<SUBMISSION>
<ACCESSION-NUMBER>0001185185-06-000038
<TYPE>SB-2/A
<PUBLIC-DOCUMENT-COUNT>2
<FILING-DATE>20060125
<DATE-OF-FILING-DATE-CHANGE>20060125
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>Assured Pharmacy, Inc.
<CIK>0001100592
<ASSIGNED-SIC>5912
<IRS-NUMBER>980233878
<STATE-OF-INCORPORATION>NV
<FISCAL-YEAR-END>1231
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>SB-2/A
<ACT>33
<FILE-NUMBER>333-121288
<FILM-NUMBER>06549096
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>17935 SKY PARK CIRCLE
<STREET2>SUITE F
<CITY>IRVINE
<STATE>CA
<ZIP>92614
<PHONE>949-222-9971
</BUSINESS-ADDRESS>
<MAIL-ADDRESS>
<STREET1>17935 SKY PARK CIRCLE
<STREET2>SUITE F
<CITY>IRVINE
<STATE>CA
<ZIP>92614
</MAIL-ADDRESS>
<FORMER-COMPANY>
<FORMER-CONFORMED-NAME>ERXSYS INC
<DATE-CHANGED>20030916
</FORMER-COMPANY>
<FORMER-COMPANY>
<FORMER-CONFORMED-NAME>SURFORAMA COM INC
<DATE-CHANGED>20001128
</FORMER-COMPANY>
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<DOCUMENT>
<TYPE>SB-2/A
<SEQUENCE>1
<FILENAME>aphysb2a2.txt
<DESCRIPTION>ASSURED PHARMACY SB-2/A
<TEXT>



                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM SB-2
                                 Amendment No. 2

             REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
                             Assured Pharmacy, Inc.
                             ----------------------
                 (Name of small business issuer in its charter)

NEVADA                                      5912                      98-0233878
------                                      ----                      ----------
(State or jurisdiction of       (Primary Standard Industrial    (I.R.S. Employer
incorporation or organization)   Classification Code Number)      Identification
                                                                         Number)
17935 Sky Park Circle, Suite F
Irvine, CA                                                      92614
----------                                                      -----
(Name and address of principal                                (Zip Code)
executive offices)

Registrant's telephone number, including area code: 949-222-9971

Approximate  date of proposed sale to the public:  As soon as practicable  after
the effective date of this Registration Statement.

If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the  Securities  Act,  check the following box and list the
Securities  Act  registration   statement   number  of  the  earlier   effective
registration statement for the same offering. |_|

If this Form is a  post-effective  amendment filed pursuant to Rule 462(c) under
the  Securities  Act,  check  the  following  box and  list the  Securities  Act
registration  statement number of the earlier effective  registration  statement
for the same offering. |_|

If this Form is a  post-effective  amendment filed pursuant to Rule 462(d) under
the  Securities  Act,  check  the  following  box and  list the  Securities  Act
registration  statement number of the earlier effective  registration  statement
for the same offering. |_|

If delivery of the prospectus is expected to be made pursuant to Rule 434, check
the following box. |_|

<TABLE>
<CAPTION>
                                   CALCULATION OF REGISTRATION FEE
--------------------------------------------------------------------------------------------------
     TITLE OF EACH                                   PROPOSED        PROPOSED
       CLASS OF                                       MAXIMUM         MAXIMUM
      SECURITIES                  OFFERING           AGGREGATE       AMOUNT OF
         TO BE                  AMOUNT TO BE         PRICE PER        OFFERING      REGISTRATION
      REGISTERED                 REGISTERED           UNIT(1)          PRICE            FEE
--------------------------------------------------------------------------------------------------
<S>                          <C>                       <C>           <C>              <C>
    Common Stock(2)          13,711,000 shares         $0.28         $3,839,080       $486.41
Common Stock Underlying       5,610,875 shares         $0.60         $3,366,525       $426.54
      Warrants(3)
--------------------------------------------------------------------------------------------------
</TABLE>

(1)     Estimated solely for the purpose of calculating the registration fee.
        Pursuant to Rule 457(c) under the Securities Act, the proposed maximum
        offering price per share and the proposed maximum aggregate offering
        price have been determined on the basis of the average of the bid and
        asked price as of a specified date within five business days prior to
        the date of filing this registration statement.
(2)     These shares of common stock refer to those issued in exempt offerings
        to accredited investors.

(3)     These shares of common stock underlie the warrants to purchase shares of
        common stock that were issued in exempt offerings to accredited
        investors.


THE REGISTRANT HEREBY AMENDS THIS  REGISTRATION  STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT  SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY  STATES THAT THIS REGISTRATION  STATEMENT
SHALL  THEREAFTER  BECOME  EFFECTIVE  IN  ACCORDANCE  WITH  SECTION  8(a) OF THE
SECURITIES ACT OF 1933, AS AMENDED,  OR UNTIL THE  REGISTRATION  STATEMENT SHALL
BECOME  EFFECTIVE  ON SUCH DATE AS THE  COMMISSION,  ACTING  PURSUANT TO SECTION
8(a), MAY DETERMINE.


                                       1


<PAGE>
================================================================================
                          COPIES OF COMMUNICATIONS TO:
                                 CANE CLARK LLP
                            3273 E. WARM SPRINGS RD.
                               LAS VEGAS, NV 89120
                                 (702) 312-6255
                               FAX: (702) 944-7100
                          AGENT FOR SERVICE OF PROCESS
================================================================================


                                       2


<PAGE>


                  SUBJECT TO COMPLETION, DATED JANUARY 20, 2006
                                   PROSPECTUS
                             ASSURED PHARMACY, INC.
                        19,321,875 SHARES OF COMMON STOCK

                               -------------------

We completed two exempt offerings of units to accredited investors. This first
exempt offering was completed on June 17, 2004 and the second exempt offering
was completed on December 23, 2005. Each unit in both offerings was priced at
$0.80 and consisted of two shares of common stock and a warrant to purchase one
share of restricted common stock. We are registering in this prospectus the
shares contained in each unit, including the issued common stock and the common
stock underlying the warrants. We are also registering in this prospectus
2,500,000 shares of common stock issued to a credit provider upon the conversion
of debt into equity. The selling shareholders named in this prospectus are
offering all of the shares of common stock being registered by this prospectus.
Assured Pharmacy, Inc. will not receive any proceeds from the sale of the
shares, although we will receive proceeds from the exercise of the stock
warrants. Assured Pharmacy, Inc. has not made any arrangements for the sale of
these securities.

Our common stock is presently quoted on the over-the-counter bulletin board (the
"OTCBB") administered by the National Association of Securities Dealers ("NASD")
and our stock trading symbol is APHY. As a result, the actual price of the stock
will be determined by prevailing market prices at the time of sale or by private
transactions negotiated by the selling shareholders. The offering price will
thus be determined by market factors and the independent decisions of the
selling shareholders. On January 12, 2006 the last sale price of our common
stock as reported by the OTCBB was $0.45 per share.


THE PURCHASE OF THE SECURITIES OFFERED THROUGH THIS PROSPECTUS INVOLVES A HIGH
DEGREE OF RISK. SEE SECTION ENTITLED "RISK FACTORS" ON PAGE 8-15.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.

The information in this prospectus is not complete and may be changed. The
selling shareholders may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and it is not soliciting an
offer to buy these securities in any state where the offer or sale is not
permitted.


                The Date of This Prospectus Is: January 20, 2006


================================================================================


                                       3


<PAGE>

                                Table of Contents
                                -----------------

                                                                            Page
                                                                            ----
Part I. Information Required in Prospectus

Summary Information........................................................  6

Risk Factors...............................................................  9

    If we do not obtain additional financing, our business will fail.......  9

    Because of the time gap between replenishing our inventory and
    collecting our accounts receivable, we may not have sufficient
    financing on hand to purchase additional inventory...................... 9

    Because we have a short  operating  history and a new business
    model,  it is difficult to evaluate our future  prospects  and
    this increases the risk of your investment.............................. 9

    Because we have only recently commenced  business  operations,
    we  expect  to  incur  operating  losses  for the  foreseeable
    future..................................................................10

    If we are unable to  generate  significant  revenues  from our
    operations, our business will fail..................................... 10

    Because  our auditor  has raised  substantial  doubt about our
    ability to continue as a going  concern,  our  business  has a
    high risk of failure................................................... 10

    Since  we  are  subject  to  onerous  government   regulations
    affecting  our  operations,  our  business  could be adversely
    affected............................................................... 11

    If we are unable to retain or motivate  key  personnel or hire
    qualified  personnel,  we may not be able to grow  effectively
    and execute our business plan.......................................... 11

    We will not be able to compete effectively if we are unable to
    attract, hire and retain qualified pharmacists......................... 11

    If  competition  increases,  our ability to attract and retain
    customers or expand our business could be impaired..................... 11

    If we have difficulty  adapting our service to accommodate any
    concerns  of  physicians  and  technological   advances,   our
    business could be harmed............................................... 12

    Because  we  are   dependent  on   third-parties   to  provide
    technological support and e-scripting technology, our business
    could be harmed if  third-parties  fail to provide  technology
    that  we  utilize  in  our  operations  and/or   technological
    support................................................................ 12

    If physicians do not embrace the e-scripting  technology as an
    effective means of prescribing  medication for their patients,
    we will not be able to service these physicians'  patients and
    this will negatively impact business................................... 12

    Because we purchased 95% of our inventory from one drug vendor
    during the year ended December 31, 2004, there is an increased
    risk that our  business  could be  harmed if our  relationship
    with this vendor is terminated......................................... 12

    If we fail to obtain the mandatory  approval to participate in
    California's   Medicaid  program  within  Orange  County,  our
    pharmacy  location in Santa Ana,  California will be unable to
    supply  medication  to potential  customers who rely on health
    coverage  through  Medicaid  resulting  in a material  adverse
    financial impact on our financial results.............................. 12

    If some third party payors continue to restrict our ability to
    participate  as suppliers of  medication  to  participants  in
    their  health  coverage  plans,  we  may  experience  loss  of
    business  resulting in a material adverse  financial impact on
    our financial results.................................................. 13

    Because we are dependent on third-party  payors,  our business
    is  volatile  and there is an  increased  risk of loss of your
    investment............................................................. 13

                                       4
<PAGE>

    If we  fail  to  maintain  an  effective  system  of  internal
    control, we may not be able to accurately report our financial
    results or prevent  fraud  resulting in current and  potential
    stockholders losing confidence in our financial reporting.............. 13

    If the  selling  shareholders  sell a  substantial  number  of
    shares all at once or in large blocks, the market price of our
    shares would most likely decline....................................... 13

    Our  quarterly  financial  results are subject to  significant
    fluctuation,   and  if  our  future   results  are  below  the
    expectations of investors, the price of our common stock would
    likely decline......................................................... 14

    Because  our  common  stock is quoted on the  over-the-counter
    bulletin board  administered by the NASD and is subject to the
    "Penny  Stock"  rules,  the level of trading  activity  in our
    stock may be reduced................................................... 14

  Use of Proceeds.......................................................... 15

  Determination of Offering Price.......................................... 15

  Selling Security Holders................................................. 15

  Plan of Distribution..................................................... 20

  Legal Proceedings........................................................ 21

  Directors, Executive Officers, Promoters and Control Persons............. 22

  Security Ownership of Certain Beneficial Owners and Management........... 23

  Description of Securities................................................ 24

  Interest of Named Experts and Counsel.................................... 25

  Disclosure of Commission   Position  of  Indemnification  for
     Securities  Act Liabilities........................................... 26

  Organization Within Last Five Years...................................... 26

  Description of Business.................................................. 26

  Management's Discussion and Analysis..................................... 36

  Description of Property.................................................. 46

  Certain Relationships and Related Transactions........................... 47

  Market for Common Equity and Related Stockholder Matters................. 49

  Executive Compensation................................................... 51

  Consolidated Financial Statements........................................ 53

  Changes In and Disagreements with Accountants on Accounting and
     Financial Disclosure.................................................. 54

You should rely only on the information contained in this prospectus. We have
not, and the selling stockholders have not, authorized any other person to
provide you with information that is different from that contained in this
prospectus. The information contained in this prospectus is accurate only as of
the date of the prospectus, regardless of the delivery of this prospectus or of
any sale of common stock.

                                       5

<PAGE>

                               SUMMARY INFORMATION


                             ASSURED PHARMACY, INC.

We were organized as a Nevada corporation on October 22, 1999 under the name
Surforama.com, Inc. ("Surforama") and previously operated under the name eRXSYS,
Inc. We changed our name to Assured Pharmacy, Inc. in October 2005. From October
1999 to August 2002, we were in the business of developing and marketing on-line
advertising for service providers, corporations and individuals. After this
time, we reorganized our operations. We are now engaged in the business of
operating pharmacies that specialize in the dispensing of highly regulated pain
medication by utilizing technology that allows physicians to transmit
prescriptions from a wireless hand-held device or desktop computer directly to
our dedicated pharmacies, thus eliminating or reducing the need for paper
prescription. Because our focus is on physicians whose practice necessitates
that they frequently prescribe medication to manage their patients' chronic
pain, we typically will not keep in inventory non-prescription drugs, or health
and beauty related products such as walking canes, bandages and shampoo. We
derive our revenue from the sale of prescription drugs.


The majority of our business is derived from physicians who transmit
prescriptions directly to our store electronically. We have limited "walk-in"
prescriptions.

In April 2003, we entered into a joint venture with TPG Partners, L.L.C. ("TPG")
to form Safescript Pharmacies of California, L.L.C. ("Joint Venture"). This
Joint Venture was formed to establish and operate pharmacies. We own 51% of the
Joint Venture with TPG owning the remaining 49% (minority owner). In June 2003,
the Joint Venture formed a wholly owned subsidiary, Safescript of California,
Inc. ("Safescript"), to own and operate the pharmacies. Effective September 8,
2004, Safescript filed amended articles of incorporation and changed its name to
Assured Pharmacies, Inc. ("API").


In February 2004, we entered into an agreement with TAPG, L.L.C. ("TAPG"), a
Louisiana limited liability company, and formed Safescript Northwest, Inc.
("Safescript Northwest"), a Louisiana corporation. Effective August 19, 2004,
Safescript Northwest filed amended articles of incorporation and changed its
name to Assured Pharmacies Northwest, Inc. ("APN"). We own 75% of APN, while
TAPG owns the remaining 25%. In accordance with our shareholders agreement with
TAPG, TAPG will provide start-up costs in the amount of $335,000 per pharmacy
location established up to five (5) pharmacies, and we will contribute
technology, consulting services, and marketing expertise.

We announced in our quarterly report for the three months ended September 30,
2004 that we were suspending the development of new pharmacies for a period of
sixty to ninety days in order to evaluate and potentially improve the operations
of our four existing pharmacies. It was the belief of our board of directors and
executive management that all four stores were not operating at their full
potential. This basis for this belief was primarily the reluctance of physicians
to adopt our technology for electronically transmitting prescriptions and our
failure to implement a successful marketing strategy to attract business. Since
this announcement, management postponed activity related to the development of
new locations. At the present time and following this period of evaluation, our
management decided not to close any of our existing pharmacy locations. We are
hopeful that we will resume the development of new pharmacies in the first
quarter of 2006.

The primary catalyst for the decision to suspend the development of new
pharmacies was substantially attributable to a lack of sufficient cash to fund
the expenses associated with the development of new pharmacies. We have incurred
significant expenditures in connection with purchases of inventory for our
existing pharmacies. As sales increased, a time gap developed between inventory
replenishing and accounts receivable. Nearly all of our pharmacy sales are to
customers whose medications were covered by health benefit plans and other third
party payors. As a result, we typically do not receive cash for our sales at the
time of transactions and are dependent on health benefit plans to pay for all or
a portion of our customers' prescription purchases. There is a significant delay
from the time of a customer's purchase of medication to the time when we receive
payment for the customer's purchase from a health benefit plan or other third
party payor. The delay from the point of a customer's purchase to our receipt of
payment has ranged between 41and 27 days when calculated for a specific
quarterly period.

                                       6

<PAGE>

As of September 30, 2005, we had a working capital deficit of $1,239,920. We
will be required to seek additional funds to finance our long-term operations.
The successful outcome of future financing activities cannot be determined at
this time and there is no assurance that if achieved, we will have sufficient
funds to execute our intended business plan or generate positive operating
results. Our auditors have raised substantial doubt about our ability to
continue as a going concern.

Our principal office is located at 17935 Sky Park Circle, Suite F, Irvine,
California, 92614.

We currently have four operating pharmacies. Our first pharmacy was opened on
October 13, 2003 in Santa Ana, California. On June 10, 2004, we opened our
second pharmacy in Riverside, California. These pharmacies were opened pursuant
to a joint venture agreement entered into with TPG Partners, LLC. We opened our
third pharmacy in Kirkland, Washington on August 11, 2004. Our fourth pharmacy
was opened in Portland, Oregon on September 21, 2004. The pharmacies located in
Kirkland and Portland were opened pursuant to a joint venture agreement with
TAPG LLC. The locations of our pharmacies are as follows:



    o    2431 N. Tustin Ave., Unit L, Santa Ana, California, 92705,

    o    7000 Indiana, Ave., Suite 112, Riverside, California, 92506,

    o    12071 124th Avenue NE, Kirkland, Washington, 98034, and

    o    3822 S.E. Powell Blvd, Portland, Oregon, 97202.



                                       7


<PAGE>

                                  THE OFFERING


Securities          Being Offered Up to 19,321,875 shares of our common stock of
                    which  13,711,000 are currently  issued and  outstanding and
                    5,610,875  represent  common shares  underlying  warrants we
                    have issued.


Offering            Price and Alternative  Plan of Distribution All shares being
                    offered are being sold by existing  shareholders without our
                    involvement,  so the  actual  price  of the  stock  will  be
                    determined by  prevailing  market prices at the time of sale
                    or  by  private  transactions   negotiated  by  the  selling
                    shareholders.  The offering price will thus be determined by
                    market factors and the independent  decisions of the selling
                    shareholders.


Minimum Number
of Shares To
Be Sold in
This Offering       None

Securities
Issued and
to be Issued        54,449,398  shares  of  our  common  stock  are  issued  and
                    43,590,740  outstanding  as of January 20, 2006.  All of the
                    common stock to be sold under this  prospectus  will be sold
                    by existing shareholders.  Our issued and outstanding shares
                    will increase if warrants issued to the selling shareholders
                    are  exercised  into common  stock.  If all of the  warrants
                    issued to the selling shareholders are exercised into common
                    stock, we will have 60,060,273 shares of common stock issued
                    and 49,201,615 outstanding.

Use of Proceeds     We will not receive any proceeds from the sale of the common
                    stock by the selling shareholders.

                          Summary Financial Information
                          -----------------------------

                                       Fiscal Year Ended      Three Months Ended
                                       December 31, 2004      September 30, 2005
Balance Sheet Data                         (audited)             (unaudited)
--------------------------------------------------------------------------------
Cash                                       $ 86,325               $ 144,394
Total Assets                               1,019,340              1,055,456
Liabilities                                2,957,565              2,258,828
Total Stockholder's Equity (Deficit)      (1,938,225)            (1,203,372)
--------------------------------------------------------------------------------
Statement of Operations
--------------------------------------------------------------------------------
Revenue                                   $ 1,164,568             $ 980,181
Net Loss for Reporting Period             $ 8,011,287            $ 2,835,877
--------------------------------------------------------------------------------

                                        8


<PAGE>

                                  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. Due to any of these risks, you may lose all or part of your
investment.


IF WE DO NOT OBTAIN ADDITIONAL FINANCING, OUR BUSINESS WILL FAIL.

As of September 30, 2005, we had cash in the amount of $144,394. We entered into
several loan agreements during the first and second quarter of fiscal 2005 and
received financing in private equity offerings. However, we still require
additional financing. Our total liabilities as of September 30, 2005 was
$1,816,050. Our total loans outstanding as of January 18, 2006 were $866,186 and
our annual debt service was $108,150 as of the same date. We are required to
make monthly interest payments on our outstanding loans and the principal
balance is due in January 2007. Our management anticipates that our current cash
on hand is insufficient for us to operate our four existing pharmacies at the
current level through the end of the first quarter of fiscal 2006. Our business
plan calls for ongoing expenses in connection with evaluating the technology we
utilize, salary expense, expenditures to retain consultants, maintaining our
existing technologies, implementing a new marketing strategies, and developing a
strong corporate infrastructure to be able to manage further growth and
expansion when we resume the development of additional pharmacies. These
expenditures are anticipated to be approximately $4,000,000 for fiscal 2006. In
order to continue to pursue our business plan to establish and operate
additional pharmacies, we will require additional funding. If we are not able to
secure additional funding, the implementation of our business plan will be
delayed and our ability to expand and develop additional pharmacies will be
impaired. We intend to secure additional funding through increased sales
generated by our operations and additional equity financing arrangements. There
can be no assurance that we will be successful in raising all of the additional
funding that we are seeking.

BECAUSE OF THE TIME GAP BETWEEN REPLENISHING OUR INVENTORY AND COLLECTING OUR
ACCOUNTS RECEIVABLE, WE MAY NOT HAVE SUFFICIENT FINANCING ON HAND TO PURCHASE
ADDITIONAL INVENTORY.

Almost all of our pharmacy sales are to customers whose medications were covered
by health benefit plans and other third party payors. We typically do not
receive cash for our sales at the time of transactions and are dependent on
health benefit plans to pay for all or a portion of our customers' prescription
purchases. There is a significant delay from the time of a customer's purchase
of medication to the time when we receive payment for the customer's purchase
from a health benefit plan or other third party payor. The delay from the point
of a customer's purchase to our receipt of payment has ranged between 41 and 27
days when calculated for a specific quarterly period. As a result, we may not
have sufficient financing on hand to purchase additional inventory. On February
23, 2005, we entered into an accounts receivable servicing agreement and line of
credit agreement with Mosaic Financial Services, LLC ("Mosaic") for the purpose
of financing future inventory purchases. This line of credit was converted into
equity and we issued 2,500,000 shares of our common stock to satisfy our
obligations under these agreements. On October 31, 2005, we entered into another
line of credit agreement with Mosaic enabling us to draw a maximum of $1,000,000
to purchase inventory. In the event that Mosaic Financial Services, LLC is
unable to service our receivables as set forth in the agreement, we may not have
sufficient financing on hand to purchase additional inventory resulting in our
pharmacies maintaining insufficient inventory to be able to achieve profitable
operations.

