credit transactions. From 1983 to 2005,
Mr. Anderson worked in the institutional mortgage business at Lehman Brothers, Morgan Stanley, Drexel Burnham Lambert, Kidder Peabody,
Paine Webber and Countrywide Securities. Mr. Anderson received a Bachelor of Science degree from the United States Military Academy
at West Point in 1974, and an MBA from the University of Pennsylvania in 1983. Mr. Anderson served in the United States Army from
June 1974 to August 1981.



Joseph Camardo,
M.D. has served as our director since April 1, 2011. Dr. Camardo worked at Wyeth-Ayerst laboratories in Philadelphia from
1989, when he joined as an Associate Director, Clinical Research, until 2010, when he retired as Senior Vice President of Global
Medical Affairs. Dr. Camardo received a Bachelor of Arts degree in Biology from the University of Pennsylvania in Philadelphia
in 1974, and an MD from the University of Pennsylvania School of Medicine in 1979. He completed his internship at the Hospital
of the University of Pennsylvania in 1980, and his residency at Presbyterian Hospital in Philadelphia in 1988. Between his internship
and residency Dr. Camardo worked as a postdoctoral fellow at the Division of Neurobiology and the Department of Pharmacology at
the College of Physicians and Surgeons of Columbia University in New York.





44







Michael Imperiale
M.D. has served as our director since April 1, 2011. Since 2009 Dr. Imperiale has served as Senior Director, Global Medical
Affairs for BioMarin in Novato California. Prior to joining BioMarin from 2007 to 2009, he was Vice President of Clinical research
Operations at Hana Biosciences in South San Francisco. Dr. Imperiale has served in a number of positions in the Pharmaceutical
and Biotechnology industries including as Senior Director of Medical Services at Nuvelo and Director of Clinical Trials Development
at Exelixis from 2004 to 2006. Dr. Imperiale received a M.D. from The Hahnemann University School of Medicine in 1987 and a B.A.
from Villanova University in 1982.



Andrius Pranskevicius
has served as our director since April 1, 2011. Since October 2010, Mr. Pranskevicius has served as an investment manager at Mart
Management LLC, a private equity advisor. From January 2007 to March 2010, he was the Chief Financial Officer at MMM Projecktai
UAB, a real estate development and acquisition firm. From January 2004 to January 2007, Mr. Pranskevicius was the Chief Financial
Officer at UAB “SP Investicija”, which develops and manages food chains. He received a B.A. in Management and Business
Administration in 2001 from Vilnius University in Lithuania.



Section 16(a) beneficial reporting compliance



No person who, during
the fiscal year ended December 31, 2011, was a director or officer of the Company, or beneficial owner of more than ten percent
of the Company’s Common Stock (which is the only class of securities of the Company registered under Section 12 of the
Exchange Act), failed to file on a timely basis reports required by Section 16 of the Act during such fiscal year except that
(i) Steve Urbanski filed an untimely Form 4 on November 21, 2013 (for an event
occurring on November 18, 2013); (ii) Brian Anderson filed an untimely Form 4 on May 23, 2013 (for an event occurring on April
12, 2013), an untimely Form 4 on December 17, 2013 (for events occurring on July 30, 2013, and October 15, 2013), , an untimely
Form 4 on January 7, 2014 (for events occurring on December 18, 2013, December 23, 2013 and December 31, 2013) and an untimely
Form4 on April 2, 2014 (for an event occurring on October 16, 2013); (iii) Dr. Michael Imperiale filed an untimely Form 4 on May
20, 2013 (for an event occurring on April 12, 2013) and a Form 5 on January 10, 2014 (for events occurring on June 25, 2013, July
30, 2013, October 15, 2013, December 18, 2013, December 23, 2013 and December 31, 2013; (iv) Brian Ettinger filed an untimely Form
4 on August 13, 2013 (for events occurring on April 12, 2013 and July 30, 2013), an untimely Form 4 on December 18, 2013 (for an
event occurring on October 15, 2013), an untimely Form 4 on January 6, 2014 (for events occurring on December 18, 2013, December
23, 2013 and December 31, 2013) and an untimely Form 4 on April 2, 2014 (for an event occurring on October 16, 2013); (v) Dr. Joseph
Camardo filed an untimely Form 4 on April 25, 2013 (for an event occurring on April 12, 2013), an untimely Form 4 on December 18,
2013 (for events occurring on July 30, 2013 and October 15, 2013), an untimely Form 4 on December 24, 2013 (for an event occurring
on December 18, 2013), an untimely Form 4 on January 6, 2014 (for events occurring on December 23, 2013 and December 31, 2013)
and an untimely Form 4 on April 3, 2014 (for an event occurring on October 16, 2013); (vi) Andrius Pranskevicius filed an untimely
Form 4 on May 1, 2013 (for an event occurring on April 12, 2013), an untimely Form 4 on August 6, 2013 (for an event occurring
on July 30, 2013), an untimely Form 4 on November 15, 2013 (for an event occurring on October 16, 2013), an untimely Form 4 on
December 23, 2013 (for an event occurring on October 15, 2013) and an untimely Form 4 on January 7, 2014 (for events occurring
on December 18, 2013, December 23, 2013 and December 31, 2013); and (vii) Robert Schneiderman filed an untimely Form 4 on September
13, 2013 (for an event occurring on September 10, 2013), an untimely Form 4 on September 13, 2013 (for an event occurring on September
10, 2013), an untimely Form 4 on December 13, 2013 (for an event occurring on October 15, 2013) and an untimely Form 4 on December
24, 2013 (for events occurring on October 11, 2013, November 27, 2013, December 9, 2013 and December 18, 2013). The
foregoing is based solely upon a review by the Company of Forms 3 and 4 relating the most recent fiscal year as furnished to the
Company under Rule 16a-3(d) under the Act, and Forms 5 and amendments thereto furnished to the Company with respect to
its most recent fiscal year.