BECAUSE WE HAVE A SHORT OPERATING HISTORY AND A NEW BUSINESS MODEL, IT IS
DIFFICULT TO EVALUATE OUR FUTURE PROSPECTS AND THIS INCREASES THE RISK OF YOUR
INVESTMENT.

We were incorporated in October 1999. Our Internet web site was also developed
in 1999 and never made a profit. We abandoned our prior business model and
acquired a new business opportunity. This new business model has not been proven
successful or been tested by any other company in any respect. Accordingly, you
have a limited opportunity to evaluate our business and future prospects because
we have a limited operating history under our current business model. There is
no certainty that future operations will be profitable. There is a risk that we
will be unable to develop a broad enough customer base to conduct enough volume
to pay our operating costs. A limited operating history requires frequent
evaluation to improve operations and/or remedy unforeseen difficulties that may
occur. If we are unable to remedy unforeseen difficulties that materialize, our
ability to achieve profitable operations could be impaired. An investor should
consider the risks, expenses and uncertainties of a company like ours that has
only recently commenced business operations. If we are unsuccessful in
addressing these risks, our business will most likely fail.


                                       9
<PAGE>

BECAUSE WE HAVE ONLY RECENTLY COMMENCED BUSINESS OPERATIONS, WE EXPECT TO INCUR
OPERATING LOSSES FOR THE FORESEEABLE FUTURE.

As we pursue our business plan, we are incurring increasing expenses and expect
to do so for the foreseeable future. We incurred an operating loss in the amount
of $1,414,008 for the year ended November 30, 2003 and an operating loss in the
amount of $8,443,763 for the year ended December 31, 2004. As of September 30,
2005, we had an accumulated deficit of approximately $14,393,316 and


recurring losses from operations. The term accumulated deficit means the total
losses of the company over the life of the company. This differs from
profitability in that profitability generally refers to profits in a defined
period of time. We initially projected that each store would be cash flow
positive by the ninth month of operation; however, none of our operating
pharmacies currently is or ever has been cash flow positive. As a result, we
anticipate that we will incur increased operating expenses while obtaining only
limited increases in revenues from sales. Therefore, we expect to incur
significant losses into the foreseeable future and until such time that each
pharmacy opened is cash flow positive. There can be no assurance that each
pharmacy opened will achieve profitable operations.


IF WE ARE UNABLE TO GENERATE SIGNIFICANT REVENUES FROM OUR OPERATIONS, OUR
BUSINESS WILL FAIL.

As we pursue our business plan, we are incurring significant expenses. We
incurred operating expenses for the year ended December 31, 2004 in the amount
of $8,197,168 and had gross sales of $1,164,568 for the same reporting period.
We incurred operating expenses for the three months ended September 30, 2005 in
the amount of $3,026,446 and had gross sales of $980,181 for the same reporting
period. We incurred operating expenses for the nine months ended September 30,
2005 in the amount of $5,286,535 and had gross sales of $2,417,988 for the same
reporting period. The success and viability of our business is contingent upon
generating significant revenues from the operations of our pharmacies such that
we are able to pay our operating expenses and operate our business at a profit.
Currently, we are unable to generate significant revenues from our existing
business to pay our operating expenses and operate at a profit. In the event
that we remain unable to generate significant revenues from the sale of
prescribed medications at our pharmacies to pay our operating expenses, we will
not be able to achieve profitability or continue operations. In such
circumstance, you may lose all of your investment.


BECAUSE OUR AUDITOR HAS RAISED SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO CONTINUE
AS A GOING CONCERN, OUR BUSINESS HAS A HIGH RISK OF FAILURE.

As noted in our financial statements, we have only recently commenced
operations. The audit report of Squar, Milner, Reehl & Williamson, LLP issued a
going concern opinion and raised substantial doubt as to our continuance as a
going concern. When an auditor issues a going concern opinion, the auditor has
substantial doubt that the company will continue to operate indefinitely and not
go out of business and liquidate its assets. This is a significant risk to
investors who purchase shares of our common stock because there is an increased
risk that we may not be able to generate and/or raise enough resources to remain
operational for an indefinite period of time.

To date, we have abandoned our prior business model and implemented a new
business plan to operate pharmacies that specialize in dispensing highly
regulated pain medication while incorporating web-based technology that allows
physicians to transmit prescriptions from a personal data assistant ("PDA")
and/or desktop computer directly to our dedicated pharmacies. The success of our
business operations depends upon our ability to obtain further financing to
complete the successful development of our business plan and to attain
profitable operations. It is not possible at this time for us to predict with
assurance the outcome of these matters. If we are not able to successfully
complete the development of our business plan and attain sustainable profitable
operations, then our business will fail.



                                       10


<PAGE>

SINCE WE ARE SUBJECT TO ONEROUS GOVERNMENT REGULATIONS AFFECTING OUR OPERATIONS,
OUR BUSINESS COULD BE ADVERSELY AFFECTED.

The operation of pharmacies is highly regulated and there are extensive federal
and state government regulations affecting companies that dispense
pharmaceutical products. Each pharmacy location must be licensed by the state
government. The licensing requirements vary from state to state. An additional
registration certificate must be granted by the Drug Enforcement Agency, and, in
some states, a separate controlled substance license must be obtained to
dispense Class 2 drugs. In addition, pharmacies selling Class 2 drugs are
required to maintain extensive records and often report information to state
agencies. The operation of our business is contingent upon compliance with
governmental regulations. In the event that a state should revoke a current
pharmacy's license or deny any potential store licenses, our future revenue
could be materially impacted in a negative manner. Lastly, new government
regulations cannot be predicted and our business could be adversely affected if
compliance with new government regulation becomes extremely onerous.

IF WE ARE UNABLE TO RETAIN OR MOTIVATE KEY PERSONNEL OR HIRE QUALIFIED
PERSONNEL, WE MAY NOT BE ABLE TO GROW EFFECTIVELY AND EXECUTE OUR BUSINESS PLAN.

We depend on the services of our senior management. We retained the services of
Robert DelVecchio to serve as our Chief Executive Officer and Chief Financial
Officer. Our success depends on the continued efforts of Mr. DelVecchio. The
loss of the services of Mr. DelVecchio could have an adverse effect on our
business, financial condition and results of operations. We do not maintain "key
man" or similar insurance policies on Mr. DelVecchio or any other personnel. As
our business develops, our success is largely dependent on our ability to hire
and retain highly qualified managerial, sales and technical personnel. These
managerial, technical and sales personnel are generally in high demand and we
may not be able to attract the staff we need at a cost that is within our
operating budget. In addition, we may lose employees or consultants that we hire
due to higher salaries and fees being offered by other businesses. If we do not
succeed in attracting excellent personnel or retaining or motivating existing
personnel, we may be unable to grow effectively and implement our business plan.


WE WILL NOT BE ABLE TO COMPETE EFFECTIVELY IF WE ARE UNABLE TO ATTRACT, HIRE AND
RETAIN QUALIFIED PHARMACISTS.


There is a nationwide shortage of qualified pharmacists. We current employ four
pharmacists, one pharmacist at each operating pharmacy. Although we have not
experienced any difficulty recruiting pharmacists in the past, we may experience
difficulty attracting, hiring and retaining qualified pharmacists in the future.
If we are unable to attract, hire and retain enough qualified pharmacists, our
operations could be adversely affected.

IF COMPETITION INCREASES, OUR ABILITY TO ATTRACT AND RETAIN CUSTOMERS OR EXPAND
OUR BUSINESS COULD BE IMPAIRED.

We face intense competition with local, regional and national companies,
including other drugstore chains, independently owned drugstores, supermarkets,
mass merchandisers, discount stores, dollar stores, mail order pharmacies and
drug importation. Competition in this industry is intense primarily because
national pharmacies including Walgreens and CVS Pharmacy have expanded
significantly and prescription drugs are now offered at a variety of retail
establishments when traditionally prescription drugs were only provided at local
pharmacies. Supermarkets and discount stores now maintain retail pharmacies
onsite as a part of a business plan to provide consumers with all of their
retail needs at one location. Retail pharmacies such as Walgreens, CVS Pharmacy,
and Rite Aid use proprietary and/or commercialized paperless prescription
technology in their pharmacy operations. Many of these retail pharmacies rely
substantially on the sale of non-prescription drugs or health and beauty related
products to generate revenue. Currently, Safescript Pharmacies, Inc. is the only
company that our management is aware of that operates pharmacies in the United
States that exclusively dispense pharmaceutical products to patients who require
medication for chronic pain management and also provide technological support to
physicians to enable them to e-prescribe medication for their patients to the
pharmacy. It is possible that significant competition may emerge or chain retail
pharmacies will revise their business model and focus on dispensing
pharmaceutical products to patients who require medication for chronic pain
management. If competitors emerge and offer competing products and services that
achieve greater market acceptance, our business, financial condition, and
results of operations could be negatively impacted. We may not be able to
effectively compete against them because our existing or potential competitors
may have financial and other resources that are superior to ours. We may also
fail to attract and retain consumers because they may prefer to purchase all of
their consumer goods at one retail location. We cannot assure you that we will
be able to continue to complete effectively in our market or increase our sales
volume in response to further increased competition. In addition, we may be at a
competitive disadvantage because we are more highly leveraged than our
competitors. If we our unable to compete effectively with our competition, we
will not be able to attract and retain business resulting in a loss of business
and potential discontinuation of operations.



                                       11


<PAGE>

IF WE HAVE DIFFICULTY ADAPTING OUR SERVICE TO ACCOMMODATE ANY CONCERNS OF
PHYSICIANS AND TECHNOLOGICAL ADVANCES, OUR BUSINESS COULD BE HARMED.

To be successful, our web portal that physicians utilize has to perform well and
the service we provide at the pharmacy has to be efficient. Our business plan
calls for us to continually assess the technology we utilize and improve our
efficiency. We must continuously evaluate and implement the most user-friendly
technology. Feedback that we receive from physicians may require that we add new
features and functionality to the technology we utilize. Our inability to
adequately address any functionality concerns of physicians could have adverse
consequences such as a loss of business. If we are unable to provide technology
that is user-friendly, we could experience a loss of business.

BECAUSE WE ARE DEPENDENT ON THIRD-PARTIES TO PROVIDE TECHNOLOGICAL SUPPORT AND
E-SCRIPTING TECHNOLOGY, OUR BUSINESS COULD BE HARMED IF THIRD-PARTIES FAIL TO
PROVIDE TECHNOLOGY THAT WE UTILIZE IN OUR OPERATIONS AND/OR TECHNOLOGICAL
SUPPORT.

We are dependent upon Network Technology, Inc. ("RxNT") to provide technological
support and e-scripting technology for our operations. Any failure in the
technology or lack of financial resources to properly operate and deliver the
technology would temporarily interrupt our ability to service our customers. In
the event that RxNT failed for any reason to provide us with technological
support, our customers would experience a lack of service until such time when
we were able to secure an agreement with another company to provide
technological support. Any failure of the technology we utilize or interruption
in service could negatively impact our relationship with physicians resulting in
a loss of business and failed operations.

IF PHYSICIANS DO NOT EMBRACE THE E-SCRIPTING TECHNOLOGY AS AN EFFECTIVE MEANS OF
PRESCRIBING MEDICATION FOR THEIR PATIENTS, WE WILL NOT BE ABLE TO SERVICE THESE
PHYSICIANS' PATIENTS AND THIS WILL NEGATIVELY IMPACT BUSINESS.

The ability to electronically transmit prescriptions to pharmacies is relatively
new. Our success will in part depend upon physicians embracing the ability to
electronically submit prescriptions to pharmacies when the customary procedure
has been writing prescriptions by hand. It is difficult to predict with any
assurance how many physicians will be hesitant to embrace this new technology
because it is a departure from prior practice. Those physicians that are
reluctant to embrace this new technology are more likely to avoid or discontinue
our services after an initial trial. The inability of physicians to adapt and
embrace new technology could negatively impact our business.

BECAUSE WE PURCHASED 95% OF OUR INVENTORY FROM ONE DRUG VENDOR DURING THE YEAR
ENDED DECEMBER 31, 2004, THERE IS AN INCREASED RISK THAT OUR BUSINESS COULD BE
HARMED IF OUR RELATIONSHIP WITH THIS VENDOR IS TERMINATED.

During the year ended December 31, 2004, we purchased 95% of our inventory of
prescription drugs from one wholesale drug vendor. During the same period of
time, we purchased the remaining 5% of our inventory from 3 different wholesale
drug vendors. If there were to be a dispute with the drug vendor that we
primarily purchase our inventory from, our ability to supply our pharmacies with
adequate inventory could be impaired. In the event that we are unable to
maintain adequate inventory in any of our pharmacies, we could experience an
interruption in our ability to service customers. Although management believes
we could obtain our inventory though another distributor at competitive prices
and upon competitive payment terms if our relationships with the wholesale drug
vendor were terminated, there can be no assurance that the termination of such a
relationship would not adversely affect us.


IF WE FAIL TO OBTAIN THE  MANDATORY  APPROVAL  TO  PARTICIPATE  IN  CALIFORNIA'S
MEDICAID  PROGRAM  WITHIN  ORANGE  COUNTY,  OUR PHARMACY  LOCATION IN SANTA ANA,
CALIFORNIA WILL BE UNABLE TO SUPPLY  MEDICATION TO POTENTIAL  CUSTOMERS WHO RELY
ON HEALTH COVERAGE  THROUGH MEDICAID  RESULTING IN A MATERIAL ADVERSE  FINANCIAL
IMPACT ON OUR FINANCIAL RESULTS.

The Medicaid program is administered and all benefits are processed by CalOptima
exclusively in Orange County, California. All applications to participate in the
Medicaid programs for pharmacies located in Orange County are processed by
CalOptima. In 2002, CalOptima placed a moratorium on additional pharmacies in
Orange County enrolling as a supplier of prescription drugs to customers who
rely solely on Medicaid for health coverage. This moratorium remains in effect
and impacts our location in Santa Ana, California. The continued failure to
participate in California's Medicaid program in Orange County could have a
material adverse financial impact on our pharmacy in Santa Ana, California and
our company's overall financial results.

                                       12


<PAGE>

IF SOME THIRD PARTY PAYORS CONTINUE TO RESTRICT OUR ABILITY TO PARTICIPATE AS
SUPPLIERS OF MEDICATION TO PARTICIPANTS IN THEIR HEALTH COVERAGE PLANS, WE MAY
EXPERIENCE OF LOSS OF BUSINESS RESULTING IN A MATERIAL ADVERSE FINANCIAL IMPACT
ON OUR FINANCIAL RESULTS.


Some third party payors such as Health Net in California have placed a
moratorium on additional pharmacies which they will sanction as a supplier of
medication to participants enrolled in the health benefit plans that they
administer. The failure of third party payors to approve additional pharmacies
as suppliers of medication to participants enrolled in their health benefit
plans could have a material adverse financial impact on us, and our operations.


BECAUSE WE ARE DEPENDENT ON THIRD-PARTY PAYORS, OUR BUSINESS IS VOLATILE AND
THERE IS AN INCREASED RISK OF LOSS OF YOUR INVESTMENT.

Nearly all of our pharmacy sales are to customers whose medications were covered
by health benefit plans and other third party payors. Health benefit plans
include insurance companies, governmental health programs, workers'
compensation, self-funded ERISA plans, health maintenance organizations, health
indemnity insurance, and other similar plans. In general, a health benefit plan
agrees to pay for all or a portion of a customer's eligible prescription
purchases. Any significant loss of third-party payor business for any reason
could have a material adverse effect on our business and results of operations.
These third-party payors could unilaterally change how they reimburse us,
without our prior approval, for the prescription drugs that we provide to their
members. The passing in December 2003 of the Medicare Prescription Drug,
Improvement and Modernization Act will grant a prescription drug benefit to
participants. As a result of this benefit, we may be reimbursed for some
prescription drugs at prices lower than our current reimbursement levels. There
have been a number of recent proposals and enactments by various states to
reduce Medicaid reimbursement levels in response to budget problems, some of
which propose to reduce reimbursement levels in the applicable states
significantly, and we expect other similar proposals in the future. If
third-party payors reduce their reimbursement levels or if Medicare or state
Medicaid programs cover prescription drugs at lower reimbursement levels, our
margins on these sales would be reduced, and the profitability of our business
and our results of operations, financial condition or cash flows could be
adversely affected. Additionally, there are no guarantees that health benefit
plans will contract with our pharmacies.

IF WE FAIL TO MAINTAIN AN EFFECTIVE SYSTEM OF INTERNAL CONTROL, WE MAY NOT BE
ABLE TO ACCURATELY REPORT OUR FINANCIAL RESULTS OR PREVENT FRAUD RESULTING IN
CURRENT AND POTENTIAL STOCKHOLDERS LOSING CONFIDENCE IN OUR FINANCIAL REPORTING.

Effective internal controls are necessary for us to provide reliable financials
reports and effectively prevent fraud. If we cannot provide reliable financial
reports or prevent fraud, our operating results could be harmed. We have in the
past discovered, and may in the future discover, areas of our internal controls
that need improvement. Any failure to implement required new or improved
controls, or difficulties encountered in their implementation, could harm our
operating results or cause us to fail to meet our reporting obligations.
Inferior internal controls could also cause investors to lose confidence in our
reported financial information, which could have a negative effect on the
trading price of our stock.

IF THE SELLING SHAREHOLDERS SELL A SUBSTANTIAL NUMBER OF SHARES ALL AT ONCE OR
IN LARGE BLOCKS, THE MARKET PRICE OF OUR SHARES WOULD MOST LIKELY DECLINE.


The selling shareholders are offering 19,321,875 shares of our common stock
through this prospectus. Our common stock is presently quoted on the NASD OTCBB
and any sale of shares at a price below the current market price at which the
common stock is trading will cause that market price to decline. Moreover, the
offer or sale of a large number of shares at any price may cause the market
price to fall. The shares of common stock being registered by this prospectus
represent approximately 44% of the common shares outstanding as of the date of
this prospectus. We cannot predict the effect, if any, that future sales of
shares of our common stock into the market, including those acquirable by the
possible conversion of warrants into common shares, will have on the market
price of our common stock. Sales of substantial amounts of common stock,
including shares issued upon the exercise of warrants and stock options into
common stock, or the perception that such transactions could occur, may
materially and adversely affect prevailing markets prices for our common stock.

                                       13


<PAGE>

OUR QUARTERLY FINANCIAL RESULTS ARE SUBJECT TO SIGNIFICANT FLUCTUATION, AND IF
OUR FUTURE RESULTS ARE BELOW THE EXPECTATIONS OF INVESTORS, THE PRICE OF OUR
COMMON STOCK WOULD LIKELY DECLINE.

Our operating results have in the past and could in the future vary
significantly from quarter to quarter. Our quarterly operating results are
likely to be particularly effected by the number of physicians that utilize our
e-scripting technology to prescribe medication for their patients and the volume
of medication that they prescribe. Other factors that could affect our quarterly
operating results include:

     o    our ability to attract new customers and retain our current customers;

     o    the emergence of competition;

     o    the amount and timing of operating  expenses and capital  expenditures
          relating to the business.

Due to these and other factors we believe that period-to-period comparisons of
our results of operations are not meaningful and should not be relied upon as
indicators of our future performance. In addition, we may be unable to
accurately forecast our operating results because of our short operating
history.

BECAUSE OUR COMMON STOCK IS QUOTED ON THE OVER-THE-COUNTER BULLETIN BOARD
ADMINISTERED BY THE NASD AND IS SUBJECT TO THE "PENNY STOCK" RULES, THE LEVEL OF
TRADING ACTIVITY IN OUR STOCK MAY BE REDUCED.

Broker-dealer practices in connection with transactions in "penny stocks" are
regulated by penny stock rules adopted by the Securities and Exchange
Commission. Penny stocks generally are equity securities with a price of less
than $5.00 (other than securities registered on some national securities
exchanges or quoted on the over-the-counter bulletin board administered by the
NASD). The penny stock rules require a broker-dealer, prior to a transaction in
a penny stock not otherwise exempt from the rules, to deliver a standardized
risk disclosure document that provides information about penny stocks and the
nature and level of risks in the penny stock market. The broker-dealer also must
provide the customer with current bid and offer quotations for the penny stock,
the compensation of the broker-dealer and its salesperson in the transaction,
and, if the broker-dealer is the sole market maker, the broker-dealer must
disclose this fact and the broker-dealer's presumed control over the market, and
monthly account statements showing the market value of each penny stock held in
the customer's account. In addition, broker-dealers who sell these securities to
persons other than established customers and "accredited investors" must make a
special written determination that the penny stock is a suitable investment for
the purchaser and receive the purchaser's written agreement to the transaction.
Consequently, these requirements may have the effect of reducing the level of
trading activity, if any, in the secondary market for a security subject to the
penny stock rules, and investors in our common stock may find it difficult to
sell their shares.

FORWARD-LOOKING STATEMENTS

This prospectus includes forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended (the "Securities Act"),
and Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). Forward-looking statements are not statements of historical
fact but rather reflect our current expectations, estimates and predictions
about future results and events. These statements may use words such as
"anticipate,""believe,""estimate,""expect,""intend,""predict,""project" and
similar expressions as they relate to us or our management. When we make
forward-looking statements, we are basing them on our beliefs and assumptions,
using information currently available to us. These forward-looking statements
are subject to risks, uncertainties and assumptions, including but not limited
to, risks, uncertainties and assumptions discussed in this prospectus. Factors
that can cause or contribute to these differences include those described under
the headings "Risk Factors" and "Plan of Operation."