Audit Committee; Audit Committee Financial Expert



The three members of
the Audit Committee of our Board of Directors (the “Audit Committee”) are Brian Anderson (Chairman), Dr. Joseph Camardo
and Dr. Michael Imperiale. The Board of Directors has determined that each member of the Audit Committee meets the independence
criteria prescribed by applicable law and the rules of the SEC for audit committee membership and meets the criteria for audit
committee membership required by NASDAQ. Further, each Audit Committee member meets NASDAQ’s financial knowledge requirements.
Also, our Board has determined that Brian Anderson qualifies as an “audit committee financial expert,” as defined in
the rules and regulations of the SEC. Mr. Anderson qualifies as an independent director under Rule 10A-3 of the Securities
Exchange Act and as defined in Nasdaq Marketplace Rule 4200(15).



Code of Ethics



On May 17, 2011, we
adopted a code of ethics that applies to all of our directors, officers (including our chief executive officer and chief financial
officer, and any person performing similar functions) and employees. We have made our Code of Ethics available by filing it as
Exhibit 14 to our registration statement on Form S-1, SEC File No. 333-174831.





45







|ITEM 11. | EXECUTIVE COMPENSATION
|-------- | ----------------------



The following summary
compensation table sets forth all compensation awarded to, earned by, or paid to the named executive officer during the years ended
December 31, 2013, and 2012 in all capacities for the accounts of our executive, including the Chief Executive Officer (CEO) and
Chief Financial Officer (CFO):



SUMMARY COMPENSATION TABLE



|Name and Principal Position |  | Year |      |  | Salary ($) |   |         | Bonus ($) |  |  | Stock Awards ($) |  |  | Option Awards ($) |        | All Other Compensation ($) |  |   | Total ($) |  
|--------------------------- |  | ---- | ---- |  | ---------- | - | ------- | --------- |  |  | ---------------- |  |  | ----------------- | ------ | -------------------------- |  | - | --------- | -
|Robert Schneiderman         |  |      | 2013 |  |            | $ | 120,000 |           |  |  | –                |  |  | $                 | –      |                            |  | – |           |  
|Chief Executive Officer     |  |      | 2012 |  |            | $ | 100,000 |           |  |  | –                |  |  | $                 | 20,000 | (1)                        |  | – |           |  
|                            |  |      |      |  |            |   |         |           |  |  |                  |  |  |                   |        |                            |  |   |           |  
|Jeffrey Andrews (2)         |  |      | 2013 |  |            | $ | 178,000 |           |  |  | –                |  |  | $                 | –      |                            |  | – |           |  
|Chief Financial Officer     |  |      | 2012 |  |            | $ | 180,000 |           |  |  | –                |  |  | $                 | –      |                            |  | – |           | $



|(1) | Consists of 114,288 shares of common stockvalued at $20,000 that we issued to Harry James Production DBA R S and Associates, a consulting firm owned by Mr. Schneiderman, for payment of Mr. Schneiderman’s salary in lieu of a cash compensation payments for services rendered during the year ended December 31, 2012.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Employment Agreements