If one or more of these or other risks or uncertainties materialize, or if our
underlying assumptions prove to be incorrect, actual result may vary materially
from what we projected. Any forward-looking statements you read in this
prospectus reflect our current views with respect to future events and are
subject to these and other risks, uncertainties and assumptions relating to our
operations, results of operations, growth strategy and liquidity. All subsequent
written and oral forward-looking statements attributable to us or individuals
acting on our behalf are expressly qualified in their entirety by this
paragraph. You should specifically consider the factors identified in this
prospectus that would cause actual results to differ before making an investment
decision.


                                       14


<PAGE>

                                 USE OF PROCEEDS

We will not receive any proceeds from the sale of the common stock offered
through this prospectus by the selling shareholders.

                         DETERMINATION OF OFFERING PRICE

All shares being offered will be sold by existing shareholders without our
involvement, consequently the actual price of the stock will be determined by
prevailing market prices at the time of sale or by private transactions
negotiated by the selling shareholders. The offering price will thus be
determined by market factors and the independent decisions of the selling
shareholders.

SELLING SECURITY HOLDERS

The selling shareholders named in this prospectus are offering all of the shares
of common stock being  registered  by this  prospectus.  The shares  include the
following:


        o       11,211,000 common shares and the right to purchase 5,610,875
                common shares that are underlying each warrant that the selling
                shareholders acquired from us when they purchased units in two
                different offerings that were exempt from registration under
                Rule 506 of Regulation D of the Securities Act. The first exempt
                offering was completed on June 17, 2004 and the second exempt
                offering was completed on December 23, 2005. Each purchaser
                represented his or her intention to acquire the securities for
                investment intent only and not with a view toward distribution.
                Each purchaser represented and warranted that they were an
                accredited investor as defined in Rule 501 of Regulation D
                promulgated under the Securities Act. Each investor was given
                adequate information about us to make an informed investment
                decision. We did not engage in any public solicitation or
                general advertising. We issued the stock certificates and
                affixed the appropriate legends to the restricted stock.

        o       2,500,000 common shares issued to a credit provider upon the
                conversion of debt into equity. The issuance of these shares was
                exempt from registration pursuant to Section 4(2) of the
                Securities Act. The purchaser represented his or her intention
                to acquire the securities for investment intent only and not
                with a view toward distribution. The investor was given adequate
                information about us to make an informed investment decision. We
                did not engage in any public solicitation or general
                advertising. We issued the stock certificates and affixed the
                appropriate legends to the restricted stock


The selling shareholder purchased their shares in the ordinary course of
business. At the time of the purchase, the selling shareholder had no agreements
or understandings to distribute the securities.


The following table provides information regarding the beneficial ownership of
our common stock by each of the selling shareholders as of January 20, 2006,
including:


     1.   the number of shares owned by each prior to this offering;

     2.   the number of shares to be received upon the exercise of warrants;

     3.   the total number of shares that are to be offered by each;

     4.   the total number of shares that will be owned by each upon  completion
          of the offering;

     5.   the percentage owned by each upon completion of the offering; and

     6.   the  identity  of the  beneficial  holder of any entity  that owns the
          shares.



                                       15


<PAGE>


The named party beneficially owns and has sole voting and investment power over
all shares or rights to the shares, unless otherwise shown in the table. The
numbers in this table assume that none of the selling shareholders sells shares
of common stock not being offered in this prospectus or purchases additional
shares of common stock, and assumes that all shares offered are sold. The
percentages are based on 43,590,740 shares of common stock outstanding on
January 20, 2006.


<TABLE>
<CAPTION>
                                                                                    Total           Total
                                                                 Shares         Number Of       Shares To       Percent
                                                  Shares          To Be      Shares To Be        Be Owned         Owned
                                                   Owned       Received       Offered For            Upon          Upon
                                                Prior to       Upon The           Selling      Completion    Completion
                                                    This    Exercise of       Shareholder         of This       Of This
Name and Address of Selling Shareholder         Offering       Warrants           Account        Offering      Offering
------------------------------------------------------------------------------------------------------------------------
<S>                                           <C>              <C>             <C>              <C>             <C>
Toby Batansky                                     60,000         30,000            90,000               0            0%
815 Primrose Lane
Wynnewood, PA 19096
------------------------------------------------------------------------------------------------------------------------
James W. Bloor                                    25,000         12,500            37,500               0            0%
16635 168th Place NE
Woodinville, WA 98072
------------------------------------------------------------------------------------------------------------------------
Blue & Gold Enterprises LLC 1                    400,000        200,000           600,000               0            0%
10550 Fonterelle Way
Los Angeles, CA 90077
------------------------------------------------------------------------------------------------------------------------
Howard Carlin                                     50,000         25,000            75,000               0            0%
13158 Diamond Mill Drive
Heindon, VA 20171
------------------------------------------------------------------------------------------------------------------------
Mark Ciboroski                                   250,000        125,000           375,000               0            0%
28 Monadnock Drive
Westford, MA 01886
------------------------------------------------------------------------------------------------------------------------
Clear View Investment Fund, LP 2                 200,000        100,000           300,000               0            0%
Three Radnor Corp Center
Radnor, PA 19087
------------------------------------------------------------------------------------------------------------------------
Jeff Conroy                                       30,000         15,000            45,000               0            0%
150 Marion Point
Belews Creeks, NC 27009
------------------------------------------------------------------------------------------------------------------------
William Davis                                     90,250         45,125           135,375               0            0%
214 Megan Lane
Slidell, LA 70458
------------------------------------------------------------------------------------------------------------------------
Donald Delach & Joan Delach JTTEN                320,000        160,000           480,000               0            0%
2315 Chumly Court
Rocklin, CA 95765
------------------------------------------------------------------------------------------------------------------------
Elaine Roberts Investment Trust 3                187,500         93,750           281,250               0            0%
3234 Atlantic Avenue
Allenwood, NJ 08720
------------------------------------------------------------------------------------------------------------------------
Richard A. Faieta                                 75,000         37,500           112,500               0            0%
7304 Market Street
Greensboro, NC 27409
------------------------------------------------------------------------------------------------------------------------
FEQ GAS LLC 4                                    500,000        250,000           750,000               0            0%
2400 Fountainview
Houston, TX

------------------------------------------------------------------------------------------------------------------------
Bernard M. Frank                                  60,000         30,000            90,000               0            0%
30 Glenview Drive
South Orange, NJ 07079
------------------------------------------------------------------------------------------------------------------------
Michael J. Garnick                               500,000        250,000           750,000               0            0%
1590 Stockton Road
Meadowbrook Drive, PA 19046
------------------------------------------------------------------------------------------------------------------------
</TABLE>


                                       16


<PAGE>

<TABLE>
<CAPTION>
                                                                                    Total           Total
                                                                 Shares         Number Of       Shares To       Percent
                                                  Shares          To Be      Shares To Be        Be Owned         Owned
                                                   Owned       Received       Offered For            Upon          Upon
                                                Prior to       Upon The           Selling      Completion    Completion
                                                    This    Exercise of       Shareholder         of This       Of This
Name and Address of Selling Shareholder         Offering       Warrants           Account        Offering      Offering
------------------------------------------------------------------------------------------------------------------------
<S>                                           <C>              <C>             <C>              <C>             <C>
Bruce Martin Ginsburg                            100,000         50,000           150,000               0            0%
309 Myrtle Lane
Narbeth, PA 19072
Larry Goodwin                                    100,000         50,000           150,000               0            0%
6022 East 76th Court
Tulsa, OK 74136
------------------------------------------------------------------------------------------------------------------------
Elton Ray Howard                                  30,000         15,000            45,000               0            0%
P.O. Box 2498
Onalaska, TX 77360
------------------------------------------------------------------------------------------------------------------------
JMK Investment Partners LP 5                     750,000        375,000         1,125,000               0            0%
2030 Franklin Street, Suite 210
Piedmont, CA 94611
------------------------------------------------------------------------------------------------------------------------
Bill Jurika TTEE UAD 031789                      750,000        375,000         1,125,000               0            0%
FBO Jurika Family Trust
42 Glen Alpine Road
Piedmont, CA 94611
------------------------------------------------------------------------------------------------------------------------
Robert T. Lempert                                 50,000         25,000            75,000               0            0%
23 Briarwood Drive
Voorhees, NJ 08043
------------------------------------------------------------------------------------------------------------------------
Mosaic Partners Fund 6                           387,500        193,750           581,250               0            0%
P.O. Box 705 GT
Butterfield House
68 Fort Street
Grand Cayman, Cayman Island
------------------------------------------------------------------------------------------------------------------------
Periscope Partners, LP 7                         875,000        437,500         1,312,500               0            0%
1600 Flat Rock Road
Penn Valley, PA 19072
------------------------------------------------------------------------------------------------------------------------
Daniel Plenzo                                    375,000        187,500           562,500               0            0%
187 Heyers Mill Road
Colts Neck, NJ 07722
------------------------------------------------------------------------------------------------------------------------
James Ricciardi                                  200,000        100,000           300,000               0            0%
5 Hilltop Circle
Mendham, NJ 07945
------------------------------------------------------------------------------------------------------------------------
Steven B. Rosner C/F Lauren P. Rosner             25,000         12,500            37,500               0            0%
UTMA PA
1220 Mirabeau Lane
Gladwyne, PA 19035
------------------------------------------------------------------------------------------------------------------------
David A. Rosner                                   25,000         12,500            37,500               0            0%
1220 Mirabeau Lane
Gladwyne, PA 19035
------------------------------------------------------------------------------------------------------------------------
Steven Rosner                                    625,000        312,500           937,500               0            0%
1220 Mirabeau Lane
Gladwyne, PA 19035
------------------------------------------------------------------------------------------------------------------------
Jose E. Serra & Cecilla P. Serra JTTEN            50,000         25,000            75,000               0            0%
4732 SW Branch Terrace
Palm City, FL 34990
------------------------------------------------------------------------------------------------------------------------
Ronald E. Showalter & Mary Alice                  25,000         12,500            37,500               0            0%
Showalter JTTEN
3904 Erbbe NE
Albuquerque, NM 87111
------------------------------------------------------------------------------------------------------------------------
Harvey Sternberg                                 100,000         50,000           150,000               0            0%
765 John Barry Drive
Bryn Mahr, PA 19010
------------------------------------------------------------------------------------------------------------------------
Jeff Tillery                                      25,000         12,500            37,500               0            0%
704 Helane Lane
Longview, TX 75605
------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                       17


<PAGE>

<TABLE>
<CAPTION>
                                                                                    Total           Total
                                                                 Shares         Number Of       Shares To       Percent
                                                  Shares          To Be      Shares To Be        Be Owned         Owned
                                                   Owned       Received       Offered For            Upon          Upon
                                                Prior to       Upon The           Selling      Completion    Completion
                                                    This    Exercise of       Shareholder         of This       Of This
Name and Address of Selling Shareholder         Offering       Warrants           Account        Offering      Offering
------------------------------------------------------------------------------------------------------------------------
<S>                                           <C>              <C>             <C>              <C>             <C>
Danny Tomac                                      125,000         62,500           187,500               0            0%
1528 East 35 ON
Bluffton, IN 46714
Roy E. Tull                                       30,000         15,000            45,000               0            0%
1802 Tamarron Parkway
Smryna, GA 30080
------------------------------------------------------------------------------------------------------------------------
Jerry Turnwald                                    25,000         12,500            37,500               0            0%
25146 RD P
Fort Jennings, OH 45844
------------------------------------------------------------------------------------------------------------------------
Veng K Ung                                       100,000         50,000           150,000               0            0%
5608 New Castle Drive
Richardson, TX 75082
------------------------------------------------------------------------------------------------------------------------
Jose Valdez                                       25,000         12,500            37,500               0            0%
4726 Shadowglen Drive
Colorado Springs, CO 80918
------------------------------------------------------------------------------------------------------------------------
Wes Weston                                        34,000         17,000            51,000               0            0%
231 Horizon Ridge Parkway, #2133
Henderson, NV 89012
------------------------------------------------------------------------------------------------------------------------
Owen M. Yoder                                     75,000         37,500           112,500               0            0%
10496 West 1100 North
Nappanee, IN 46550
------------------------------------------------------------------------------------------------------------------------
Ben B. Shenassa                                   50,000         25,000            75,000               0            0%
3544 Alana Drive
Sherman Oaks, CA 91403
------------------------------------------------------------------------------------------------------------------------
Christopher K. Pepper                             25,000         12,500            37,500               0            0%
2519 Crest Drive
Manhattan Beach, CA 90266
------------------------------------------------------------------------------------------------------------------------
Amy Taus                                          50,000         25,000            75,000               0            0%
11 Darius Court
Dix Hills, NY 11746
------------------------------------------------------------------------------------------------------------------------
Capital Growth Trust (8)                         400,000        200,000           600,000               0            0%
13 Pastto Street
Andover, MA 01810
------------------------------------------------------------------------------------------------------------------------
Steve Goodman                                      9,500          4,750            14,250               0            0%
4032 Hilton Head Way
Tarzana, CA 91356
------------------------------------------------------------------------------------------------------------------------
Stellar Capital Fund LLC 9                       500,000        250,000           750,000               0            0%
5633 Strand Blvd., Suite 318
Naples, FL 34110
------------------------------------------------------------------------------------------------------------------------
Mosaic Partners Fund (U.S.) LP 10              1,050,000        525,000         1,575,000               0            0%
545 Fifth Avenue, Suite 709
New York, NY 10017
------------------------------------------------------------------------------------------------------------------------
Raffaele Ricci                                   500,000        250,000           750,000               0            0%
25 Chafel Street
Belgravia, London SWIX 7DA
------------------------------------------------------------------------------------------------------------------------
Periscope Partners L.P. 11                       375,000        187,500           562,500               0            0%
1600 Flat Rock Road
Penn Valley, PA 19072
------------------------------------------------------------------------------------------------------------------------
Donald E. Cohen                                   20,000         10,000            30,000               0            0%
54 Main Street, Unit 10
Westhampton Beach, NY 11978
------------------------------------------------------------------------------------------------------------------------
Argyll Equities LLC 12                            50,000         25,000            75,000               0            0%
4225 Executive Square, Suite 260
La Jolla, CA 92037
------------------------------------------------------------------------------------------------------------------------
Ronald M. Shippel                                 50,000         25,000            75,000               0            0%
4507 Roma Court
Marina Del Rey, CA 90292
------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                       18


<PAGE>


<TABLE>
<CAPTION>
                                                                                    Total           Total
                                                                 Shares         Number Of       Shares To       Percent
                                                  Shares          To Be      Shares To Be        Be Owned         Owned
                                                   Owned       Received       Offered For            Upon          Upon
                                                Prior to       Upon The           Selling      Completion    Completion
                                                    This    Exercise of       Shareholder         of This       Of This
Name and Address of Selling Shareholder         Offering       Warrants           Account        Offering      Offering
------------------------------------------------------------------------------------------------------------------------
<S>                                           <C>              <C>             <C>              <C>             <C>
Judy M. Shippel                                   25,000         12,500            37,500               0            0%
4507 Roma Court
Marina Del Rey, CA 90292
------------------------------------------------------------------------------------------------------------------------
Ray Y. Yamada                                     14,000          7,000            21,000               0            0%
7671 Barbi Ln
La Palma, CA 90623
------------------------------------------------------------------------------------------------------------------------
Richard H. Gearns and Linda Gearns                44,000         22,000            66,000               0            0%
2087 Willow Street
Wantagh, NY 11793
------------------------------------------------------------------------------------------------------------------------
Dorothy Breslin                                   70,000         35,000           105,000               0            0%
3 Forte Drive
Old Westbury, NY 11568
------------------------------------------------------------------------------------------------------------------------
Mosaic Financial Services, LLC 13              2,500,000              0         2,500,000               0            0%
545 Fifth Avenue, Suite 709
New York, NY 10017
------------------------------------------------------------------------------------------------------------------------
Totals                                        13,386,750      5,443,375        18,830,125               0            0%
------------------------------------------------------------------------------------------------------------------------
</TABLE>


   Other than as disclosed below, none of the selling shareholders:

     o    has had a material relationship with us other than as a shareholder at
          any  time  within  the  past  three  years;  or

     o    has been one of our officers or directors.

     1    Steven  Antebi is the  beneficial  owner of the shares  held by Blue &
          Gold  Enterprises  LLC

     2    Walter Beach is the beneficial  owner of the shares held by Clear View
          Investment Fund, LP

     3    Elaine  Roberts  is the  beneficial  owner of the  shares  held by the
          Elaine Robert Investment Trust

     4    Howard Appel is the beneficial owner of the shares held by FEQ GAS LLC

     5    Mikel  Keifer  is the  beneficial  owner  of the  shares  held  by JMK
          Investment Partners LP

     6    Ameet  Shah is the  beneficial  owner of the  shares  held by Mosaic
          Partners Fund.  Mosaic Partners Fund has the same principals as Mosaic
          Financial  Services,  LLC.  We entered  into an  accounts  receivable
          servicing agreement and line of credit agreement with Mosaic Financial
          Services, LLC.

     7    Leon Frenkel is the  beneficial  owner of the shares held by Periscope
          Partners,  LP


     8    Vicki Appel is the trustee of shares held by Capital Growth Trust

     9    Richard Schmidt is the managing member and beneficial  owner of shares
          held by Stellar Capital Fund LLC

     10   Ameet  Shah is the  beneficial  owner  of the  shares  held by  Mosaic
          Partners  Fund (U.S.) LP.

     11   Leon  Frenkel is the general  partner and beneficial  owner of shares
          held by  Periscope  Partners  L.P.

     12   Doug McClain,  Jr. is the President and beneficial  owner of shares
          held by Argyll Equities LLC

     13   Ameet Shah is the beneficial owner of the shares held by Mosaic
          Financial Service, LLC

                                       19


<PAGE>

                              PLAN OF DISTRIBUTION

The selling  shareholders  may sell some or all of their  common stock in one or
more transactions, including block transactions:

1.   on such public  markets or  exchanges  as the common stock may from time to
     time be trading;

2.   in privately negotiated transactions;

3.   through the writing of options on the common stock;

4.   in short sales,

5.   in any combination of these methods of distribution; or

6.   any other method permitted by applicable law.

Our common stock is quoted on the over-the-counter bulletin board administered
by the NASD, so the offering price of the stock will be determined by prevailing
market prices at the time of sale or by private transactions negotiated by the
selling shareholders. The offering price will thus be determined by market
factors and the independent decisions of the selling shareholders. The sales
price to the public may be:

1.   the market price of our common stock prevailing at the time of sale;

2.   a price related to such prevailing market price of our common stock, or;

3.   such other price as the selling shareholders determine from time to time.

The shares  may also be sold in  compliance  with the  Securities  and  Exchange
Commission's Rule 144.

In general, under Rule 144 of the Securities Act as currently in effect, a
person who has beneficially owned restricted securities for at least one year
would be entitled to sell within any three-month period a number of shares that
does not exceed the greater of the following:

o    one percent of the number of shares of common stock then outstanding, or

o the average weekly trading volume of the common stock during the four calendar
weeks preceding the sale. However, pursuant to the rules and regulations
promulgated under the Securities Act, the OTC Bulletin Board, where our common
stock is quoted, is not an "automated quotation system" referred to in Rule
144(e). As a consequence, this market-based volume limitation allowed for
securities listed on an exchange or quoted on NASDAQ is unavailable for our
common stock.

Sales under Rule 144 are also subject to requirements with respect to
manner-of-sales requirements, notice requirements and the availability of
current public information about us. Under Rule 144(k), a person who is not
deemed to have been our affiliate at any time during the three months preceding
a sale, and who has beneficially owned the shares proposed to be sold for at
least two years, is entitled to sell his or her shares without complying with
the manner-of-sale, public information, volume limitation or notice provisions
of Rule 144.


The selling shareholders may also sell their shares directly to market makers
acting as agents in unsolicited brokerage transactions. Any broker or dealer
participating in such transactions as an agent may receive a commission from the
selling shareholders, or if they act as agent for the purchaser of such common
stock, from such purchaser. The selling shareholders will likely pay the usual
and customary brokerage fees for such services. If applicable, the selling
shareholders may distribute shares to one or more of their partners who are
unaffiliated with us. Such partners may, in turn, distribute such shares as
described above. Under such circumstance, all unidentified security holders will
be identified in pre-effective or post-effective amendment(s) or prospectus
supplement(s), as applicable. We can provide no assurance that all or any of the
common stock offered being registered hereby will be sold by the selling
shareholders.


We are bearing all costs relating to the registration of the common stock. The
selling shareholders, however, will pay any commissions or other fees payable to
brokers or dealers in connection with any sale of the common stock.



                                       20


<PAGE>

The selling shareholders must comply with the requirements of the Securities Act
and the Exchange Act in the offer and sale of the common stock. In particular,
during such times as the selling shareholders may be deemed to be engaged in a
distribution of the common stock, and therefore be considered to be an
underwriter, they must comply with applicable law and may, among other things:

1.      not engage in any stabilization activities in connection with our common
        stock;

2.      furnish each broker or dealer through which common stock may be offered,
        such copies of this prospectus, as amended from time to time, as may be
        required by such broker or dealer; and;

3.      not bid for or purchase any of our securities or attempt to induce any
        person to purchase any of our securities other than as permitted under
        the Exchange Act.

                                LEGAL PROCEEDINGS

Our agent for service of process in Nevada is Cane Clark LLP, 3273 E. Warm
Springs Rd., Las Vegas, Nevada 89120.

From time to time, we may be involved in various claims, lawsuits, and disputes
with third parties, actions involving allegations of discrimination or breach of
contract actions incidental to the normal operations of the business.