We do not have any
employment agreements with any of our executive officers. We expect that Messrs. Schneiderman
and Andrews will enter into employment agreements with us by the end of 2014.In connection with our sale of shares of Series
A Preferred Stock, our Chief Executive Officer and Chief Financial Officer each entered into a restrictive covenant agreement. Under
this agreement, these officers are subject to a five year non-compete and non-solicitation provision. They are also
subject to a confidentiality provision. Lastly, under the restrictive covenant agreement, these officers assigned to
us any and all inventions, developments and improvements developed by them and which are within the scope of our business (regardless
of where and when invented, developed or improved). Each of our executive officers works on a full time basis.



Outstanding Equity Awards at Year End



We currently do not
have any equity compensation plans. Except for 5,000,000 shares of our common stock we granted to our Chief Financial
Officer, Jeffrey Andrews, in connection with his hiring and the stock awards we granted to our outside directors for their attendance
at board and committee meetings and stock options granted to directors for their service on the board, we have not made any equity
awards to any of our officers or directors. We do not have any outstanding options or other forms of equity compensation.





46







OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END



|Option Awards | Stock Awards                                                       
|------------- | -------------------------------------------------------------------
|Name          | Number of Securities Underlying Unexercised Options (#) Exercisable
|              |                                                                    
|              | –                                                                  



Director Compensation



In June 2011, upon
recommendation of the Compensation Committee of the board of directors, our board approved a compensation plan for our outside,
or non-employee, directors. Each outside director would receive 100,000 shares of restricted common stock for joining
our board (effective retroactively for all directors). Outside Directors will receive $1,000 and 4,000 shares of restricted
common stock for each board meeting attended (in person or by telephonic means). Additionally, each outside director
who is a member of a committee will receive 4,000 shares of restricted stock for each committee meeting attended (in person or
by telephonic means). In addition to the foregoing stock grants and cash payments, our board approved a plan that would
grant the following options to directors: (i) an annual grant of a stock option exercisable to purchase 100,000 shares of common
stock for their annual service on the board and (ii) a grant of a stock option exercisable to purchase 10,000 shares of common
stock for attendance at a board meeting and (iii) a grant of a stock option exercisable to purchase 5,000 shares of common stock
for attendance at a committee meeting. The options will be exercisable for three (3) years and have an exercise price equal to
110% of the closing price of our common stock on the date of grant. Our board of directors is required to meet four (4) times a
year. Our audit committee will meet at least four (4) times a year, and the Compensation Committee and the Nominating
Committee will each meet at least twice a year.



|Name                  |  | Fees earnedor paid in cash($) |       |     | Stock Awards
        ($) |   |       | Option awards($) |  |  | Non-equity
        incentive plan
        compensation
        ($) |     |  | Nonqualified deferredcompensation earnings($) |   |  | All other
        compensation
        ($) |  |   | Total($) | 
|--------------------- |  | ----------------------------- | ----- | --- | ------------------------ | - | ----- | ---------------- |  |  | ------------------------------------------------------------------ | --- |  | --------------------------------------------- | - |  | ------------------------------------------ |  | - | -------- | 
|Brian Ettinger        |  | $                             | 4,000 | (1) |                          | $ | 6,040 | (1)              |  |  | 52,078                                                             | (1) |  |                                               | – |  |                                            |  | – |          | 
|Brian Anderson        |  | $                             | 4,000 | (2) |                          | $ | 7,360 | (2)              |  |  | 39,183                                                             | (2) |  |                                               | – |  |                                            |  | – |          | 
|Dr. Joseph Camardo    |  | $                             | 4,000 | (3) |                          | $ | 8,400 | (3)              |  |  | 39,183                                                             | (3) |  |                                               | – |  |                                            |  | – |          | 
|Dr. Michael Imperiale |  | $                             | 4,000 | (4) |                          | $ | 8,400 | (4)              |  |  | 39,183                                                             | (4) |  |                                               | – |  |                                            |  | – |          | 
|Andrius Pranskevicius |  | $                             | 4,000 | (5) |                          | $ | 5,000 | (5)              |  |  | 39,183                                                             | (5) |  |                                               | – |  |                                            |  | – |          | 
|Robert Schneiderman   |  |                               | --    |     |                          |   | --    |                  |  |  | 37,922                                                             | (6) |  |                                               |   |  |                                            |  |   |          | 