Providing pharmacy services entails an inherent risk of medical and professional
malpractice liability. We may be named as a defendant in such lawsuits and thus
become subject to the attendant risk of substantial damage awards. We believe
that we have adequate professional and medical malpractice liability insurance
coverage. There can be no assurance, however, that we will not be sued, that any
such lawsuit will not exceed our insurance coverage, or that we will be able to
maintain such coverage at acceptable costs and on favorable terms.

Safescript Pharmacies, Inc. (formerly known as RTIN, Inc.) failed to provide us
with essential services as set forth in the license agreement that they entered
into and this has forced us to terminate our use of all technology granted under
the license agreement entered into with Safescript Pharmacies, Inc. On March 17,
2004, we filed a lawsuit in Nevada State Court against Safescript Pharmacies,
Inc. seeking damages, declaratory relief, to rescind the License and to recover
the consideration paid. On March 19, 2004, Safescript Pharmacies, Inc. filed for
Chapter 11 bankruptcy protection. The litigation in Nevada State Court has been
stayed by reason of Safescript Pharmacies, Inc.'s filing for bankruptcy. We
refiled substantially the same claim as an adversary proceeding in Safescript's
bankruptcy case which was pending in the U.S. Bankruptcy Court located in Tyler,
Texas. In July 2004, this case was transferred to the U.S. District Court for
the Eastern District of Texas located in Tyler, Texas.


On June 30, 2005, the United Stated Bankruptcy Court for the Eastern District of
Texas located in Tyler, Texas ("District Court") approved a Settlement Agreement
and Mutual Release (the "Settlement Agreement") between Safescript Pharmacies,
Inc., a Texas corporation f/k/a RTIN Holdings, Inc. and Safe Med Systems, Inc.,
a Texas corporation (collectively, "Safescript"), and us. Under the Terms of the
Settlement Agreement, Safescript retained 100,000 shares of our common stock and
returned the remaining 4,344,444 shares of common stock for cancellation. In
addition, we agreed to issue Safescript 500,000 additional shares of our common
stock and dismiss the lawsuit currently pending in the District Court with
prejudice. The Agreement contained a mutual release which resulted in Safescript
releasing us from of any liability with respect to the note payable due to
Safescript in the amount of approximately $1,013,000.

On July 11, 2005, a creditor of Safescript filed a motion with the District
Court for reconsideration of its approval of the Settlement Agreement. On
October 14, 2005, the District Court denied the creditor's motion for
reconsideration. The creditor has appealed the District Court's approval of the
Settlement Agreement. The court granted the creditor an extension until January
9, 2006 to file its opening brief. The court has not decided that appeal, but it
is substantially unlikely, based on the advice of counsel, that the court would
overturn the District Court's approval of the Settlement Agreement.

On April 14, 2004, a former officer filed a lawsuit against us in Orange County
California Superior Court. The former officer is seeking additional compensation
in the amount of $213,000 and other further relief that the court deems just and
appropriate. This case went to trial in early August. On August 10, 2005, the
judge ruled in our favor deciding that no compensation was due to the former
officer.


Other than as disclosed herein, we are not currently involved in any litigation
which we believe could have a material adverse effect on our financial position
or results of operations.


                                       21


<PAGE>

          DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS


The following information sets forth the names of our directors and executive
officers, their ages and their present positions with the Company as of January
20, 2006.

Name                Age    Office(s) Held
--------------------------------------------------------------------------------
Robert DelVecchio    40    Chief Executive Officer, Chief Financial Officer, &
                              Director
James Manfredonia    44    Director
Richard Falcone      52    Director
Haresh Sheth         55    Director
John Eric Mutter     45    Chief Operating Officer
================================================================================


Set forth below is a brief description of the background and business experience
of each of our current executive officers and directors.

ROBERT DELVECCHIO. On February 3, 2005, our board of directors appointed Mr.
Robert DelVecchio to serve as Chief Executive Officer. Mr. DelVecchio was
appointed as our Chief Financial Officer and as a member of the board of
directors on March 31, 2005. Since 1995, Mr. DelVecchio has acted as Chief
Executive Officer and President of Brockington Securities, Inc., a broker-dealer
who is a member of the National Association of Securities Dealers.


JAMES MANFREDONIA. Mr. Manfredonia was appointed to the board of directors of
Assured Pharmacy, Inc. in June 2004. Since 2002, Mr. Manfredonia has served as
manager of listed equity trading and New York Stock Exchange operations at Bear
Stearns. Mr. Manfredonia currently serves as the Chairman of the New York Stock
Exchange Upstairs Traders Advisory Committee and as a member of the Market
Performance Committee of the New York Stock Exchange. Prior to joining Bear
Stearns, Mr. Manfredonia worked for ten years at Merrill Lynch where he managed
the listed trading desk with additional responsibilities for NASDAQ, portfolio
trading, sales trading, and NYSE staff. Mr. Manfredonia was the founding general
partner of Blair Manfredonia Limited Partners, a hedge fund/broker-dealer. Mr.
Manfredonia has also worked at Lehman Brothers, Salomon Brothers, and Drexel
Burnham.

RICHARD FALCONE. Mr. Falcone was appointed to the board of directors of Assured
Pharmacy, Inc. in July 2004. Since 2001, Mr. Falcone has served as Chief
Financial Officer of The A Consulting Team, Inc., an IT service company. Mr.
Falcone has served as Chief Financial Officer of Netgrocer.com. In 1990, Mr.
Falcone joined Bed Bath & Beyond, Inc. as its Chief Financial Officer. In 1983,
Mr. Falcone joined Tiffany & Co. and served as Manager of Audit, Director of
Financial Control, and Director of International Finance and Operations. Mr.
Falcone has also worked at PriceWaterhouseCoopers & Co., an international public
accounting firm.

HARESH SHETH. Mr. Sheth was appointed to the board of directors of Assured
Pharmacy, Inc. in September 2005. Mr. Sheth is a graduate of West Virginia
University where he earned an engineering degree. Since 1991, Mr. Sheth has
acted as President of Janus Finance Corporation, an asset based finance company.
Mr. Sheth joined Mosaic Capital Advisors LLC in 2004 as their group financial
officer.

JOHN ERIC MUTTER. Mr. Mutter was appointed to serve as Chief Operating Officer
on May 11, 2005. Since January 2004, Mr. Mutter has acted as a consultant to
Assured Pharmacy, Inc. providing technology and information systems support.
From 2000 to 2003, Mr. Mutter performed similar responsibilities for the MedEx
Systems Inc. designing, implementing and managing a digital prescribing
infrastructure for Pegasus Pharmacies. Prior to these positions, Mr. Mutter has
held numerous field engineering and technology positions with Alpha
Microsystems, Tomba Communications, Neosoft Inc., Checkpoint Systems, and
Southwest Communications.


                                 TERM OF OFFICE

Our directors are appointed for a one-year term to hold office until the next
annual meeting of our shareholders or until removed from office in accordance
with our bylaws.

Our executive officers are appointed by our board of directors and hold office
until removed by the board.



                                       22


<PAGE>

FAMILY RELATIONSHIPS

There are no family relationships between or among the directors, executive
officers or persons nominated or chosen by the Company to become directors or
executive officers.

INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS

To the best of our knowledge, during the past five years, none of the following
occurred with respect to a present or former director, executive officer, or
employee of the Company: (1) any bankruptcy petition filed by or against any
business of which such person was a general partner or executive officer either
at the time of the bankruptcy or within two years prior to that time; (2) any
conviction in a criminal proceeding or being subject to a pending criminal
proceeding (excluding traffic violations and other minor offenses); (3) being
subject to any order, judgment or decree, not subsequently reversed, suspended
or vacated, of any court of competent jurisdiction, permanently or temporarily
enjoining, barring, suspending or otherwise limiting his or her involvement in
any type of business, securities or banking activities; and (4) being found by a
court of competent jurisdiction (in a civil action), the SEC or the Commodities
Futures Trading Commission to have violated a federal or state securities or
commodities law, and the judgment has not been reversed, suspended or vacated.

         SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT


The following table sets forth, as of January 20, 2006, the beneficial ownership
of the Company's common stock by each executive officer and director, by each
person known by us to beneficially own more than 5% of the Company's common
stock and by the executive officers and directors as a group. Except as
otherwise indicated, all shares are owned directly and the percentage shown is
based on 43,590,740 shares of common stock issued and outstanding on January 17,
2006.

<TABLE>
<CAPTION>
                                  NAME AND ADDRESS                      AMOUNT OF              PERCENT
   TITLE OF CLASS              OF BENEFICIAL OWNER(1)              BENEFICIAL OWNERSHIP       OF CLASS*
-----------------------------------------------------------------------------------------------------------
EXECUTIVE OFFICERS & DIRECTORS:
-----------------------------------------------------------------------------------------------------------
<S>                  <C>                                            <C>                       <C>
Common               Robert DelVecchio                              970,860 shares(2)         14.5%(3)
                     17935 Sky Park Circle, Suite F
                     Irvine, California 92614
-----------------------------------------------------------------------------------------------------------
Common               James Manfredonia
                     17935 Sky Park Circle, Suite F                   350,000 shares            0.8%
                     Irvine, California 92614
-----------------------------------------------------------------------------------------------------------
Common               Richard Falcone
                     17935 Sky Park Circle, Suite F                   350,000 shares            0.8%
                     Irvine, California 92614
-----------------------------------------------------------------------------------------------------------
Common               Haresh Sheth
                     17935 Sky Park Circle, Suite F                      0 shares              0.0%(4)
                     Irvine, California 92614
-----------------------------------------------------------------------------------------------------------
Common               John Eric Mutter                                 325,000 shares           1.3%(5)
                     17935 Sky Park Circle, Suite F
                     Irvine, California 92614
-----------------------------------------------------------------------------------------------------------
        TOTAL OF ALL DIRECTORS AND EXECUTIVE OFFICERS:               1,995,860 shares           17.4%
-----------------------------------------------------------------------------------------------------------
MORE THAN 5% BENEFICIAL OWNERS:
-----------------------------------------------------------------------------------------------------------
Common               Mosaic Financial Services, LLC
                     545 Fifth Avenue, Suite 709                     2,500,000 shares            5.7%
                     New York, NY 10017
-----------------------------------------------------------------------------------------------------------
</TABLE>


(1)     As used in this table, "beneficial ownership" means the sole or shared
        power to vote, or to direct the voting of, a security, or the sole or
        shared investment power with respect to a security (i.e., the power to
        dispose of, or to direct the disposition of, a security). In addition,
        for purposes of this table, a person is deemed, as of any date, to have
        "beneficial ownership" of any security that such person has the right to
        acquire within 60 days after such date.


                                       23


<PAGE>


(2)     Mr. DelVecchio is the indirect beneficial owner of 970,860 shares held
        by Brockington Securities, Inc.


(3)     Included in the calculation of beneficial ownership for Mr. DelVecchio
        are 350,000 warrants which are exercisable within 60 days. Brockington
        Securities, Inc. holds 350,000 warrants to purchase 350,000 shares of
        common stock at the exercise price of $0.60 per share. These warrants
        are immediately exercisable and expire on June 17, 2009. Mr. DelVecchio
        is the indirect beneficial owner of the warrants held by Brockington
        Securities, Inc. Also included in the calculation of beneficial
        ownership for Mr. DelVecchio are options to purchase 5,000,000 shares of
        common stock at the exercise price of $0.60 per share. These options are
        immediately exercisable and were granted to Mr. DelVecchio pursuant to
        the terms of an employment agreement executed in September 2005.

(4)     Mr. Sheth maintains a 24% voting interest and 25% economic interest in
        Mosaic Capital Advisors, LLC ("MCA"). MCA is the investment advisor to
        Mosaic Partners Fund and by Mosaic Partners Fund LP. As of the record
        date, Mosaic Partners Fund held 387,500 shares of the Company's common
        stock and Mosaic Partners Fund LP held 1,050,000 shares of the Company's
        common stock. Pursuant to Rule 13d-4 of the Securities and Exchange Act
        of 1934, Mr. Sheth disclaims beneficial ownership over the shares held
        by Mosaic Partners Fund and by Mosaic Partners Fund LP.

(5)     Included in the calculation of beneficial ownership for Mr. Mutter are
        options to purchase 250,000 shares of common stock at the exercise price
        of $0.60 per share. These options are immediately exercisable and expire
        on August 29, 2008.


                            DESCRIPTION OF SECURITIES


COMMON STOCK

We have authorized 70,000,000 shares of our common stock with a par value of
$0.001 per share, of which 43,590,740 shares were outstanding as of January 20,
2006.

VOTING RIGHTS


Holders of common stock have the right to cast one vote for each share of stock
held in his or her own name on the books of the corporation, whether represented
in person or by proxy, on all matters submitted to a vote of holders of common
stock, including the election of directors. There is no right to cumulative
voting in the election of directors. Except where a greater requirement is
provided by statute, the Articles of Incorporation, or the Bylaws, the presence,
in person or by proxy duly authorized, of the holder or holders of 33 1/3
percent of the outstanding shares of the our common voting stock shall
constitute a quorum for the transaction of business. The vote by the holders of
a majority of such outstanding shares is required to effect certain fundamental
corporate changes such as liquidation, merger or amendment of the Company's
Articles of Incorporation.

Holders of our common stock have no pre-emptive rights, no conversion rights and
there are no redemption provisions applicable to our common stock.

PREFERRED STOCK


We have authorized 5,000,000 shares of our preferred stock with a par value of
$0.001 per share, of which no shares were outstanding as of January 20, 2006.


Preferred stock may be issued in one or more series, each series to be
appropriately designated by a distinguishing letter or title, prior to the
issuance of any shares thereof. The voting powers, designations, preferences,
limitations, restrictions, and relative, participating, optional and other
rights, and the qualifications, limitations, or restrictions thereof, of the
preferred stock shall be prescribed by resolution of the board of directors
pursuant to Section 3 of Article III of the Articles of Incorporation.


                                       24


<PAGE>

WARRANTS


We are registering the common stock underlying warrants that are a component of
the units offered in offerings that were exempt from registration under Rule 506
of Regulation D of the Securities Act. This first exempt offering was completed
on June 17, 2004 and the second exempt offering was completed on December 23,
2005. The terms of the warrants issued in both offerings are identical with the
exception of the termination date. The holder(s) of the 3,695,875 warrants
issued in the exempt offering that closed on June 17, 2004 have the option to
convert the warrant into our common stock on a one-to-one basis for a 24-month
period commencing June 17, 2004. The holder(s) of the 1,766,250 warrants issued
in the exempt offering that closed on December 23, 2005 have the option to
convert the warrant into our common stock on a one-to-one basis for a 36-month
period from the date of issuance. The exercise price for the warrant is $0.60
per share. If the average closing price for our common stock on the OTCBB for
thirty consecutive trading days following the effectiveness of this registration
statement is equal to or greater than $1.20, we shall have unlimited discretion
to call the warrants at their exercise price of $0.60 for a period of fifteen
business days following such occurrence.

In addition, we issued 575,000 warrants to purchase shares of our common stock
to consultants.



Holders of all warrants have no voting rights unless and until the warrants are
converted into common stock. As a result of owning these warrants, warrant
holders have no right to participate in any shareholder decisions.

All of the Company's outstanding warrants discussed above have an exercise price
of $0.60 per share.


NEVADA ANTI-TAKEOVER LAWS

Nevada Revised Statutes Sections 78.378 to 78.379 provide state regulation over
the acquisition of a controlling interest in certain Nevada corporations unless
the articles of incorporation or bylaws of the corporation provide that the
provisions of these sections do not apply. Our articles of incorporation and
bylaws do not state that these provisions do not apply. The statute creates a
number of restrictions on the ability of a person or entity to acquire control
of a Nevada company by setting down certain rules of conduct and voting
restrictions in any acquisition attempt, among other things. The statute is
limited to corporations that are organized in the state of Nevada and that have
200 or more stockholders, at least 100 of whom are stockholders of record and
residents of the State of Nevada; and does business in the State of Nevada
directly or through an affiliated corporation. Because of these conditions, the
statute currently does not apply to our Company.

                     INTERESTS OF NAMED EXPERTS AND COUNSEL

No expert or counsel named in this prospectus as having prepared or certified
any part of this prospectus or having given an opinion upon the validity of the
securities being registered or upon other legal matters in connection with the
registration or offering of the common stock was employed on a contingency
basis, or had, or is to receive, in connection with the offering, a substantial
interest, direct or indirect, in the registrant or any of its parents or
subsidiaries. Nor was any such person connected with the registrant or any of
its parents or subsidiaries as a promoter, managing or principal underwriter,
voting trustee, director, officer, or employee.

Cane Clark LLP, our independent legal counsel, has provided an opinion on the
validity of our common stock.

Squar, Milner, Reehl & Williamson, LLP, our Independent Registered Public
Accounting Firm, has audited our consolidated financial statements included in
this prospectus and registration statement to the extent and for the period set
forth in their audit report. Squar, Milner, Reehl & Williamson, LLP has
presented their report with respect to our December 31, 2004 consolidated
financial statements. The report of Squar, Milner, Reehl & Williamson, LLP is
included in reliance upon their authority as experts in accounting and auditing.



                                       25


<PAGE>

              DISCLOSURE OF COMMISSION POSITION OF INDEMNIFICATION
                         FOR SECURITIES ACT LIABILITIES

Our articles of incorporation provide that we will indemnify an officer,
director, or former officer or director, to the full extent permitted by law. We
have been advised that in the opinion of the SEC indemnification for liabilities
arising under the Securities Act is against public policy as expressed in the
Securities Act, and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities is asserted by one of our directors,
officers, or controlling persons in connection with the securities being
registered hereby, we will, unless in the opinion of our legal counsel the
matter has been settled by controlling precedent, submit the question of whether
such indemnification is against public policy to a court of appropriate
jurisdiction. We will then be governed by the court's decision.

                     ORGANIZATION WITHIN THE LAST FIVE YEARS

We were organized as a Nevada corporation on October 22, 1999 under the name
Surforama.com, Inc. From October 1999 to August 2002, we were in the business of
developing and marketing advertising for service providers, corporations and
individuals. After this time, we reorganized our operations. We are now engaged
in the business of operating pharmacies that specialize in the dispensing of
highly regulated pain medication by utilizing technology that allows physicians
to transmit prescriptions from a PDA and/or desktop computer directly to our
dedicated pharmacies, thus eliminating or reducing the need for paper
prescription.


In October 2003, we changed our name to eRXSYS, Inc. We changed our name again
in October 2005 to Assured Pharmacy, Inc.


In January 2004, we changed our fiscal year end from November 30 to December 31.

                             DESCRIPTION OF BUSINESS

OVERVIEW

We are engaged in the business of operating pharmacies that specialize in the
dispensing of highly regulated pain medication by utilizing technology that
allows physicians to transmit prescriptions from a wireless hand-held device or
desktop computer directly to our dedicated pharmacies, thus eliminating or
reducing the need for paper prescriptions. Our technology is web-based and we do
not provide physicians with any equipment. Physicians are able to electronically
transmit prescriptions to our pharmacies simply by accessing our web portal.
There is no software required by the physicians. We do provide physicians with
training on how to utilize our web portal to electronically transmit
prescriptions to our pharmacies. Physicians are not charged any fees or costs
for transmitting prescriptions to our pharmacies or for any training they may
receive on how to utilize our web portal.

Because our focus is on physicians whose practice necessitates that they
frequently prescribe medication to manage their patients' chronic pain, we
typically will not keep in inventory non-prescription drugs, or health and
beauty related products such as walking canes, bandages and shampoo. We do not
intend to sell over-the-counter medication or fill prescriptions unrelated to
chronic pain management at our pharmacies. We will fill prescriptions that
address any side effects experienced by individuals who have health conditions
that require them to be treated for chronic pain. We derive our revenue from the
sale of prescription drugs.


The majority of our business is derived from physicians who send prescriptions
directly to our store electronically. We have limited "walk-in" prescriptions.
Within the previous 90 days, approximately 80 physicians have transmitted
prescriptions to our pharmacies through our web portal. Currently, we generate
reoccurring business from approximately 47 physicians and 14 of those physicians
account for approximately 80% of all prescriptions filled at our pharmacies. The
number of physicians that send reoccurring business to our pharmacies has
increased from December 2004 when at that time we generated reoccurring business
from approximately 41 physicians, but at that time those 10 physicians accounted
for approximately 81% of all prescriptions.

                                       26


<PAGE>

SAFESCRIPT PHARMACIES, INC. (FORMERLY KNOWN AS RTIN HOLDINGS, INC.) LICENSE

Our former CEO, Mr. David Parker, founded RxSystems, Inc. ("RxSystems") in March
2002. In March 2002, RxSystems acquired from Safescript Pharmacies, Inc. (the
"Licensor") the exclusive licensing rights to establish and operate pharmacies
under the name "Safescript Pharmacies" throughout California, Oregon, Washington
and Alaska. In May 2003, RxSystems assigned to us all of their rights under this
exclusive license (the "License").In exchange, we agreed to indemnify RxSystems
for any claims with respect to the License against RxSystems in any amount now
or in the future. Subsequent to this assignment, RxSystems, Inc. filed articles
of dissolution with the Nevada Secretary of State. We also agreed to reimburse
the former CEO $370,000 for personal funds advanced to the Licensor to secure
the License. These funds plus five percent (5%) interest per annum were due and
payable in full to Mr. Parker on December 31, 2007. In a termination and
settlement agreement entered into with Mr. Parker on February 1, 2005, Mr.
Parker agreed to accept $10,000 cash and 494,000 shares of our common stock and
release and forever discharge us from all liability associated with this debt.


At the time of the assignment we assumed a note payable to the Licensor of
$3,176,615 with monthly payments of $25,000 through December 1, 2004, with the
remaining principal and accrued interest due on December 31, 2004. On June 30,
2003, the Licensor agreed to convert $2,000,000 of the note payable into 100,000
shares of the Company's convertible preferred stock which was then converted
into 4,444,444 shares of our restricted common stock with an estimated fair
value of $1,393,000. Due to the conversion of all of our issued and outstanding
preferred shares, there are currently no preferred shares issued or outstanding.
We remained obligated to make payments of $25,000 per month through December 1,
2004, with the remaining principal and interest due on December 31, 2004. As of
June 30, 2005, monthly installments of $25,000 for the note payable due to the
Licensor were seventeen months in arrears and the last monthly installment was
paid in January 2004. As of June 30, 2005, the current balance of the note
payable to the Licensor was approximately $1,013,000.


The Licensor failed to provide us with essential services as set forth in the
license agreement and this has forced us to terminate our use of all technology
granted by the Licensor. On March 17, 2004, we filed a lawsuit in Nevada State
Court against Safescript Pharmacies, Inc. seeking damages, declaratory relief,
to rescind the License and to recover the consideration paid. On March 19, 2004,
Safescript Pharmacies, Inc. filed for Chapter 11 bankruptcy protection. The
litigation in Nevada State Court has been stayed by reason of Safescript
Pharmacies, Inc.'s filing for bankruptcy. We refiled substantially the same
claim as an adversary proceeding in Safescript Pharmacies, Inc.'s bankruptcy
case in the U.S. Bankruptcy court located in Tyler, Texas. In July 2004, this
case was transferred to the U.S. District Court for the Eastern District of
Texas located in Tyler, Texas.

We originally recorded the intangible asset at the carrying value of the notes
payable assumed in the amount of $3,586,615. In accordance with accounting
principles generally accepted in the United States of America, we subsequently
engaged a third party valuation firm to estimate the fair value of the acquired
License and the consideration given. Based on this independent valuation, we
reduced the book value (by the excess of the carrying value of the portion of
the note payable converted over the estimated fair value of the common stock
issued) and recorded the following amounts, as adjusted:

License rights                                    $             --
Cost in excess of estimated fair value                   2,977,000
                                                      ------------
Intangible assets                                 $      2,977,000
                                                      ============
Consideration:
Notes payable                                     $      1,547,000
Common stock                                             1,393,000
Cash paid                                                   37,000
                                                      ------------
                                                  $      2,977,000
                                                      ============

In February 2004, the Licensor announced that it had been notified that the
Securities and Exchange Commission (the "SEC") may commence an enforcement
action against the Licensor and certain executive officers of the Licensor for
alleged violation of the Securities Act and the Exchange Act. On October 5,
2004, the SEC announced that it filed a civil action in the United States
District Court for the Eastern District of Texas against Safescript Pharmacies,
Inc., f/k/a RTIN holdings, Inc. and former officers and directors of the
Licensor.


                                       27


<PAGE>

As of the reporting period ended March 31, 2004, management determined that the
License was 100% impaired based on (a) the uncertainty of the Licensor's ability
to continue as a going concern, which creates substantial doubt about the
Licensor's ability to continue to support their e-prescribing technology, (b)
our dispute with the Licensor, and (c) our implementation of other technologies
at our first two pharmacies. Accordingly, as of March 31, 2004, we impaired the
entire intangible asset of approximately $2,977,000.


On June 30, 2005, the United States Bankruptcy Court for the Eastern District of
Texas located in Tyler, Texas approved a Settlement Agreement and Mutual Release
(the "Settlement Agreement") between Safescript Pharmacies, Inc., a Texas
corporation f/k/a RTIN Holdings, Inc. and Safe Med Systems, Inc., a Texas
corporation (collectively, "Safescript"), and us.

Under the Terms of the Settlement Agreement, Safescript will retain 100,000
shares of our common stock and return the remaining 4,344,444 shares of common
stock for cancellation. The shares which Safescript will return for cancellation
represent over 10% of our currently issued and outstanding shares. In addition,
we agreed to issue Safescript 500,000 additional shares of our common stock and
dismiss the lawsuit currently pending in the U.S. District Court for the Eastern
District of Texas located in Tyler, Texas with prejudice. The Agreement
contained a mutual release which resulted in Safescript releasing us from of any
liability with respect to the note payable due to Safescript in the amount of
approximately $1,013,000.

On July 11, 2005, a creditor of Safescript filed a motion with the District
Court for reconsideration of its approval of the Settlement Agreement. On
October 14, 2005, the District Court denied the creditor's motion for
reconsideration. The creditor appealed the District Court's approval of the
Settlement Agreement. The reviewing court has not decided that appeal, but it is
substantially unlikely, based on the advice of counsel, that the court would
overturn the District Court's approval of the Settlement Agreement. The court
has granted the creditor an extension until January 9, 2006 to file its opening
brief.


LICENSE AGREEMENT WITH NETWORK TECHNOLOGY, INC. ("RXNT")

As a result of Safescript Pharmacies, Inc.'s failure to provide us with
essential services as set forth in the license agreement, we entered into a
technology license agreement ("Technology License") with Network Technology,
Inc. ("RxNT") on March 15, 2004. The Technology License grants us the right to
use RxNT's e-prescribing technology under the brand name "Assured Script."
Pursuant to the Technology License agreement, we paid RxNT a licensing fee of
$100,000 and are also responsible for paying RxNT a royalty equal to twenty five
percent (25%) of the gross profit from sales of the "Assured Script" product,
which refers to the licensed products and technology set forth in the Technology
License and not prescription drug sales. Given that we are in the business of
owning and operating pharmacies, management does not anticipate that we would
make any sales of the "Assured Script" product resulting in a royalty payment to
RxNT.

AGREEMENT WITH TPG PARTNERS, L.L.C.

On April 24, 2003, we entered into an agreement with TPG Partners, L.L.C.
("TPG") for the purpose of funding the establishment and operations of
pharmacies. Under this agreement, TPG holds the right to fund on a joint venture
basis fifty pharmacies that we establish. In exchange for contributing financing
in the amount of $230,000 per pharmacy location, TPG will acquire a 49%
ownership interest in each pharmacy established under this agreement and we will
own the remaining 51%. Under the terms of the agreement with TPG, our
contribution to establish pharmacies primarily consisted of the right to utilize
the rights granted under a license agreement we own and to render services
consisting of sales and marketing expertise.

In April 2003, Safescript Pharmacies of California, LLC was formed to establish
and operate the pharmacies that would be operated under the agreement with TPG.
In accordance with the terms of the agreement with TPG, we own 51% of Safescript
Pharmacies of California, LLC and TPG owns the remaining 49%. In June 2003,
Safescript Pharmacies of California, LLC formed a wholly owned subsidiary,
Safescript of California, Inc. ("Safescript"), which will own and operate the
pharmacies. Effective September 8, 2004, Safescript filed amended articles of
incorporation and changed its name to Assured Pharmacies, Inc. ("API").


TPG has advanced a total of $448,000 for the establishment of our first pharmacy
located in Santa Ana, California and our second pharmacy located in Riverside,
California. No additional funds have been received from TPG since 2003. TPG is
obligated to contribute an additional $12,000 to satisfy their full capital
contribution. TPG is also obligated to contribute their proportionate share of
the start-up costs in excess of their initial capital contribution of $230,000


                                       28
<PAGE>

per  pharmacy.  The  parties'  agreement  defined  start-up  costs as any  costs
associated with the opening of any open pharmacy location that accrue within the
ninety  days  period  following  the opening of that  particular  pharmacy.  TPG
obligated to contribute an additional $44,572 to satisfy its proportionate share
of the start-up costs in excess of their initial capital contribution. The
advances by TPG  represent  forty seven (47%)  percent of the total  approximate
cost to open both pharmacies.  Currently, only these two pharmacies are operated
under the agreement with TPG.


AGREEMENT WITH TAPG, L.L.C.

In February 2004, we entered into an agreement with TAPG, L.L.C. ("TAPG"), a
Louisiana limited liability company, and formed Safescript Northwest, Inc.
("Safescript Northwest"), a Louisiana corporation. Safescript Northwest was
formed to establish and operate up to five pharmacies. Effective August 19,
2004, Safescript Northwest filed amended articles of incorporation and changed
its name to Assured Pharmacies Northwest, Inc. ("APN").We own 75% of APN, while
TAPG owns the remaining 25%. In accordance with our shareholders agreement with
TAPG, TAPG will provide start-up costs in the amount of $335,000 per pharmacy
location established not to exceed five pharmacies. Under the terms of the
agreement with TAPG, our contribution to establish pharmacies primarily
consisted of the right to utilize the rights granted under a license agreement
we own and to render services consisting of sales and marketing expertise.


TAPG advanced a total of $664,000 for the start-up costs of our third pharmacy
in Kirkland, Washington and our fourth pharmacy in Portland, Oregon. Currently,
only these two pharmacies are opened and operated under the agreement with TAPG.
Between March 2004 and October 2004, we received from TAPG initial capital
contributions in the amount of $854,213 for three pharmacies. This capital
contribution funded the opening of two pharmacies in Kirkland, WA in August 2004
and Portland, OR in September 2004. Included in these monies was a partial
capital contribution in the amount of $190,000 for the establishment of another
pharmacy located in Portland, OR. TAPG is obligated to contribute an additional
$150,787 to satisfy their full capital contribution. APNI and we requested that
TAPG provide the $150,787 balance of its full capital contribution. TAPG is also
obligated to contribute their proportionate share of the start-up costs in
excess of their initial capital contribution of $335,000 per pharmacy. The
parties' agreement defined start-up costs as any costs associated with the
opening of any open pharmacy location that accrue within the one hundred eighty
days period following the opening of that particular pharmacy. TAPG obligated to
contribute an additional $49,301 excluding interest to satisfy its proportionate
share of the start-up costs in excess of their initial capital contribution. The
advances by TAPG represent thirty four (34%) percent of the total approximate
cost to open both of these pharmacies.


INDUSTRY OVERVIEW

According to the National Institute for Health Management, the $200 billion
prescription drug market is the fastest-growing segment of the health care
industry today, rising 17% or more a year since 1998. At the same time, the
market has been plagued by several chronic and growing problems that underscore
the need to modernize the way medications are prescribed and dispensed in the
United States. These problems include, but are not limited to:

o       Deaths and injuries due to illegible prescriptions. According to the
        Institute of Medicine, errors in reading hand-written drug prescriptions
        are reportedly responsible for over 7,000 deaths a year in the U.S., $77
        billion in additional medical expenses, and rapidly escalating medical
        malpractice insurance costs. Indeed, the Institute for Safe Medical
        Practices (ISMP), a non-profit medical research group, has called for
        the complete elimination of handwritten prescriptions.

o       A study by the American Pain Society and the American Academy of Pain
        Management determined that an estimated 48 million suffer from chronic
        pain in the U.S. and this number is projected to continue growing;

o       Too few qualified pharmacists. A recent study conducted by the United
        States Department of Health and Human Services confirmed that there is a
        growing shortage of trained and licensed pharmacists.

o       Handwritten prescriptions are prone to counterfeiting. Unscrupulous
        patients can alter prescriptions in dose and/or quantity. Many patients
        falsely report lost prescriptions or just forge the prescription to
        visit multiple pharmacies.


                                       29


<PAGE>

MARKET FOR OUR PRODUCTS AND SERVICES

The target market we will serve in dispensing pharmaceutical products is
patients who require medication for chronic pain management. Patients in this
category are likely to require prescription medications far more frequently and
for longer periods of time than patients in most other medical categories. In
order to access this target market, we will enable physicians whose practice
necessitates that they frequently prescribe medication to manage their patients'
chronic pain to transmit prescriptions to our pharmacies electronically using
our web portal. We do not pay physicians to transmit prescriptions to our
pharmacies and physicians do not pay us to transmit prescriptions to our
pharmacies. We generate our revenue exclusively from the sale of prescription
drugs at our pharmacies.


Within the previous 90 days, approximately 80 physicians have transmitted
prescriptions to our pharmacies through our web portal. Currently, we generate
reoccurring business from approximately 47 physicians and 14 of those physicians
account for approximately 80% of all prescriptions filled at our pharmacies. The
number of physicians that send reoccurring business to our pharmacies has
increased from December 2004 when at that time we generated reoccurring business
from approximately 41 physicians, but at that time 10 of those physicians
accounted for approximately 81% of all prescriptions. Two physicians' practice
accounted for greater than 10% of all prescription we received in 2004.


PRINCIPAL SUPPLIERS

We purchased 95% of our inventory of prescription drugs from one wholesale drug
vendor during the year ended December 2004. During the same period of time, we
purchased the remaining 5% of our inventory from 3 different wholesale drug
vendors. Management believes that the wholesale pharmaceutical and
non-pharmaceutical distribution industry is highly competitive because of the
consolidation of the pharmacy industry and the practice of certain large
pharmacy chains to purchase directly from product manufacturers. Although
management believes we could obtain the majority of our inventory through other
distributors at competitive prices and upon competitive payment terms if our
relationship with our primary wholesale drug vendor was terminated, there can be
no assurance that the termination of such a relationship would not adversely
affect us.

CUSTOMERS AND THIRD-PARTY PAYORS

In fiscal 2004, nearly all of our pharmacy sales were to customers covered by
health care insurance plans, which typically contract with a third-party payor
such as an insurance company, a prescription benefit management company, a
governmental agency, workers' compensation, a private employer, a health
maintenance organization or other managed care provider that agrees to pay for
all or a portion of a customer's eligible prescription purchases. Any
significant loss of third-party payor business could have a material adverse
effect on our business and results of operations.

COMPETITION

We face intense competition with local, regional and national companies,
including other drugstore chains, independently owned drugstores, supermarkets,
mass merchandisers, discount stores, dollar stores, mail order pharmacies and
drug importation. Competition in this industry is intense primarily because
national pharmacies including Walgreens and CVS Pharmacy have expanded
significantly and prescription drugs are now offered at a variety of retail
establishments when traditionally prescription drugs were only provided at local
pharmacies. Supermarkets and discount stores now maintain retail pharmacies
onsite as a part of a business plan to provide consumers with all of their
retail needs at one location. Retail pharmacies such as Walgreens, CVS Pharmacy,
and Rite Aid use proprietary and/or commercialized paperless prescription
technology in their pharmacy operations. However, these pharmacies are not
focused or dedicated to physicians practicing in pain management. These retail
pharmacies traditionally keep in inventory non-prescription drugs, or health and
beauty related products such as walking canes, bandages and shampoo. Consumers
are able to have their prescriptions filled at these retail pharmacies, but
typical retail pharmacies either do not keep in inventory or keep limited
amounts of Class 2 drugs in inventory. As a result, the time it takes for
traditional retail pharmacies to fill a prescription for Class 2 drug is
extended. Because of our pain management focus, we maintain an appropriate
inventory level of Class 2 drugs to meet the


                                       30


<PAGE>

needs of physicians that transmit prescription to our pharmacies and do not keep
in inventory non-prescription drugs or health and beauty related products. We do
not intend to sell over-the-counter medication or fill prescriptions unrelated
to chronic pain management at our pharmacies. We will fill prescriptions that
address any side effects experienced by individuals who have health conditions
that require them to be treated for chronic pain.

Currently, Safescript Pharmacies, Inc. is the only company that our management
is aware of that operates pharmacies in the United States that exclusively
dispense pharmaceutical products to patients who require medication for chronic
pain management while also providing technological support to physicians to
enable them to e-prescribe medication for their patients to the pharmacy.

There are companies that are in the business of developing and manufacturing
proprietary software and hardware that facilitate e-scripting. We are not in
this business. We constantly seek out and evaluate available technologies to
integrate into our business model; as such, we do not consider ourselves a
technology company because we do not develop, program, or manufacture
proprietary hardware and/or software used by our pharmacies or by physicians
that transmit prescriptions to our pharmacies.

PATENTS, LICENSES, TRADEMARKS,  FRANCHISES,  CONCESSIONS, ROYALTY AGREEMENTS, OR
LABOR CONTRACTS


On March 27, 2003, RxSystems assigned to us all of their rights under an
exclusive license agreement with Safescript Pharmacies, Inc. (formerly known as
RTIN Holdings, Inc.) which enables the licensee to operate pharmacies under the
name "Safescript Pharmacies" throughout California, Oregon, Washington and
Alaska. Thereafter, the licensor failed to provide us with essential services
underlying the license agreement and this forced us to terminate our use of all
technology granted under the license agreement. On March 17, 2004, we initiated
suit in Nevada State Court against Safescript Pharmacies, Inc. seeking damages,
declaratory relief, to rescind our license agreement with them and to recover
the consideration paid, including all cash and 4,444,444 restricted common
shares of our stock, which were issued to retire $2,000,000 of the debt owed on
the License. This case was stayed by reason of Safescript Pharmacies, Inc.'s
March 19, 2004 bankruptcy filing. We refiled substantially the same claim as an
adversary proceeding in Safescript's bankruptcy case which was pending in the
U.S. Bankruptcy Court located in Tyler, Texas. In July 2004, this case was
transferred to the U.S. District Court for the Eastern District of Texas located
in Tyler, Texas. On June 30, 2005, the United States Bankruptcy Court for the
Eastern District of Texas approved a Settlement Agreement and Mutual Release
(the "Settlement Agreement") between Safescript Pharmacies, Inc., a Texas
corporation f/k/a RTIN Holdings, Inc. and Safe Med Systems, Inc., a Texas
corporation (collectively, "Safescript"), and us. On July 11, 2005, a creditor
of Safescript filed a motion with the District Court for reconsideration of its
approval of the Settlement Agreement. On October 14, 2005, the District Court
denied the creditor's motion for reconsideration. The creditor appealed the
District Court's approval of the Settlement Agreement. The reviewing court has
not decided that appeal, but it is substantially unlikely, based on the advice
of counsel, that the court would overturn the District Court's approval of the
Settlement Agreement. The court has granted the creditor an extension until
January 9, 2006 to file its opening brief.


On March 15, 2004, we entered into a technology license agreement ("Technology
License") with Network Technology, Inc. ("RxNT"). The Technology License grants
us the right to use RxNT's e-prescribing technology under the brand name
"Assured Script."

On November 9, 2004, we received trademark approval (registration number
2901258) by the United States Patent and Trademark Office for the "eRXSYS"
company logo.

State law requires pharmacies to apply to the State Board of Pharmacy to receive
a license to operate. The application process to operate a pharmacy is
substantially similar among different states. The application process for a
license on average takes sixty days in the state of California. We have retained
the services of a law firm that specializes in healthcare and pharmacy to
oversee the application process for our pharmacies. In addition, each pharmacy
must employ a licensed pharmacist to serve as the Pharmacist in Charge (PIC).
The PIC oversees personnel and reports on the operations at a specific pharmacy.
State law regulates the number of employees and clerks that can work under the
supervision of one PIC. Currently, we are licensed to operate four pharmacies.


                                       31


<PAGE>

RESEARCH AND DEVELOPMENT

We did not incur any research and development expenditures in either the fiscal
year ended November 30, 2003, the one month transition period ended December 31,
2003, or the fiscal year ended December 31, 2004.

EXISTING AND PROBABLE GOVERNMENTAL REGULATION

Pharmacy operations are subject to significant governmental regulation on the
federal and state level. Compliance with governmental regulation is essential to
continued operations. We are in compliance with each of the laws, rules, and
regulations set forth below and have not experienced any incidence of
noncompliance.

Licensure Laws
--------------

Each state's board of pharmacy enforces laws and regulations governing
pharmacists and pharmacies. Each of our pharmacies applied and received a
license. Licensure requires strict compliance with state pharmacy standards.
Although we believe our pharmacies are compliant, changes in pharmacy laws and
differing interpretations regarding such laws could impact our level of
compliance. A pharmacy's failure to comply with applicable law and regulation
could result in licensure revocation as well as the imposition of fines and
penalties.

Drug Enforcement Laws
---------------------

The United States Department of Justice enforces the Drug Enforcement Act
through the Drug Enforcement Agency (DEA). The DEA strictly enforces regulations
governing controlled substances. In addition to regulation by the DEA, we are
subject to significant state regulation regarding controlled substances. Because
our pharmacies' operations focus on highly regulated pain medications, failure
to adhere to DEA and state controlled substance requirements could jeopardize
our ability to operate. While we believe we are in compliance with current DEA
requirements, such requirements and interpretation of these requirements do
change over time.

Federal Health Programs
-----------------------

As we grow, we believe that a significant amount of our revenues will be derived
from governmental programs such as Medicaid. With the recent passage of the
Medicare Modernization and Prescription Drug Act of 2003, we also believe that
Medicare will become a significant source of funding.

Medicare
--------

Medicare reimbursement is determined by the Centers for Medicare and Medicaid
Services ("CMS"), an agency of the United States Department of Health and Human
Services. CMS establishes reimbursement policy for services provided to Medicare
beneficiaries in a manner consistent with the Social Security Act, as amended by
Congress. CMS has not yet established the reimbursement methodology pursuant to
which it will reimburse prescription drugs.


In order to participate in the Medicare program, each pharmacy must enroll as a
participating supplier. There can be no assurance that our pharmacies will be
able to obtain the necessary approvals to participate in the Medicare program,
which could have a material adverse financial impact on us, our operations, and
our investors.

Medicaid
--------

Medicaid is a federal/state program that provides health coverage (including
prescription drug coverage) to the needy. In order to participate in the
Medicaid program, each pharmacy must enroll as a participating supplier. There
can be no assurance that our pharmacies will be able to obtain the necessary
approvals to participate in the Medicaid program, which could have a material
adverse financial impact on us, our operations, and our investors. Each state's
Medicaid program is different, and some states impose limitations on the
pharmacies that may serve the Medicaid population. We currently participate in
Medicaid in Oregon and Washington. We submitted an application to participate in
California's Medicaid program, known as Medi-Cal and received a notice of
approval on August 22, 2005. We were assigned a unique provider identification
number to enable our pharmacy in Riverside, California and other California
locations that we may establish in the future, exclusive of locations in Orange
County, to process claims through Medi-Cal.