|(1) | Consists of $4,000 paid in cash for board meetings attended during 2013,24,000 shares of common stock for attendance at board and committee meetings during 2013 and options exercisable to purchase 425,000 shares of common stock. 
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Consists of $4,000 paid in cash for board meetings attended during 2013, 28,000 shares of common stock for attendance at board and committee meetings during 2013 and options exercisable to purchase 320,000 shares of common stock.
|(3) | Consists of $4,000 paid in cash for board meetings attended during 2013, 32,000 shares of common stock for attendance at board and committee meetings during 2013 and options exercisable to purchase 320,000 shares of common stock.
|(4) | Consists of $4,000 paid in cash for board meetings attended during 2013, 32,000 shares of common stock for attendance at board and committee meetings during 2013 and options exercisable to purchase 320,000 shares of common stock.
|(5) | Consists of $4,000 paid in cash for board meetings attended during 2013, 20,000 shares of common stock for attendance at board and committee meetings during 2013 and options exercisable to purchase 320,000 shares of common stock.
|(6) | Consists of options exercisable to purchase 310,000 shares of common stock.                                                                                                                                                          





47







For the year ended
December 31, 2013, we issued 136,000 shares of common stock to our outside directors for the compensation as outlined above, which
was valued at $35,200, and options exercisable to purchase 2,015,000 shares of common stock, which was valued at $246,731.



Equity Compensation Plan Information



We currently do not
have any equity compensation plans. Except for 5,000,000 shares of our common stock we granted to our Chief Financial
Officer, Jeffrey Andrews, in connection with his hiring and the stock awards we granted to our outside directors for their attendance
at board and committee meetings, we have not made any equity awards to any of our officers or directors. We do not have
any outstanding options or other forms of equity compensation.





|ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
|-------- | ----------------------------------------------------------------------------------------------



SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT



The
following table sets forth, asof April 8, 2014, certain information concerning the beneficial
ownership of our common stock, by (i) each person known by us to own beneficially five per cent
(5%) or more of the outstanding shares of each class, (ii) each of our directors and executive officers, and (iii) all
of our executive officers and directors as a group.



The number of shares
beneficially owned by each 5% stockholder, director or executive officer is determined under the rules of the Securities and Exchange
Commission, or SEC, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under those
rules, beneficial ownership includes any shares as to which the individual or entity has sole or shared voting power or investment
power and also any shares that the individual or entity has the right to acquire within 60 days after March 19, 2013 through the
exercise of any stock option, warrant or other right, or the conversion of any security. Unless otherwise indicated,
each person or entity has sole voting and investment power (or shares such power with his or her spouse) with respect to the shares
set forth in the following table. The inclusion in the table below of any shares deemed beneficially owned does not constitute
an admission of beneficial ownership of those shares.



|Name and Address(1)                                          |  | Shares ofCommon StockBeneficiallyOwned |            |      | Percent ofCommonStock (2) | 
|------------------------------------------------------------ |  | -------------------------------------- | ---------- | ---- | ------------------------- | 
|                                                             |  |                                        |            |      |                           | 
|Robert Schneiderman                                          |  |                                        | 18,882,663 | (3)  |                           | 
|Steve Urbanski503 Summit CourtVirginia Beach, VA 23462       |  |                                        | 18,972,850 |      |                           | 
|Jeffrey Andrews                                              |  |                                        | 3,930,000  | (4)  |                           | 
|Brian Ettinger                                               |  |                                        | 597,000    | (5)  |                           | 
|Brian Anderson                                               |  |                                        | 404,000    | (6)  |                           | 
|Dr. Michael Imperiale                                        |  |                                        | 360,000    | (7)  |                           | 
|Andrius Pranskevicius                                        |  |                                        | 6,468,504  | (8)  |                           | 
|Dr. Joseph Camardo                                           |  |                                        | 516,000    | (9)  |                           | 
|All executive officers and directors as a group (7  persons) |  |                                        | 31,143,167 | (10) |                           | 