                                       32
<PAGE>

The Medicaid program is administered and all benefits are processed by CalOptima
exclusively in Orange County, California. All applications to participate in the
Medicaid programs for pharmacies located in Orange County are processed by
CalOptima. In 2002, CalOptima placed a moratorium on additional pharmacies in
Orange County enrolling as a supplier of prescription drugs to customers who
rely solely on Medicaid for health coverage. This moratorium remains in effect
and impacts our location in Santa Ana, California. There can be no assurance
that the moratorium will be lifted and we will be able to obtain the necessary
approvals to participate in California's Medicaid program in any respect in
Orange County, California.

Medicare and Medicaid Participation
-----------------------------------

We received notice that CalOptima was accepting applications for pharmacies to
participate in CalOptima specifically for claims by customers who rely on health
coverage through both Medicaid and Medicare. We submitted an application to
CalOptima for approval to supply customers who rely on health coverage through
both Medicaid and Medicare in Orange County, California during the reporting
period. We anticipate that we will receive a response to our application no
later than December 31, 2005.




The Federal Health Care Programs Anti-Kickback Act
--------------------------------------------------

Federal law prohibits the solicitation or receipt of remuneration in return for
referrals and the offer or payment of remuneration to induce the referral of
patients or the purchasing, leasing, ordering or arranging for any good,
facility, service or item for which payment may be made under a "federal health
care program" (defined as "any plan or program that provides health benefits,
whether directly, through insurance, or otherwise, which is funded directly, in
whole or in part, by the United States Government other than the Federal
Employees Health Benefit Program").

Because our business and operations involve providing health care services, we
are subject to the Federal Health Care Programs Anti-Kickback Act (the "Act").
The Anti-Kickback Statute, codified in 42 U.S.C. ss. 1320a-7b(b), prohibits
individuals and entities from knowingly and willfully soliciting, receiving,
offering or paying any remuneration to other individuals and entities (directly
or indirectly, overtly or covertly, in cash or in kind):

        (i)     In return for referring an individual to a person for the
                furnishing or arranging for the furnishing of any item or
                service for which payment may be made under a federal or state
                health care program; or

        (ii)    In return for purchasing, leasing, ordering or arranging for or
                recommending purchasing, leasing, or ordering any good,
                facility, service or item for which payment may be made under a
                federal or state health care program.

There are both criminal and civil penalties for violating the Federal Statute.
Criminal sanctions include a fine not to exceed $25,000 or imprisonment up to
five years or both, for each offense. In addition, monetary penalties for each
offense may be increased to up to $250,000 for individuals and up to $500,000
for organizations. Civil penalties include fines of up to $50,000 for each
violation, monetary damages up to three times the amount paid for referrals
and/or exclusion from the Medicare program. Courts have broadly construed the
Anti-Kickback Statute to include virtually anything of value given to an
individual or entity if one purpose of the remuneration is to influence the
recipient's reason or judgment relating to referrals.

The Department of Health and Human Service's Office of Inspector General ("OIG")
promulgated safe harbor regulations specifying payment practices that will not
be considered to violate the statute. If a payment practice falls within one of
the safe harbors, it will be immune from criminal prosecution and civil
exclusion under the Act even if it fails to fall within another potentially
applicable safe harbor. Significantly, failure to fall within any safe harbor
does not necessarily mean that the payment arrangement violates the statute.
Failure to comply with a safe harbor can mean one of three things: (1) the
arrangement does not fall within the broad scope of the anti-fraud and abuse
rules so there is no risk of prosecution; (2) the arrangement is a clear
statutory violation and is subject to prosecution; or (3) the arrangement may
violate the anti-fraud and abuse rules in a less serious manner, in which case
there is no way to predict the degree of risk.


                                       33


<PAGE>


Because our pharmacies maintain relationships with referring physicians, our
operations are subject to scrutiny under the Act. Although we will attempt to
structure our financial relationships with physicians in a manner that qualifies
for safe harbor protection, we anticipate that our relationships with physicians
will not qualify for safe harbor protection.

If our operations fail to comply with the Act, we could be criminally
sanctioned. In addition, the right of any of our pharmacies to participate in
governmental health plans could be terminated.

Ethics in Patient Referrals Act
-------------------------------

The Ethics in Patient Referrals Act, 42 U.S.C. ss.1395nn, commonly referred to
as Stark II ("Stark II"), prohibits physicians from referring or ordering
certain Medicare or Medicaid reimbursable "designated health services" from any
entity with which the physician or any immediate family member of the physician
has a financial relationship. A financial relationship is generally defined as a
compensation or ownership/investment interest. The purpose of the prohibition is
to assure that physicians base their treatment decisions upon the needs of the
patients and not upon any financial benefit that would inure to the physician as
a result of the referral.

Prescription medications are classified as "designated health services" under
Stark II. Physicians owning stock in our Company are not allowed to refer any
Medicare or Medicaid patient to any of our pharmacies until and unless our
Company's capitalization exceeds $75,000,000. A referral made in violation of
Stark II results in non-payment to the pharmacy and could result in the
imposition of fines and penalties as well as termination of our participation in
Medicare and Medicaid.

State Fraud and Abuse Laws
--------------------------

States have generally adopted their own laws similar to the Act and Stark II.
However, in some instances, state laws apply to all health care services,
regardless of whether such services are payable by a government health plan. For
example, in California, physicians and other practitioners are not permitted to
own more than 10% of any entity that owns a pharmacy.



HIPAA
-----

We are impacted by the Health Insurance Portability and Accountability Act of
1996 ("HIPAA"), which mandates, among other things, the adoption of standards to
enhance the efficiency and simplify the administration of the healthcare system.
HIPAA requires the Department of Health and Human Services to adopt standards
for electronic transactions and code sets for basic healthcare transactions such
as payment and remittance advice ("transaction standards"); privacy of
individually identifiable healthcare information ("privacy standards"); security
and electronic signatures ("security standards"), as well as unique identifiers
for providers, employers, health plans and individuals; and enforcement. We are
required to comply with these standards and are subject to significant civil and
criminal penalties for failure to do so.

Management believes that we are in material compliance with these standards.
However, HIPAA's privacy and transaction standards only recently became
effective, and the security standards will become mandatory as of April 21,
2005. Considering HIPAA's complexity, there can be no assurance that future
changes will not occur. Changes in standards as well as changes in the
interpretation of those standards could require us to incur significant costs to
ensure compliance.

Management anticipates that federal and state governments will continue to
review and assess alternate healthcare delivery systems, payment methodologies
and operational requirements for pharmacies. Given the continuous debate
regarding the cost of healthcare services, management cannot predict with any
degree of certainty what additional healthcare initiatives, if any, will be
implemented or the effect that any future legislation or regulation may have on
us.


                                       34


<PAGE>

OBRA 1990
---------

Our business is subject to various other federal and state regulations. For
example, pursuant to the Omnibus Budget Reconciliation Act of 1990 ("OBRA") and
comparable state regulations, our pharmacists are required to offer counseling,
without additional charge, to our customers about medication, dosage, delivery
systems, common side effects and other information deemed significant by the
pharmacists and may have a duty to warn customers regarding any potential
adverse effects of a prescription drug if the warning could reduce or negate
such effect.

California Senate Bill #151 was chaptered by the California Secretary of State
on September 17, 2003. This legislation tightens the regulations on prescribing
prescription medication. The legislation allows for electronic prescribing of
all prescription medication except Class 2 substances. Generally, Class 2
substances are drugs that exhibit a high potential for abuse or diversion. Class
2 substances are required to be dispensed only against a hard copy prescription.
This will not pose any operational problem for us because we currently generate
a hard copy of the electronic prescription for all Class 2 prescriptions issued.
Management believes that this legislation will create no undue burden or
competitive disadvantage for us.

Other Laws
----------

In recent years, an increasing number of legislative proposals have been
introduced or proposed in Congress and in some state legislatures that would
effect major changes in the healthcare system, either nationally or at the state
level. The legislative initiatives include prescription drug benefit proposals
for Medicare participants. Although we believe we are well positioned to respond
to these developments, we cannot predict the outcome or effect of legislation
resulting from these reform efforts.

COMPLIANCE WITH ENVIRONMENTAL LAWS

We did not incur any costs in connection with the compliance with any federal,
state, or local environmental laws.

EMPLOYEES

We currently have fourteen full-time employees in addition to seven consultants.
Our employees are not represented by labor unions or collective bargaining
agreements. The classification of our full-time employees and consultant
positions are broken down as follows:


        Characterization of               Number of        Number of
         Employee's Duties                Employees        Consultants
----------------------------------------------------------------------------
   Corporate Management / Officer             1                2
----------------------------------------------------------------------------
               Sales                          2                1
----------------------------------------------------------------------------
             Technology                       0                2
----------------------------------------------------------------------------
             Accounting                       1                2
----------------------------------------------------------------------------
             Pharmacist                       4                0
----------------------------------------------------------------------------
   Technicians / Pharmacy Support             6                0
----------------------------------------------------------------------------



                                       35


<PAGE>

                      MANAGEMENT'S DISCUSSION AND ANALYSIS

FORWARD-LOOKING STATEMENTS

Historical results and trends should not be taken as indicative of future
operations. Management's statements contained in this report that are not
historical facts are forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
and Exchange Act of 1934 (the "Exchange Act"), as amended. Actual results may
differ materially from those included in the forward-looking statements. The
Company intends such forward-looking statements to be covered by the safe-harbor
provisions for forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995, and is including this statement for purposes of
complying with those safe-harbor provisions. Forward-looking statements, which
are based on certain assumptions and describe future plans, strategies and
expectations of the Company, are generally identifiable by use of the words
"believe," "expect," "intend," "anticipate," "estimate," "project," "prospects,"
or similar expressions. The Company's ability to predict results or the actual
effect of future plans or strategies is inherently uncertain. Factors which
could have a material adverse affect on the operations and future prospects of
the Company on a consolidated basis include, but are not limited to: changes in
economic conditions, legislative/regulatory changes, availability of capital,
interest rates, competition, significant restructuring activities in calendar
2004 and thereafter, and generally accepted accounting principles. These risks
and uncertainties should be considered in evaluating forward-looking statements
and undue reliance should not be placed on such statements. Further information
concerning the Company and its business, including additional factors that could
materially affect the Company's financial results, is included herein and in the
Company's other filings with the SEC.

We currently have four operating pharmacies. Our first pharmacy was opened on
October 13, 2003 in Orange County, California in the city of Santa Ana. On June
10, 2004, we opened our second pharmacy location in Riverside, California. We
opened our third pharmacy in Kirkland, Washington on August 11, 2004. Our fourth
pharmacy was opened in Portland, Oregon on September 21, 2004.


We announced in our quarterly report for the three months ended September 30,
2004 that we were suspending the development of new pharmacies for a period of
sixty to ninety days in order to evaluate and potentially improve the operations
of our four existing pharmacies. It was the belief of our board of directors and
executive management that all four stores were not operating at their full
potential. This basis for this belief was primarily the reluctance of physicians
to adopt our technology for electronically transmitting prescriptions and our
failure to implement a successful marketing strategy to attract business. Since
this announcement, management postponed activity related to the development of
new locations. At the present time and following this period of evaluation, our
management decided not to close any of our existing pharmacy locations. We are
hopeful that we will resume the development of new pharmacies in the first
quarter of 2006.

The primary catalyst for the decision to suspend the development of new
pharmacies was substantially attributable to a lack of sufficient cash to fund
the expenses associated with the development of new pharmacies. We have incurred
significant expenditures in connection with purchases of inventory for our
existing pharmacies. As sales increased, a time gap developed between inventory
replenishing and accounts receivable. Nearly all of our pharmacy sales are to
customers whose medications were covered by health benefit plans and other third
party payors. As a result, we typically do not receive cash for our sales at the
time of transactions and are dependent on health benefit plans to pay for all or
a portion of our customers' prescription purchases. There is a significant delay
from the time of a customer's purchase of medication to the time when we receive
payment for the customer's purchase from a health benefit plan or other third
party payor. The delay from the point of a customer's purchase to our receipt of
payment has ranged between 41 and 27 days when calculated for a specific
quarterly period.


Management  evaluated  various  alternatives  available  to us as it  related to
financing  future  inventory  purchases  in the  early  stages  of  our  planned
principal  operations.  Our management was successful in securing  financing for
inventory  purposes on an interim  basis.  On or about  December  21,  2004,  we
received a loan  evidenced  by a  promissory  note from Robert  James,  Inc.,  a
company under the control of our current CEO Mr. Robert DelVecchio, for the
purpose of purchasing inventory for our pharmacies.  The promissory note was for
a maximum of  $150,000  and  matured on the earlier of March 6, 2005 or the date
that we were able to consummate an


                                       36


<PAGE>

accounts receivable factoring arrangement for our working capital. The
outstanding principal amount of this promissory note bears interest at three
percent (3%) per month. In consideration for this promissory note, we agreed to
pay the lender an administrative fee of $1,500 and a financing fee of $2,100. In
addition to these fees, we agreed to pay the lender by the fifth day of every
month from January 2005 until the principal amount is repaid an administrative
fee of $1,875 and a financing fee of $2,675. We paid the loan evidenced by the
promissory note from Robert James, Inc. in full on February 21, 2005.


On February 23, 2005, we entered into an accounts receivable servicing agreement
and line of credit agreement with Mosaic Financial Services, LLC ("Mosaic"). The
monthly interest rate under this agreement is equal to one and one quarter
percent (1.25%) of the then LOC limit. These agreements enabled us to
successfully secure financing for inventory purchases over an extended period of
time. Under the terms of the line of credit agreement, the maximum amount that
we could draw to purchase inventory was originally $500,000 and increased to
$700,000. These agreements were for a term of one year with a provision to
automatically renew for another one year period unless either party provided
notice to the other of termination within 180 days prior to the end of the
effective term.

Mosaic provided notice to us of its intent to exercise its right under the Line
of Credit Agreement to convert the $700,000 previously advanced into shares of
the our common stock. On October 24, 2005, our board of directors authorized the
issuance of 2,500,000 restricted shares of our common stock to Mosaic in
accordance with the conversion right provided in the Line of Credit Agreement.
The issuance of these shares to Mosaic satisfied our obligations in full under
the Accounts Receivable Servicing Agreement and Line of Credit Agreement.

On October 31, 2005, we entered into another Line of Credit Agreement ("LOC")
with Mosaic enabling us to draw a maximum of $1,000,000 to purchase inventory.
This LOC has a one time commitment fee equal to three percent (3%) of the
initial amount of the LOC. The LOC has a monthly interest rate of 1.5% of the
then LOC limit. These accrued finance charges will be deducted prior to any
advances. Under the terms of the LOC, Mosaic has a conversion right to convert
all or a portion of the outstanding advances into shares of our common stock
where the conversion price is based on the weighted average closing bid price
for the our common stock on the over-the-counter bulletin board (or such other
equivalent market on which our common stock is quoted) as for the seven trading
days immediately preceding the date the conversion right is exercised. The
conversion price shall not be less than $0.40 nor more than $0.80. Our
management anticipates that this LOC will adequately finance inventory purchases
for our existing pharmacies over the next twelve months. This LOC is secured by
substantially all of our assets.

Following our period of evaluation, management cited our previous marketing
practice as an area for improvement. Beginning in the first quarter of 2005, our
management successfully implemented a new marketing strategy that dramatically
expands our efforts to attract business. Our current marketing strategy is
targeted to physicians, new customers, and existing customers. With respect to
new customers, we are offering a $10.00 coupon to be applied toward the
customers first prescription filled at any of our pharmacies and a $5.00 gift
card at any Starbucks location. With respect to our current customers, we
commenced a promotion through direct mailing. We are offering our current
customers a $10.00 coupon to be applied toward the purchase of prescription
drugs for any prescription that is transferred to one of our pharmacies. In
addition, we will hold a monthly drawing at each pharmacy for those customers
that transferred a prescription and the winner will receive a $150.00 gift card.
We also send notices to physicians informing them of our pharmacy operations. In
an attempt to build more name recognition, we have created brochures and posters
that are available in physicians' waiting rooms.

Our new marketing strategy set forth above has in a short time period produced
an increase in business. During the nine months ended September 30, 2005, our
four pharmacies filled an average of 519 prescriptions per week. During the
period ended September 30, 2004, our two pharmacies filled an average of 208
prescriptions per week. As a result, we had gross profit of approximately 12%
for the nine month ended September 30, 2005 as compared to a gross loss of
approximately 37% for the same reporting period in the prior year.

Additionally, our two pharmacy locations in California previously experienced
difficulty in qualifying to participate in California's Medicaid program, known
as Medi-Cal. Medicaid is a federal/state program that provides health coverage,
including prescription drug coverage to the needy. Each state's Medicaid program
is different, and some states impose limitations on the number of pharmacies
that may serve the Medicaid population. In order to participate in Medicaid
programs, each pharmacy must enroll as a participating provider. We submitted an
application to the California Department of Health Services on December 14,

                                       37
<PAGE>

2004. On June 8, 2005, the Medi-Cal Provider Relations Department rejected our
application and issued a list of deficiencies to be addressed. On July 11, 2005,
we addressed all cited deficiencies and re-submitted our Medi-Cal application.
We received a notice of approval on August 22, 2005. We were assigned a unique
provider identification number to enable our pharmacy in Riverside, California
and other California locations that we may establish in the future, exclusive of
locations in Orange County, to process claims through Medi-Cal. We anticipate
that this approval and our ability to process claims through Medi-Cal will
increase sales at our California pharmacy located in Riverside.



The Medicaid program is administered and all benefits are processed by CalOptima
exclusively in Orange County, California. All applications to participate in the
Medicaid programs for pharmacies located in Orange County are processed by
CalOptima. In 2002, CalOptima placed a moratorium on additional pharmacies in
Orange County enrolling as a supplier of prescription drugs to customers who
rely solely on Medicaid for health coverage. This moratorium remains in effect
and impacts our location in Santa Ana, California

During the quarterly period ended September 30, 2005, we received notice that
CalOptima was accepting applications for pharmacies to participate in CalOptima
specifically for claims by customers who rely on health coverage through both
Medicaid and Medicare. Medicare is a health insurance program for people over
the age of 65 or those under 65 with certain disabilities. We submitted an
application to CalOptima for approval to supply customers who rely on health
coverage through both Medicaid and Medicare in Orange County, California during
the quarterly period ended September 30, 2005. We anticipate that we will
receive a response to our application no later than December 31, 2005.

Approval to participate as a supplier to CalOptima would increase the customer
base at our California pharmacy location in Santa Ana even if such approval was
limited to a classification of individuals that rely on both Medicaid and
Medicare for health insurance coverage. There can be no assurance that the
moratorium will be lifted and our pharmacies will be able to obtain the
necessary approvals to participate in California's Medicaid program in any
respect in Orange County, California.

Similarly,  some third party payors such as Health Net in  California  have also
placed a  moratorium  on  additional  pharmacies  which they will  sanction as a
supplier of medication to participants enrolled in the health benefit plans that
they administer. The failure of government plans and other third party payors to
approve  additional  pharmacies  as  suppliers  of  medication  to  participants
enrolled in their health benefit plans could have a material  adverse  financial
impact on us, and our operations.


RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 2004 AND NOVEMBER 2003

On the cash basis of accounting, our total revenue reported for the year ended
December 31, 2004 was $1,164,568, $1,038 for the year ended November 30, 2003,
and $7,982 for the one month transition period ended December 31, 2003.As of
November 30, 2003 and December 31, 2003, we had established our first pharmacy.
During the year ended December 31, 2004, we established three additional
pharmacies and had established a total of four pharmacies by the end of the
fiscal year. For this reason, our revenue ability to generate revenue
dramatically increased.

We are in the process of monitoring our revenues and are creating several
criteria in developing a historical trend analysis based on actual claims paid
in order to estimate potential contractual allowances on a monthly basis. Given
that we are considered to be in the startup stage and lack sufficient
operational history, we are unable to determine the fixed settlement of our
revenue.

Therefore, we are recognizing revenue on a cash basis until such time as
management has developed the history and trends to estimate potential
contractual adjustments. On an accrual basis, we would have recorded additional
revenue of approximately $221,000 for the year ended December 31, 2004. As we
undertake our plan of operations, we anticipate that our revenues will
significantly increase.

The total cost of sales for the year ended December 31, 2004 was $1,411,163,
$12,784 for the year ended November 30, 2003, and $26,267 for the one month
transition period ended December 31, 2003.The cost of sales consists primarily
of the pharmaceuticals. As of November 30, 2003 and December 31, 2003, we had
established our first pharmacy. During the year ended December 31, 2004, we
established three additional pharmacies and had established a total of four
pharmacies by the end of the fiscal year. Purchasing and replenishing our
inventory supply for an increased number of pharmacies over the prior fiscal
year resulting in a significant increase in our total cost of sales.


                                       38
<PAGE>


We incurred total operating expenses of $8,197,168 for the year ended December
31, 2004, $1,402,262 for the year ended November 30, 2003, and $740,050 for the
one month transition period ended December 31, 2003.Our operating expenses for
the year ended December 31, 2004 consisted of salaries and related expenses of
$1,401,017, consulting and other compensation of $2,253,848, selling, general
and administrative expenses of $1,564,855, and $2,977,448 for the impairment of
an intangible asset. Our operating expenses for the year ended November 30, 2003
consisted of salaries and related expenses of $314,650, consulting and other
compensation of $805,455, and selling, general and administrative expenses of
$282,157. For the one month transition period ended December 31, 2003, our
operating expenses consisted of salaries and related expenses of $595,922,
consulting and other compensation of $80,526, selling, general and
administrative expenses of $63,602.

Our operating expenses incurred during the year ended December 31, 2004 were
exclusively attributable to establishing our corporate infrastructure and
establishing additional pharmacies. During the year ended December 31, 2004, we
established three additional pharmacies and had established a total of four
pharmacies by the end of the fiscal year. In the first quarter of 2004, we
expensed $2,977,448 for the impairment of a license. For these reasons, our
operating expenses dramatically increased in the year ended December 31, 2004
when compared to the prior year.

Our net loss for the year endedDecember31, 2004 was $8,011,287 and the loss for
the year ended November 30, 2003 was $1,458,995 with additional losses of
$751,748 for the one month transition period ended December 31, 2003.We
previously projected that each store would be cash flow positive by the ninth
month of operation; however, none of our operating pharmacies currently is or
ever has been cash flow positive. Increased net losses in 2004 as compared to
the prior fiscal year is primarily attributable to the impairment of a license
and significant expenditures related to establishing additional pharmacies in
the absence of a successfully marketing strategy to generate revenue.

Our basic and diluted loss per common share for the year ended December 31, 2004
was $(0.19), $(0.06) for the year ended November 30, 2003, and $(0.02) for the
one month transition period ended December 31, 2003.


LIQUIDITY AND CAPITAL RESOURCES

As of December 31, 2004, we maintained $86,325 in cash which primarily resulted
from funds raised in the private offering of common stock and receivables
financing. This cash was used, among other things, to fund additional working
capital needs, support the establishment of our corporate infrastructure, and to
pay for additional purchases of inventory.

As of September 30, 2004, we maintained $150,000 in restricted cash. This
restricted cash was set aside to be used exclusively to satisfy our obligations
under leases that were personally guaranteed by an officer of our Company in the
event that we are unable to pay rent at these locations from our daily operating
account. We no longer maintain any restricted cash because we terminated the
leases which were personally guaranteed by an officer of our Company.

During the fiscal year ended December 31, 2004, net cash used in operating
activities was $3,432,266, net cash used in investing activity was $719,872, and
net cash provide by financing activities was $3,528,021.

During the fourth quarter of fiscal 2004, our management anticipated that the
current cash on hand was sufficient for us to operate our four existing
pharmacies at the current level until December 31, 2004. Following a period of
evaluation and restructuring, our management has taken aggressive steps to
reduce our operating costs. In the first quarter of 2005, we closed our regional
office located in Ft. Worth, Texas. In January 2005, we relocated our corporate
headquarters to a new location. We reduced our staff from nineteen full time
employees in December 2004 to fourteen at the present time. We also reduced
expenses by suspending the development of new pharmacies and terminating certain
leases. The cost reducing actions set forth above are estimated to reduce our
operating expenses on an annual basis by approximately $1,024,000. The breakdown
of these projected cost reductions are as follows:

Costs Reducing Action                                      Annualized Savings
                                                           ------------------
Closure of the Ft. Worth Regional Office                       $ 139,295
Relocation of corporate headquarters                              85,200
Reduction in full time employees                                 567,508
Reduced expense by suspending development of new pharmacies      232,016
Total Cost Savings on an Annualized Basis                      1,024,019
                                                               =========

                                       39
<PAGE>

We primarily relied on equity capital and proceeds from the our agreements with
TAPG, LLC and TPG Partners, LLC to fund our operations during the year ended
December 31, 2004 and year ended November 30, 2003. During the year ended
December 31, 2004, we received net proceeds of $2,650,030 from accredited
investors and issued a total of 7,391,750 shares of our common stock. During the
year ended November 30, 2003, we received net proceeds of $1,330,750 and issued
a total of 5,323,000 shares of our common stock. Our operations since December
31, 2004 have been primarily funded through debt and equity financings.

The underlying drivers that resulted in material changes and the specific
inflows and outflows of cash in calendar 2004 are as follows:

a.      Expenses such as salaries, rents, legal fees, selling and administrative
        costs were necessary to fund our on-going business and pursue expanding
        doctor enrollments to increase revenue. Legal and administrative
        expenses resulted from expenditures to establish the business and to
        maintain compliance with government reporting requirements. Selling and
        administrative expenses have been reduced via work force reductions and
        expenditures associated with establishing the enterprise are
        non-recurring.

b.      A significant breach by a licensor severely impaired our ability to
        operate under the original license agreement, which resulted in a
        material impairment of an intangible asset.

c.      Our inventory level increased with the addition of two pharmacies. We
        continually track inventory usage and adjust inventory levels to market
        requirements.



d.      Increases in accounts payable are the result of expenses and fees
        associated with establishing existing business and two new pharmacies in
        the Northwest.

e.      We obtained the necessary funding from the issuance of common stock. Our
        management believes that additional issuance of stock and/or debt
        financing will be required to provide us with working capital and a
        positive cash flow.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2005 AND
SEPTEMBER 30, 2004

REVENUES

On the cash basis of accounting, our total revenue reported for the quarter
ended September 30, 2005 was $980,181, an increase of approximately 180% from
$350,459 for the quarter ended September 30, 2004. We generated more revenue in
the quarter ended September 30, 2005 than in any other quarterly period since
our inception. The increase in revenue growth is primarily attributable to
having four operating pharmacies for the entire reporting period. During the
quarter ended September 30, 2004, only our two pharmacies in California were
operating for the entire reporting period. Additional locations in Oregon and
Washington commenced operations during the quarter ended September 30, 2004 and
did not materially impact our revenue during this reporting period. Our
management also attributes the implementation of our new marketing strategy for
the increase in reported revenue.

We are in the process of monitoring our revenues and creating several criteria
to develop a historical trend analysis based on actual claims paid in order to
estimate potential contractual allowances on a monthly basis. Given that we are
considered to be in the start-up stage and lack sufficient operational history,
we are unable at this time to determine the fixed settlement of our revenue.
Therefore, we are recognizing revenue on a cash basis until such time that
management can develop the history and trends necessary to estimate potential
contractual adjustments. On an accrual basis, we would have recorded revenue of
$1,158,058 for the quarter ended September 30, 2005, which is additional revenue
of approximately $177,877. On an accrual basis, we would have recorded revenue
of approximately $465,717 for the quarter ended September 30, 2004, which is
additional revenue of approximately $115,258 for the quarter ended September 30,
2004.


                                       40
<PAGE>


COST OF SALES

The total cost of sales increased to $835,268 for the quarter ended September
30, 2005, compared to $395,618 for the quarter ended September 30, 2004. The
price on a per unit basis of pharmaceuticals has remained relatively stable
between the three months ended September 30, 2005 and 2004. The increase is
primarily attributable to supplying and replenishing inventory in four
pharmacies for the entire reporting period. We opened additional pharmacies in
August and September 2004 in Oregon and Washington. As a result, we were
supplying and replenishing inventory at only the two pharmacy locations in
California for the entire quarter ended September 30, 2004.

GROSS PROFIT

Gross Profit increased to $144,913, or approximately 15% of gross sales, for the
quarter ended September 30, 2005. This is an increase from a reported loss of
$45,159 for the quarter ended September 30, 2004. The growth of gross profit is
primarily attributable to operating four pharmacies for the entire reporting
period as compared to the prior year when only two pharmacies were operating for
the same period. The growth in gross profit is also attributable to the focus of
all four pharmacies on servicing the profitable segments of the specialty pain
market. This quarter represents the third consecutive reporting period that we
reported gross profits and the highest amount of gross profit reported during
any quarterly period since our inception.

The growth in gross profit is largely attributable to operating four pharmacies
for the entire reporting period as compared to the prior year when only two
pharmacies were operating for the entire reporting period.

OPERATING EXPENSES

Operating expenses increased to $3,026,446 for the quarter ended September 30,
2005, compared to $1,263,999 for the quarter ended September 30, 2004. Our
operating expenses for the quarter ended September 30, 2005 consisted of
salaries and related expenses of $2,458,950, consulting and other compensation
of $298,151, and selling, general and administrative expenses of $269,345. Our
operating expenses for the same quarter last year consisted of salaries and
related expenses of $412,091, consulting and other compensation of $372,934 and
selling, general and administrative expenses of $478,974.



This increase in operating expenses is primarily attributable to compensating
consultants, management and directors for services rendered through to issuance
of restricted common stock and increased employee compensation.



OTHER INCOME AND EXPENSE

During the quarter ended September 30, 2005, we reported other expenses in the
amount of $27,413, compared to reporting other income in the amount of $4,389
for the same reporting period in the prior year. On February 21, 2005, we
entered into an Accounts Receivable Servicing Agreement and Line of Credit
Agreement with Mosaic Financial Services, LLC ("Mosaic") for the purpose of
servicing our accounts receivable. Mosaic advanced $700,000 to us pursuant to
the terms and conditions of the Line of Credit Agreement. We incurred interest
expense of $31,783 during the quarterly period ended September 30, 2005
primarily as a result of the financing we received from Mosaic. During the
quarter ended September 30, 2004, we generated interest income of $4,476.



NET LOSS

Net loss for the quarter ended September 30, 2005 was $2,835,877, compared to
$1,132,423 for the quarter ended September 30, 2004. Our loss per common share
for the three months ended September 30, 2005 was $0.07, compared to a loss per
common share of $0.03 for the three months ended September 30, 2004.


                                       41
<PAGE>

RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005 AND SEPTEMBER
30, 2004

REVENUES

On the cash basis of accounting, our total revenue reported for the nine months
ended September 30, 2005 was $2,417,988, an increase of approximately 244% from
$703,167 for the nine months ended September 30, 2004. On an accrual basis, we
would have recorded revenue of approximately $2,820,929 for the nine months
ended September 30, 2005, which is additional revenue of approximately $402,941.
On an accrual basis, we would have recorded revenue of approximately $879,859
for the nine months ended September 30, 2004, which is additional revenue of
approximately $176,692 for the nine months ended September 30, 2004.

COST OF SALES

The total cost of sales increased to $2,116,798 for the nine months ended
September 30, 2005, compared to $960,629 for the nine months ended September 30,
2004. The increase is primarily attributable to supplying and replenishing
inventory in four pharmacies for the entire reporting period. Our Santa Ana
pharmacy was the only location opened for the entire nine month period ended
September 30, 2004. As a result, we were supplying and replenishing inventory at
only this location for the entire nine months ended September 30, 2004.

GROSS PROFIT

Gross Profit increased to $301,190 for the nine months ended September 30, 2005,
compared to a loss of $257,462, for the nine months ended September 30, 2004.
Our year to date gross profit is approximately 12% as compared to a 37% gross
loss for the same period in the prior year. The growth of gross profit is
largely attributable to the focus of all four pharmacies on servicing the
profitable segments of the specialty pain market.

OPERATING EXPENSES

Operating expenses decreased to $5,286,535 for the nine months ended September
30, 2005 from operating expense of $6,699,280 reported for the nine months ended
September 30, 2004. Our operating expenses for the nine months ended September
30, 2005 consisted of salaries and related expenses of $3,144,970, consulting
and other compensation of $1,006,916, selling, general and administrative
expenses of $940,769, and restructuring charges of $193,881. Our operating
expenses for the same nine month period in the prior year consisted of salaries
and related expenses of $889,484, consulting and other compensation of
$1,784,937, selling, general and administrative expenses of $1,047,411, and
impairment of intangible assets in the amount of $2,977,448.

This decrease in operating expenses in the current nine month period as compared
to the same reporting period in the prior year was primarily attributable to a
write off in the first quarter of 2004 of $2,977,448 due to the impairment of a
license. Our consulting and other compensation expenditures also decreased
because we now engage fewer consultants and a small number of consultants were
retained as employees that currently receive salary.

OTHER INCOME AND EXPENSE

During the nine months ended September 30, 2005, we reported other income in the
amount of $885,426, compared to reporting other expenses in the amount of
$26,228 for the same reporting period in the prior year. The reporting of other
income for the nine months ended September 30, 2005 is primarily attributable to
a settlement agreement we entered into with Safescript Pharmacies, Inc., a Texas
corporation f/k/a RTIN Holdings, Inc. and Safe Med Systems, Inc., a Texas
corporation (collectively, "Safescript"), and approved by the United States
Bankruptcy Court for the Eastern District of Texas located in Tyler, Texas on
June 30, 2005. The settlement agreement contained a mutual release which
resulted in the Safescript releasing us from of any liability with respect to a
note payable due to the Safescript in the amount of approximately $1,013,000.
This amount was recorded as other income attributable to forgiveness of debt.

                                       42
<PAGE>


NET LOSS

Net loss for the nine months ended September 30, 2005 was $3,849,291, as
compared to a net loss of $6,591,671, for the nine months ended September 30,
2004. Our loss per common share for the nine months ended September 30, 2005 was
$0.10, compared to a loss per common share of $0.17 for the nine months ended
September 30, 2004.

LIQUIDITY AND CAPITAL RESOURCES

As of September 30, 2005, we maintained $144,394 in cash which primarily
resulted from funds raised in the private offering of common stock and
receivables financing. As of September 30, 2005, we had current assets in the
amount of $576,130 and current liabilities in the amount of $1,816,050. As a
result, we had a working capital deficit of $1,239,920 as of September 30, 2005.

Inventory for the quarter ended September 30, 2005 was $379,332. This is an
increase from reported inventory of $271,286 as of June 30, 2005. In response to
the increase in sales where in the current quarterly period we generated more
revenue than in any other quarterly period since our inception, we have
increased our inventory to satisfy increased demand. In addition, as we increase
the number of physicians transmitting prescriptions to our stores, we expect
additional inventory may be required to meet the needs of their patients.

Our current liabilities as of September 30, 2005 consisted of accounts payable
and accrued liabilities in the amount of $949,415, a line of credit in the
amount of $636,635, and notes payable to related parties and stockholders in the
amount of $230,000. Our line of credit was provided by Mosaic for the purpose of
servicing our accounts receivable. Mosaic provided notice to us of its intent to
exercise its right to convert the monies advanced to under the line of credit
into shares of our common stock. Subsequent to the reporting period on October
24, 2005, our board of directors authorized the issuance of 2,500,000 restricted
shares of our common stock to Mosaic in accordance with the conversion right
provided in the Line of Credit Agreement. The issuance of these shares to Mosaic
satisfied our obligations in full under the Accounts Receivable Servicing
Agreement and Line of Credit Agreement.

Operating activities used $2,161,544 in cash for the nine months ended September
30, 2005. Our net loss of $3,849,291 was the primary component of our negative
operating cash flow; along with the forgiveness of debt of $923,562; and the
joint venture minority interest in net loss of $250,629; offset by depreciation
and amortization expenses of $340,766; the impairment of property and equipment
related to restructuring of $137,312; and the issuance of common stock to
consultants for $427,942 and an employee contractual agreement for $1,950,000.

There were no investing activities during the nine months ended September 30,
2005.

Cash flows provided by financing activities during the nine months ended
September 30, 2005 consisted of $1,412,978 of proceeds from the issuance of
common stock; $636,635 net advanced on the line of credit; and $170,000 of net
advances by certain related parties and stockholders.

We primarily relied on equity capital, loan proceeds to fund our operations
during the nine months ended September 30, 2005. During the reporting period, we
commenced a private equity offering to accredited investors. During the nine
months ended September 30, 2005, we received proceeds of $1,393,319 from
accredited investors and issued a total of 3,532,500 shares of our common stock.

The underlying drivers that resulted in material changes and the specific
inflows and outflows of cash in the quarter ended September 30, 2005 are as
follows:

        a.      Our inventory level increased with the addition of more
                physicians. We continually track inventory usage and adjust
                inventory levels to market requirements.

        b.      We fully utilized our $700,000 Line of Credit with Mosaic
                Financial Services, LLC.

        c.      We obtained financing from the issuance of common stock. Our
                management believes that additional issuance of stock and/or
                debt financing will be required to provide us with working
                capital and a positive cash flow for the remainder of 2005.

                                       43
<PAGE>



In order for us to finance operations and continue our growth plan, additional
funding will be required from external sources. We intend to fund operations
through increased sales and debt and/or equity financing arrangements, which may
be insufficient to fund our capital expenditures, working capital, or other cash
requirements for the year ending December 31, 2005. There can be no assurance
that such additional financing will be available to us on acceptable terms or at
all.

OFF BALANCE SHEET ARRANGEMENTS

As of September 30, 2005, there were no off balance sheet arrangements. Please
refer to the Commitment and Contingency footnote to our consolidated financial
statements included elsewhere herein.


GOING CONCERN


The accompanying consolidated financial statements have been prepared assuming
we will continue as a going concern, which contemplates, among other things, the
realization of assets and satisfaction of liabilities in the normal course of
business. As of September 30, 2005, we had an accumulated deficit of $12,443,316
largely due the establishment of additional pharmacies.

We intend to fund operations through increased sales and debt and/or equity
financing arrangements, which may be insufficient to fund our capital
expenditures, working capital, or other cash requirements for the year ending
December 31, 2005. We have an ongoing private equity offering to secure funding
for our operations. There can be no assurance that such additional financing
will be available to us on acceptable terms or at all.

These factors, among others, raise substantial doubt about our ability to
continue as a going concern. The accompanying consolidated financial statements
do not include any adjustments related to recoverability and classification of
asset carrying amounts or the amount and classification of liabilities that
might result should we be unable to continue as a going concern.

In response to these problems, management in coordination with our board of
directors has taken the following actions:

     o    We suspended the development of new pharmacies in order to restructure
          current operations as needed.

     o    We are aggressively signing up new physicians.

     o    We implemented a new marketing strategy to attract business.

     o    We are seeking investment capital through the public markets.


INFLATION

Since the opening of our first pharmacy in October 2003, management believes
that inflation has not had a material effect on our results of operations.

CRITICAL ACCOUNTING POLICIES


In December 2001, the SEC requested that all registrants list their three to
five most "critical accounting polices" in the Management Discussion and
Analysis. The SEC indicated that a "critical accounting policy" is one which is
both important to the portrayal of a company's financial condition and results,
and requires management's most difficult, subjective or complex judgments, often
as a result of the need to make estimates about the effect of matters that are
inherently uncertain. We believe that the following accounting policies fit this
definition:


INVENTORIES


Inventories are stated at the lower of cost (first-in, first-out) or estimated
market, and consist primarily of pharmaceutical drugs. Market is determined by
comparison with recent sales or net realizable value. Net realizable value is
based on management's forecasts for sales of our products or services in the
ensuing years and/or consideration and analysis of changes in customer base,
product mix, payor mix, third party insurance reimbursement levels or other
issues that may impact the estimated net realizable value. Management regularly
reviews inventory quantities on hand and records a reserve for shrinkage and
slow-moving, damaged and expired inventory, which is measured as the difference
between the inventory cost and the estimated market value based on management's

                                       44
<PAGE>

assumptions about market conditions and future demand for our products. Such
reserve was insignificant to the accompanying consolidated financial statements.
Should the demand for our products prove to be less than anticipated, the
ultimate net realizable value of our inventories could be substantially less
than reflected in the accompanying consolidated balance sheet.


Inventories are comprised of brand and generic pharmaceutical drugs. Brand drugs
are purchased primarily from one wholesale vendor and generic drugs are
purchased primarily from another wholesale vendor. Our pharmacies maintain a
wide variety of different drug classes, known as Schedule II, Schedule III, and
Schedule IV drugs, which vary in degrees of addictiveness. Schedule II drugs,
considered narcotics by the DEA are the most addictive; hence, they are highly
regulated by the DEA and are required to be segregated and secured in a separate
cabinet. Schedule III and Schedule IV drugs are less addictive and are not
regulated. Because our business model focuses on servicing pain management
doctors and chronic pain patients, we carry in inventory a larger amount of
Schedule II drugs than most other pharmacies. The cost of acquisition for
Schedule II drugs is higher than Schedule III and IV drugs.

LONG-LIVED ASSETS

In July 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No.
144,"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of." SFAS No. 144 addresses financial accounting and
reporting for the impairment or disposal of long-lived assets. SFAS No. 144
requires that long-lived assets be reviewed for impairment whenever events or
changes in circumstances indicate that their carrying amount may not be
recoverable. If the cost basis of a long-lived asset is greater than the
projected future undiscounted net cash flows from such asset, an impairment loss
is recognized. Impairment losses are calculated as the difference between the
cost basis of an asset and its estimated fair value. SFAS No. 144 also requires
companies to separately report discontinued operations, and extends that
reporting to a component of an entity that either has been disposed of (by sale,
abandonment or in a distribution to owners) or is classified as held for sale.
Assets to be disposed of are reported at the lower of the carrying amount or the
estimated fair value less costs to sell.

Our long-lived assets consist of computers, software, office furniture and
equipment, and leasehold improvements on pharmacy build-outs which are
depreciated with useful lives varying from 3 to 10 years. Leasehold improvements
are depreciated over the shorter of the useful life or the remaining lease term,
typically 5 years. We assess the impairment of these long-lived assets at least
annually and make adjustment accordingly.

INTANGIBLE ASSETS

Statement of Financial Accounting standard ("SFAS") No. 142,"Goodwill and Other
Intangible Assets", which is effective for fiscal years beginning after December
15, 2001, addresses how intangible assets that are acquired individually or with
a group of other assets should be accounted for upon their acquisition and after
they have been initially recognized in the financial statements. SFAS No. 142
requires that goodwill and identifiable intangible assets that have indefinite
lives not be amortized but rather be tested at least annually for impairment,
and intangible assets that have finite useful lives be amortized over their
estimated useful lives.

SFAS No. 142 provides specific guidance for testing goodwill and intangible
assets that will not be amortized for impairment. In addition, SFAS No. 142
expands the disclosure requirements about intangible assets in the years
subsequent to their acquisition. Impairment losses for goodwill and
indefinite-life intangible assets that arise due to the initial application of
SFAS No. 142 are to be reported as a change in accounting principle.

In March 2004, management determined that the aforementioned license was 100%
impaired.

REVENUE RECOGNITION


We recognize revenue on a cash basis when we receive payments from third-party
insurance carriers or government agencies. The prices that we are paid for
prescription drugs are agreed upon upfront; however, insurance carriers and/or
governmental agencies can adjust the contractual price. As a result, we do not
have a fixed price at the time of sale. We are monitoring the historical trend
of these contractual adjustments to develop a reasonable and conservative
allowance for these adjustments. We anticipate that we will switch to the
accrual basis of revenue recognition in the next fiscal year.