|*   | Less than 1%.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The address for each named person, other than Mr. Steve Urbanski,, is c/o ScripsAmerica, Inc., Corporate Office Centre Tysons II, 1650 Tysons Boulevard, Suite 1580, Tysons Corner, VA 22102.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(2) | For each named person and group included in this table, percentage ownership of our common stock is calculated by dividing the number of shares of our common stock beneficially owned by such person or group by the sum of (a)125,610,436shares of our common stock outstanding as of April 8, 2014 and (b) the number of shares of our common stock that such person has the right to acquire within 60 days after April 8, 2014.                                                                                                                                                                                                                                                                  
|(3) | Includes 314,292 shares of common stock held by
    Harry James Production DBA R S and Associates, a consulting firm owned by Mr. Schneiderman, which shares were issued in lieu
    of cash salary paid to Mr. Schneiderman, 283,371 shares held by Mr. Schneiderman’s wife and 325,000 shares
    of common stock issuable upon the exercise of stock options held by Mr. Schneiderman.                                                                                                                                                                                                                                                                                                             
|(4) | Includes 150,000 shares held by Mr. Andrews’ wife.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|(5) | Includes 425,000 shares of common stock issuable upon the exercise of stock options held by Mr. Ettinger.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|(6) | Includes 320,000 shares of common stock issuable upon the exercise of stock options held by Mr. Anderson.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|(7) | Includes 320,000 shares of common stock issuable upon the exercise of stock options held by Dr. Imperiale.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(8) | Includes (a) 5,980,504 shares of common stock issuable upon the conversion of 2,990,252 shares of Series A Preferred Stock held by Development 72, LLC, a limited liability company owned by Mr. Pranskevicius, who is a member of our board of directors by virtue of being nominated to the board by the Series A Preferred Stock pursuant to our amended and restated articles of incorporation, (b) 168,000 shares of common stock issued to Mr. Pranskevicius as compensation for his service on our board of directors and (c) 320,000 shares of common stock issuable upon the exercise of stock options issued to Mr. Pranskevicius as compensation for his service on our board of directors.





48









|(9)  | Includes 320,000 shares of common stock issuable upon the exercise of stock options held by Dr. Camardo.                                                                                                                                                                                                                                                                                                                                                                                              
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(10) | Includes 2,015,000 shares of common stock issuable upon the exercise of stock options held by the directors and 5,980,504 shares of common stock issuable upon the conversion of 2,990,252 shares of Series A Preferred Stock held by Development 72, LLC, a limited liability company owned by Mr. Pranskevicius, who is a member of our board of directors by virtue of being nominated to the board by the Series A Preferred Stock pursuant to our amended and restated articles of incorporation.



Securities authorized for issuance under
equity compensation plans



We currently do not
have any equity compensation plans. We have not made any equity awards to any of our officers or directors. We do not have any
outstanding options or other forms of equity compensation.



|ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
|-------- | -------------------------------------------------------------------------





In
March 2012, our CEO and president agreed to amend the maturity date and interest rate on his $50,000 promissory notes and the $30,000
promissory notes held by Harry James Production DBA R S and Associates (as described in the preceding two paragraphs). The
maturity date on these notes has been extend from September 30, 2012until January 30, 2014. The interest
rate on the notes has been decreased from 2% monthly to 1% monthly effective on October 1, 2012.



For the year ended
December 31, 2012, we issued 124,000 shares of common stock to our outside directors for the compensation as outlined above in
Item 12 (attendance at board and committee meetings), which was valued at $34,480.



In
October 2011,our CEO agreed to accept payment of part of his salary in shares of restricted stock, starting as of July
1, 2011, until we become a public company. Accordingly, during the year ended December 30, 2012, we issued 200,004 shares
of common stock to Harry James Production DBA R S and Associates, a consulting firm owned by our Chief Executive Officer, Mr. Schneiderman,
which shares were issued in lieu of cash salary paid to Mr. Schneiderman. Such shares were valued at $35,000.



In 2012, the Company
paid $107,700 in consulting fees to by Harry James Production DBA R S and Associates and interest expense on loans from by Harry
James Production DBA R S and Associates, which is a consulting firm owned by the Company’s CEO and President. In 2012, the
Company also paid $180,000 in consulting fees to a consulting firm owned by the Company’s Chief Financial Officer.



On August 16, 2012, the Company entered
into a loan agreement with Development 72, LLC for the purpose of building the inventory of RapiMed rapidly dissolving formulation
products. Development 72 made a four (4) year term loan to the Company in the amount of $500,001. The loan is secured by the assets
of the Company. Development 72 is the holder of record of 2,990,252 shares of the registrant’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 registrant’s board of directors.



In June 2012, we 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 from Development 72 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
2012, we financed $1,497,904 of our purchase orders under this finance agreement and we incurred an interest expense of $36,357
for the fiscal year 2012. As of December 31, 2012, the unpaid purchase order finance balance was $570,000 and accrued fees and
interest was $8,280.



|ITEM 14. | PRINCIPAL ACCOUNTING FEES AND SERVICES
|-------- | --------------------------------------



The following is a summary of the fees billed
to us by Friedman LLP for professional services rendered for the fiscal years ended December 31, 2013 and 2012:



|Fee Category       |  | Fiscal 2013Fees |         |  | Fiscal 2012Fees |  
|------------------ |  | --------------- | ------- |  | --------------- | -
|Audit Fees         |  | $               | 110,000 |  |                 | $
|Audit Related Fees |  |                 | 6,500   |  |                 |  
|Tax Fees           |  |                 |         |  |                 |  
|All Other Fees     |  |                 |         |  |                 |  
|                   |  |                 |         |  |                 |  
|Total Fees         |  | $               | 116,500 |  |                 | $





49









Audit
Fees. Consists of fees billed for professional services rendered for the audit of our financial statements and review
of interim financial statements included in quarterly reports and services that are normally provided by Friedman LLP in connection
with statutory and regulatory filings or engagements infiscal 2013 and 2012.



Audit
Related Fees. Consists of fees billed for accounting, assurance and related services that are reasonably related
to the performance of the audit or review of our financial statements and are not reported under “Audit Fees”. These
services were provided by Rosenberg Rich Baker Berman & Company in connection with a registration statement and SEC reports
we filed in 2013 and 2012.



Tax
Fees. Consists of fees billed for professional services for tax compliance, tax advice and tax planning.



All
Other Fees. Consists of fees for product and services other than the services reported above.



Policy on audit committee pre-approval of audit and permissible
non-audit services of independent auditors



The Board has adopted
a policy that requires advance approval of all audits, audit-related, tax, and other services performed by our independent registered
public accounting firm. The policy provides for pre-approval by the Board of specifically defined audit and non-audit
services. Unless the specific service has been previously pre-approved with respect to that year, the Board must approve
the permitted service before the independent registered public accounting firm is engaged to perform it.  All of the
services performed by our independent registered public accounting firm during 2013 and 2012 were pre-approved by the Board of
Directors.



PART IV



|ITEM 15. | EXHIBITS, CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
|-------- | ----------------------------------------------------



(a) Documents filed as a part of this report.



|1. | List of Financial Statements.
|-- | -----------------------------



The following financial statements of ScripsAmerica,
Inc. and Report of Friedman LLP, Independent Registered Public Accounting Firm, are included in this report:



|· | Report of Friedman LLP, Independent Registered Public Accounting Firm.                         
|- | -----------------------------------------------------------------------------------------------
|  |                                                                                                
|· | Consolidated Balance Sheets at December 31, 2013 and 2012                                      
|  |                                                                                                
|· | Consolidated Statements of Operations for the years ended December 31, 2013 and 2012           
|  |                                                                                                
|· | Consolidated Statements of Stockholders’ Deficit for the years ended December 31, 2013 and 2012
|  |                                                                                                
|· | Consolidated Statements of Cash Flows for the years ended December 31, 2013 and 2012           
|  |                                                                                                
|· | Notes to Consolidated Financial Statements                                                     



|2. | List of all Financial Statement Schedules.
|-- | ------------------------------------------



All schedules are omitted because they are
not applicable or the required information is shown in the financial statements or notes thereto.





50









Exhibits required by Item 601 of Regulation S-K. The following
exhibits are filed as a part of, or incorporated by reference into, this Report:



|EXHIBIT
        NUMBER | DESCRIPTION                                                                                                                                                                                                                                                                               
|---------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1#                   | Amended and Restated Certificate of Incorporation.                                                                                                                                                                                                                                        
|3.2#                   | By-Laws.                                                                                                                                                                                                                                                                                  
|5.1@                   | Opinion of Fox Law Offices, P.A.                                                                                                                                                                                                                                                          
|10.1 ^^                | Series A Preferred Stock Purchase Agreement, dated as of April 1, 2011, by and between ScripsAmerica, Inc. and Development 72, LLC.                                                                                                                                                       
|10.2#                  | Investors’ Rights Agreement, dated as of April 1, 2011, by and between ScripsAmerica, Inc. and Development 72, LLC.                                                                                                                                                                       
|10.3#                  | Right of First Refusal and Co-Sale Agreement, dated as of April 1, 2011, by and among ScripsAmerica, Inc., Development 72, LLC, Robert Schneiderman, Jeffrey Andrews and Steve Urbanski.                                                                                                  
|10.4#                  | Form of Indemnification Agreement by and between ScripsAmerica and each member of its board of directors.                                                                                                                                                                                 
|10.5#                  | Form of Restrictive Covenant Agreement by and between ScripsAmerica and each of its officers and directors.                                                                                                                                                                               
|10.6                   | Securities Purchase Agreement, dated as of November 4, 2013, by and between the Registrant and Seaside 88, L.P. (previously filed as Exhibit 10.1 to Form 8-K, dated November 4, 2013, filed on November 7, 2013 and incorporated herein by reference)                                    
|10.7#                  | Form of Private Placement Subscription Agreement.                                                                                                                                                                                                                                         
|10.8#                  | Form of Promissory Note.                                                                                                                                                                                                                                                                  
|10.9@                  | Consulting Agreement, dated April 1, 2011, by and between Artemis and ScripsAmerica.                                                                                                                                                                                                      
|10.10@                 | Services Agreement, dated November 23, 2010, by and between Clementi & Associates Ltd. and ScripsAmerica.                                                                                                                                                                                 
|10.11#                 | Factoring and Security Agreement with United Capital Factoring.                                                                                                                                                                                                                           
|10.12#                 | Form of Regulation S Subscription Agreement (April 2011).                                                                                                                                                                                                                                 
|10.13#                 | Form of Regulation S Subscription Agreement (May 2011).                                                                                                                                                                                                                                   
|10.14*                 | Agreement, made on September 6, 2013, by and between ScripsAmerica, Inc. and Marlex Pharmaceuticals, Inc. Sarav A. Patel and Samir Patel                                                                                                                                                  
|10.15@                 | Independent Consulting Agreement, made June 6, 2011, by and between ScripsAmerica and Lincoln Associates, Inc.                                                                                                                                                                            
|10.16                  | Loan Agreement, dated as of August 15, 2012, by and between the registrant and Development 72, LLC (previously filed as Exhibit 10.1 to Form 8-K, dated August 15, 2012, filed on August 16, 2012and incorporated herein by reference).                                                   
|10.17                  | Term Promissory Note made by registrant in favor of Development 72, LLC (previously filed as Exhibit 10.2 to Form 8-K, dated August 15, 2012, filed on August 16, 2012and incorporated herein by reference).                                                                              
|10.18                  | Master Agreement, made on November 7, 2013 but retroactively effective as of November 1, 2013, by and between the Registrant and Wholesale Rx, Inc.(previously filed as Exhibit 10.1 to Form 8-K, dated November 8, 2013, filed on November 14, 2013and incorporated herein by reference).
|10.19*                 | Settlement Agreement, made on January 14, 2014, by and among ScripsAmerica, Inc., Steve Urbanski, GEM Global Yield Fund Limited, 590 Partners, LLC and The GEM Group.                                                                                                                     
|10.20*                 | Form of Warrant                                                                                                                                                                                                                                                                           
|10.21                  | Purchase Agreement, made as of September 30, 2013 by and among P.I.M.D. International, LLC, Vanessa Gonzalez and the Registrant (previously filed as Exhibit 10.1 to Form 8-K, dated October 18, 2013, filed on October 24, 2013 and incorporated herein by reference).                   
|10.22*                 | Sourcing and Marketing Agreement, made on March 15, 2014, by and between ScripsAmerica, Inc. and P.I.M.D. International, LLC.                                                                                                                                                             
|10.23*                 | Promissory Note, dated October 1, 2013, made by Implex Corporation in favor of ScripsAmerica, Inc.                                                                                                                                                                                        
|10.24*                 | Business Management Agreement, made as of February 7, 2014, by and among ScripsAmerica, Inc., Main Avenue Pharmacy and Implex Corporation.                                                                                                                                                
|10.25*                 | Worldwide Licensing Agreement, dated January 27, 2014, by and between ScripsAmerica, Inc. and Global Pharma Hub, Inc.                                                                                                                                                                     





51







|10.26*    | Canada License Agreement by and among Global Pharma Hub, Inc., Sheen Boom Investments, Ltd., Jetsaw Pharmaceutical, Inc. and ScripsAmerica, Inc.
|--------- | ------------------------------------------------------------------------------------------------------------------------------------------------
|14.1#     | ScripsAmerica Code of Conduct.                                                                                                                  
|31.1*     | Section 302 Certification of Principal Executive Officer.                                                                                       
|31.2*     | Section 302 Certification of Principal Financial Officer.                                                                                       
|32.1*     | Section 906 Certification of Principal Executive Officer - Certification of Compliance to Sarbanes-Oxley.                                       
|32.2*     | Section 906 Certification of Principal Financial Officer - Certification of Compliance to Sarbanes-Oxley.                                       
|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                                                                                                             



|*   | Filed herewith                                                                                                                                                                
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                               
|**  | To be furnished by amendment per Temporary Hardship Exemption under Regulation S-T.                                                                                           
|    |                                                                                                                                                                               
|#   | Previously filed with the registration statement on Form S-1, SEC File No. 333-174831, filed on June 10, 2011and incorporated herein by reference.                            
|    |                                                                                                                                                                               
|@   | Previously filed with the amendment no. 1 to the registration statement on Form S-1, SEC File No. 333-174831, filed on August 23, 2011and incorporated herein by reference.   
|    |                                                                                                                                                                               
|^^  | Previously filed with the amendment no. 2 to the registration statement on Form S-1, SEC File No. 333-174831, filed on September 26, 2011and incorporated herein by reference.
|    |                                                                                                                                                                               
|+++ | Previously filed with the amendment no. 3 to the registration statement on Form S-1, SEC File No. 333-174831, filed on October 20, 2011and incorporated herein by reference.  







52







SIGNATURES



Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf on April 15, 2014 by the undersigned thereunto duly authorized.





| | SCRIPSAMERICA, INC.                         
| | --------------------------------------------
| |                                             
| |                                             
| | /s/ Robert Schneiderman                     
| | Robert Schneiderman, Chief Executive Officer





Pursuant
to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.



|Signature                 |  | Title                                        |  | Date          
|------------------------- |  | -------------------------------------------- |  | --------------
|                          |  |                                              |  |               
|/s/ Robert Schneiderman   |  | Chief Executive Officer and Director         |  | April 15, 2014
|Robert Schneiderman       |  | (Principal Executive Officer)                |  |               
|                          |  |                                              |  |               
|/s/ Jeffrey Andrews       |  | Chief Financial Officer                      |  | April 15, 2014
|Jeffrey Andrews           |  | (Principal Financial and Accounting Officer) |  |               
|                          |  |                                              |  |               
|/s/ Brian Ettinger        |  | Chairman of the Board and Director           |  | April 15, 2014
|Brian Ettinger            |  |                                              |  |               
|                          |  |                                              |  |               
|/s/ Brian Anderson        |  | Director                                     |  | April 15, 2014
|Brian Anderson            |  |                                              |  |               
|                          |  |                                              |  |               
|/s/ Joseph Camardo        |  | Director                                     |  | April 15, 2014
|Joseph Camardo            |  |                                              |  |               
|                          |  |                                              |  |               
|/s/ Michael Imperiale     |  | Director                                     |  | April 15, 2014
|Michael Imperiale         |  |                                              |  |               
|                          |  |                                              |  |               
|/s/ Andrius Pranskevicius |  | Director                                     |  | April 15, 2014
|Andrius Pranskevicius     |  |                                              |  |               
|                          |  |                                              |  |               
|                          |  |                                              |  |               







53