                                       45
<PAGE>


RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS


In December 2004, the FASB issued SFAS No. 123-R, "Share-Based Payment," which
requires that the compensation cost relating to share-based payment transactions
(including the cost of all employee stock options) be recognized in the
financial statements. That cost will be measured based on the estimated fair
value of the equity or liability instruments issued. SFAS No. 123-R covers a
wide range of share-based compensation arrangements including share options,
restricted share plans, performance-based awards, share appreciation rights, and
employee share purchase plans. SFAS No.123-R replaces SFAS No. 123, and
supersedes APB Opinion No. 25. Small Business Issuers are required to apply SFAS
No. 123-R in the first interim reporting period or fiscal years that begin after
December 15, 2005. Thus, our consolidated financial statements will reflect an
expense for (a) all share-based compensation arrangements granted after December
31, 2005 and for any such arrangements that are modified, cancelled, or
repurchased after that date, and (b) the portion of previous share-based awards
for which the requisite service has not been rendered as of that date, based on
the grant-date estimated fair value.



In December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary
Assets, an Amendment of APB Opinion No. 29, Accounting for Nonmonetary
Transactions." The amendments made by SFAS No. 153 are based on the principle
that exchanges of nonmonetary assets should be measured using the estimated fair
value of the assets exchanged. SFAS No. 153 eliminates the narrow exception for
nonmonetary exchanges of similar productive assets, and replaces it with a
broader exception for exchanges of nonmonetary assets that do not have
commercial substance. A nonmonetary exchange has "commercial substance" if the
future cash flows of the entity are expected to change as a result of the
transaction. This pronouncement is effective for nonmonetary exchanges in fiscal
periods beginning after June 15, 2005.

In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error
Corrections," which replaces APB Opinion No. 20 and FASB Statement No. 3. This
pronouncement applies to all voluntary changes in accounting principle, and
revises the requirements for accounting for and reporting a change in accounting
principle. SFAS No. 154 requires retrospective application to prior periods'
financial statements of a voluntary change in accounting principle, unless it is
impracticable to do so. This pronouncement also requires that a change in the
method of depreciation, amortization, or depletion for long-lived, non-financial
assets be accounted for as a change in accounting estimate that is affected by a
change in accounting principle. SFAS No. 154 retains many provisions of APB
Opinion 20 without change, including those related to reporting a change in
accounting estimate, a change in the reporting entity, and correction of an
error. The pronouncement also carries forward the provisions of SFAS No. 3 which
govern reporting accounting changes in interim financial statements. SFAS No.
154 is effective for accounting changes and corrections of errors made in fiscal
years beginning after December 15, 2005. The Statement does not change the
transition provisions of any existing accounting pronouncements, including those
that are in a transition phase as of the effective date of SFAS No. 154.


Other recent accounting pronouncements issued by the FASB (including its
Emerging Issues Task Force), the American Institute of Certified Public
Accountants, and the Securities and Exchange Commission (the "SEC") did not or
are not believed by management to have a material impact on our present or
future consolidated financial statements.

                             DESCRIPTION OF PROPERTY

STORE LOCATION AND DESCRIPTION


We are currently leasing our executive offices and pharmacy locations. Our
executive offices are located at 17935 Sky Park Circle, Suite F, Irvine,
California 92614.


Our first pharmacy is located at 2431 N. Tustin Ave., Unit L, Santa Ana,
California, 92705. Our second pharmacy is located at 7000 Indiana, Ave., Suite
112, Riverside, California, 92506. Our third pharmacy is located at 12071 124th
Avenue NE, Kirkland, Washington, 98034. Our fourth pharmacy is located at 3822
S.E. Powell Blvd, Portland, Oregon, 97202.



                                       46
<PAGE>


We entered into leases to establish pharmacies at the following locations:

     o    10196 SW Park Way, Portland, Oregon, 97225

     o    2716 Santa Monica Blvd, Santa Monica, California, 90403

     o    2024 Sixth Ave, Tacoma, Washington, 98405.


Following our management's decision to suspend the development of new
pharmacies, we were able to terminate our lease on the property located in Santa
Monica, California. We have continued to maintain our lease on the property
located in Portland, Oregon and have resolved a dispute that resulted in the
placement of a construction lien placed on this location in the amount of
$38,950. We agreed to a payment schedule to retire this debt.


Future store locations, when established, will be selected based on the
following criteria: 1) proximity to the physician members and medical
facilities, 2) convenience of location, and 3) fast growing metropolitan areas
with a population of at least 500,000. Retail pharmacies are approximately 1,500
square feet and are leased from various property management companies for
approximately five years.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Except as disclosed below, none of our directors or executive officers, nor any
proposed nominee for election as a director, nor any person who beneficially
owns, directly or indirectly, shares carrying more than 5% of the voting rights
attached to all of our outstanding shares, nor any members of the immediate
family (including spouse, parents, children, siblings, and in-laws) of any of
the foregoing persons has any material interest, direct or indirect, in any
transaction over the last two years or in any presently proposed transaction
which, in either case, has or will materially affect us.


        1.      Our former CEO, David Parker, founded RxSystems, Inc.
                ("RxSystems") in March 2002. In March 2002, RxSystems acquired
                from the Safescript Pharmacies, Inc. (formerly known as RTIN
                Holdings, Inc.) the exclusive licensing rights to establish and
                operate pharmacies under the name "Safescript Pharmacies"
                throughout California, Oregon, Washington and Alaska. On March
                27, 2003, RxSystems assigned to us all of its rights under this
                exclusive license. We agreed to reimburse Mr. Parker $370,000
                for personal funds advanced to secure the License. These funds
                plus five percent (5%) interest per annum were due and payable
                in full to Mr. Parker on December 31, 2007. In a termination and
                settlement agreement entered into with Mr. Parker on February 1,
                2005, Mr. Parker agreed to accept $10,000 cash and 494,000
                shares of our common stock and release and forever discharge us
                from all liability associated with this debt. The price per
                share for the issued shares was approximately $0.80 and the
                market price on February 1, 2005 was $0.30 per share.

        2.      On November 27, 2003, we entered into an agreement with David
                Parker to cancel debt owed to him and reported in our financial
                statements as "Advances due to a shareholder." Initially, Mr.
                Parker agreed to release and forever discharge us from all
                liability associated with this debt and we agreed to transfer,
                assign, and convey all of our rights under the exclusive license
                granted by Safescript Pharmacies, Inc. solely for the
                consolidated statistical metropolitan area of Fresno,
                California. As a part of this agreement, we agreed to continue
                to make all payments under the license agreement, including
                those owed on the Fresno market, until the current existing
                obligation to Safescript Pharmacies, Inc. for this license
                regarding the consolidated statistical metropolitan area of
                Fresno, California is fully paid. This agreement was amended on
                February 16, 2004. As a result of this amendment to the
                agreement, Mr. Parker received 220,429 shares of our common
                stock and released and forever discharged us from all liability
                associated with this debt. Mr. Parker also relinquished to us
                all of his rights under the exclusive license granted by
                Safescript Pharmacies, Inc. solely for the consolidated
                statistical metropolitan area of Fresno, California. The price
                per share for the issued shares was approximately $0.64 and the
                market price on February 16, 2004 was $0.60 per share.


                                       47
<PAGE>


        3.      On April 24, 2003, we entered into an agreement with TPG for the
                purpose of funding the establishment and operations of
                pharmacies. Ron Folse, our former Executive Vice President, and
                A.J. LaSota, our former President and Director each own
                approximately 19% of TPG. On March 5, 2004, Mr. Folse and Mr.
                LaSota resigned from all positions of authority in TPG.


        4.      On January 26, 2004, we entered into an agreement with
                Brockington Securities, Inc. ("Brockington") to act as our
                financial advisor, investment banker, and placement agent. Our
                current CEO, Mr. Robert DelVecchio, is the President and CEO of
                Brockington. Pursuant to this agreement, Brockington received
                500,000 shares of our common stock. The price per share for the
                issued shares was approximately $0.56 and the market price on
                January 26, 2004 was $0.64 per share. On June 18, 2004, our
                board of directors approved an extension for an additional term
                of eighteen months to the agreement entered into with
                Brockington. Pursuant to the terms of this extension,
                Brockington received an additional 150,000 shares of our common
                stock and warrants to purchase 350,000 shares of our common
                stock exercisable for a period of five years from the date of
                issuance at the price of $0.60 per share. In connection with the
                aforementioned extension, Brockington was granted certain
                "piggy-back" registration rights relating to the equity
                instruments issued in June 2004. The price per share for the
                issued shares was approximately $0.47 and the market price on
                June 18, 2004 was $0.62 per share.


        5.      On June 17, 2004, we completed an exempt offering to accredited
                investors pursuant to Rule 506 of Regulation D under the
                Securities Act and Brockington acted as placement agent for this
                offering. Upon closing of this offering, Brockington received a
                commission of $295,670 and expenses in the amount of $8,000.

        6.      In December, 2004, we received a loan from Robert James, Inc.
                (the "Lender"), a company under the control of Mr. DelVecchio,
                evidenced by a promissory note ("Note") for the purpose of
                purchasing inventory for our pharmacies. This Note is for a
                maximum of $150,000 and matures on the earlier of March 6, 2005
                or the date that we are able to consummate an accounts
                receivable factoring arrangement for our working capital. The
                outstanding principal amount of this Note bears interest at a
                rate of three percent (3%) per month. In consideration of this
                Note, we agreed to pay the Lender an administrative fee of
                $1,500 and a financing fee of $2,100. In addition to these fees,
                we agreed to pay the Lender by the fifth day of every month from
                January 2005 until the principal amount is repaid an
                administrative fee of $1,875 and a financing fee of $2,675. On
                February 13, 2005, the loan was paid in full.

        7.      On February 1, 2005, we entered into a Termination and
                Settlement Agreements with Mr. David Parker and Mr. A.J. LaSota.
                Mr. Parker and Mr. LaSota resigned from their positions as
                officers and directors. In accordance with the terms of these
                agreements, Mr. Parker and Mr. LaSota returned to the corporate
                treasury 5,400,000 and 429,353 shares of our common stock
                respectively. Also on February 1, 2005, we entered into a
                Settlement Agreement with Ron Folse, our former Executive Vice
                President. In accordance with the terms of this agreement, Mr.
                Folse returned to the corporate treasury 429,353 shares of our
                common stock.


        8.      On February 23, 2005, we entered into an accounts receivable
                servicing agreement and line of credit agreement with Mosaic
                Financial Services, LLC ("Mosaic"). The monthly interest rate
                under this agreement is equal to one and one quarter percent
                (1.25%) of the maximum amount of the credit line. This agreement
                allows us to successfully secure financing for inventory
                purchases over an extended period of time. Under the terms of
                the line of credit agreement, the maximum amount that can be
                drawn to purchase inventory increased on July 1, 2005 from
                $500,000 to $700,000. This agreement was for a term of one (1)
                year with a provision to automatically renew for another one (1)
                year period unless either party provides notice to the other of
                termination within 180 days prior to the end of the effective
                term.


                                       48
<PAGE>

                Mosaic provided notice to us of its intent to exercise its right
                under the Line of Credit Agreement to convert the $700,000
                previously advanced into shares of the our common stock. On
                October 24, 2005, our board of directors authorized the issuance
                of 2,500,000 restricted shares of our common stock to Mosaic in
                accordance with the conversion right provided in the Line of
                Credit Agreement. The price per share for the issued shares was
                $0.28 and the market price on October 24, 2005 was $0.39 per
                share. The issuance of these shares to Mosaic satisfied our
                obligations in full under the Accounts Receivable Servicing
                Agreement and Line of Credit Agreement.

                On October 31, 2005, we entered into another Line of Credit
                Agreement ("LOC") with Mosaic enabling us to draw a maximum of
                $1,000,000 to purchase inventory. This LOC has a one time
                commitment fee equal to three percent (3%) of the initial amount
                of the LOC. The LOC has a monthly interest rate of 1.5% of the
                then LOC limit. These accrued finance charges will be deducted
                prior to any advances. Under the terms of the LOC, Mosaic has a
                conversion right to convert all or a portion of the outstanding
                advances into shares of our common stock where the conversion
                price is based on the weighted average closing bid price for the
                our common stock on the over-the-counter bulletin board (or such
                other equivalent market on which our common stock is quoted) as
                for the seven trading days immediately preceding the date the
                conversion right is exercised. The conversion price shall not be
                less than $0.40 nor more than $0.80. Our management anticipates
                that this LOC will adequately finance inventory purchases for
                our existing pharmacies over the next twelve months. This LOC is
                secured by substantially all of our assets.

                Mosaic Financial Services, LLC is a wholly-owned subsidiary of
                Mosaic Capital Advisors LLC. Mr. Haresh Sheth who is a member of
                our board of directors also acts as group financial officer to
                Mosaic Capital Advisors LLC. Mr. Sheth was appointed to our
                board of directors in September 2005.




            MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

MARKET INFORMATION


Our common stock is currently quoted on the OTC Bulletin Board ("OTCBB"), which
is sponsored by the NASD. The OTCBB is a network of security dealers who buy and
sell stock. The dealers are connected by a computer network that provides
information on current "bids" and "asks", as well as volume information. Our
shares are quoted on the OTCBB under the symbol "APHY."

The following table sets forth the range of high and low bid quotations for our
common stock for each of the periods indicated as reported by the OTCBB. These
quotations reflect inter-dealer prices, without retail mark-up, mark-down or
commission and may not necessarily represent actual transactions.



                      Fiscal Year Ending December 31, 2005
--------------------------------------------------------------------------------
        Quarter Ended                      High $                   Low $
-------------------------------       -----------------       ------------------
        March 31, 2005                      0.50                     0.28
-------------------------------       -----------------       ------------------
        June 30, 2005                       0.42                     0.28
-------------------------------       -----------------       ------------------
      September 30, 2005                    0.48                     0.33
-------------------------------       -----------------       ------------------

--------------------------------------------------------------------------------
                      Fiscal Year Ended December 31, 2004
--------------------------------------------------------------------------------
        Quarter Ended                      High $                   Low $
-------------------------------       -----------------       ------------------
        March 31, 2004                      0.64                     0.46
        June 30, 2004                       0.65                     0.52
      September 30, 2004                    0.599                    0.43
      December 31, 2004                     0.60                     0.25

                      Fiscal Year Ended November 30, 2003
--------------------------------------------------------------------------------
        Quarter Ended                      High $                   Low $
-------------------------------       -----------------       ------------------
      February 28, 2003                     0.21                     0.17
         May 31, 2003                       0.30                     0.17
       August 31, 2003                      0.38                     0.25
      November 30, 2003                     0.59                     0.35

On January 12, 2005, the last sales price of our common stock was $0.45.


                                      49
<PAGE>



PENNY STOCK

The SEC has adopted rules that regulate broker-dealer practices in connection
with transactions in penny stocks. Penny stocks are generally equity securities
with a market price of less than $5.00, other than securities registered on
certain national securities exchanges or quoted on the NASDAQ system, provided
that current price and volume information with respect to transactions in such
securities is provided by the exchange or system. The penny stock rules require
a broker-dealer, prior to a transaction in a penny stock, to deliver a
standardized risk disclosure document prepared by the SEC, that: (a) contains a
description of the nature and level of risk in the market for penny stocks in
both public offerings and secondary trading; (b) contains a description of the
broker's or dealer's duties to the customer and of the rights and remedies
available to the customer with respect to a violation of such duties or other
requirements of the securities laws; (c) contains a brief, clear, narrative
description of a dealer market, including bid and ask prices for penny stocks
and the significance of the spread between the bid and ask price; (d) contains a
toll-free telephone number for inquiries on disciplinary actions; (e) defines
significant terms in the disclosure document or in the conduct of trading in
penny stocks; and (f) contains such other information and is in such form,
including language, type, size and format, as the SEC shall require by rule or
regulation.

The broker-dealer also must provide, prior to effecting any transaction in a
penny stock, the customer with (a) bid and offer quotations for the penny stock;
(b) the compensation of the broker-dealer and its salesperson in the
transaction; (c) the number of shares to which such bid and ask prices apply, or
other comparable information relating to the depth and liquidity of the market
for such stock; and (d) a monthly account statement showing the market value of
each penny stock held in the customer's account.

In addition, the penny stock rules require that prior to a transaction in a
penny stock not otherwise exempt from those rules; the broker-dealer must make a
special written determination that the penny stock is a suitable investment for
the purchaser and receive the purchaser's written acknowledgment of the receipt
of a risk disclosure statement, a written agreement as to transactions involving
penny stocks, and a signed and dated copy of a written suitability statement.

These disclosure requirements may have the effect of reducing the trading
activity for our common stock. Therefore, stockholders may have difficulty
selling our securities.

HOLDERS OF OUR COMMON STOCK


As of September 30, 2005, we had approximately one hundred forty-one holders of
record of our common stock and several other stockholders hold shares in street
name.


DIVIDENDS

There are no restrictions in our articles of incorporation or bylaws that
restrict us from declaring dividends. The Nevada Revised Statutes, however, do
prohibit us from declaring dividends where, after giving effect to the
distribution of the dividend:

        1.      We would not be able to pay our debts as they become due in the
                usual course of business; or

        2.      Our total assets would be less than the sum of our total
                liabilities, plus the amount that would be needed to satisfy the
                rights of shareholders who have preferential rights superior to
                those receiving the distribution.

We have not declared any dividends, and we do not plan to declare any dividends
in the foreseeable future.

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

The following table provides information about our compensation plans under
which shares of common stock may be issued upon the exercise of options as of
December 31, 2004. See notes 2 and 6 to our consolidated financial statements
included herein.


                                       50
<PAGE>



<TABLE>
<CAPTION>
                EQUITY COMPENSATION PLANS AS OF DECEMBER 31, 2004

                                       A                         B                          C
-----------------------------------------------------------------------------------------------------------
                                                                                 Number of securities
                                  Number of                                     remaining available for
                               securities to be      Weighted-average exercise    future issuance under
                            issued upon exercise of     price of outstanding    equity compensation plans
                             outstanding options,      options, warrants and      (excluding securities
Plan Category                warrants and rights              right              reflected in column (A))
-----------------------------------------------------------------------------------------------------------
<S>                               <C>                       <C>                      <C>
Equity compensation plans
approved by security                55,000                     $0.50                  5,490,613
holders
-----------------------------------------------------------------------------------------------------------
Equity compensation plans
not approved by security           450,000                     $0.60                         --
holders
-----------------------------------------------------------------------------------------------------------
Total                              505,000                     $0.58                  5,490,613
-----------------------------------------------------------------------------------------------------------
</TABLE>


                             EXECUTIVE COMPENSATION

The table below  summarizes all  compensation  awarded to, earned by, or paid to
our  current  executive  officers  for each of the last three  completed  fiscal
years.

<TABLE>
<CAPTION>
                                        Annual Compensation                      Long Term Compensation
----------------------------------------------------------------------------------------------------------------------
                                                  Other Annual  Restricted Stock  Options/    LTIP          All Other
                                  Salary   Bonus  Compensation      Awarded         SARs     Payouts      Compensation
    Name       Title     Year       ($)     ($)        ($)             ($)          (#)        ($)             ($)
----------------------------------------------------------------------------------------------------------------------
<S>          <C>         <C>    <C>        <C>     <C>                <C>          <C>       <C>              <C>
   Robert       CEO      2004       n/a     n/a        n/a             n/a          n/a        n/a              n/a
 DelVecchio              2003       n/a     n/a        n/a             n/a          n/a        n/a              n/a
                         2002       n/a     n/a        n/a             n/a          n/a        n/a              n/a
----------------------------------------------------------------------------------------------------------------------
    David     Former     2004   129,082       0          0               0            0          0                0
  Parker(1)  CEO, CFO,   2003    33,923       0    144,000               0            0          0                0
                and      2002       n/a     n/a        n/a             n/a          n/a        n/a              n/a
             Director
----------------------------------------------------------------------------------------------------------------------
    A.J.      Former     2004   108,940       0          0               0            0          0                0
  LaSota(2)  President   2003    29,400       0    129,600               0            0          0                0
                and      2002       n/a     n/a        n/a             n/a          n/a        n/a              n/a
             Director
----------------------------------------------------------------------------------------------------------------------
Ron Folse(3)  Former     2004    91,138       0          0               0            0          0                0
             Executive   2003    24,877       0    105,600               0            0          0                0
            Vice-Preside 2002       n/a     n/a        n/a             n/a          n/a        n/a              n/a
----------------------------------------------------------------------------------------------------------------------
</TABLE>


(1)     On February 1, 2005, we received the resignation of David Parker. Under
        the terms of a settlement and termination agreement, Mr. Parker returned
        to the corporate treasury 5,400,000 shares of our common stock.

(2)     On February 1, 2005, we received the resignation of A.J. LaSota. Under
        the terms of a settlement and termination agreement, Mr. LaSota returned
        to the corporate treasury 684,861 shares of our common stock.

(3)     On November 19, 2004, we accepted the resignation of Ron Folse. Under
        the terms of a settlement agreement entered into on February 1, 2005,
        Mr. Folse returned to the corporate treasury 429,353 shares of our
        common stock.

On September 5, 2003, we entered into verbal agreements with our executive
officers and issued shares of common stock to each of them in settlement of
accrued consulting and salary expense for the period of March 2003 through July
2003. The shares issued were valued at $0.48 per share, the estimated fair value
at the date of the agreement.



                                       51
<PAGE>



        o       David Parker was issued 300,000 shares of restricted common
                stock valued at $144,000 on the issuance date, and at
                approximately $102,000 on December 31, 2004.

        o       A.J. LaSota was issued 270,000 shares of restricted common stock
                valued at $129,600 on the issuance date, and at approximately
                $91,800 on December 31, 2004.

        o       Ron Folse was issued 220,000 shares of restricted common stock
                valued at $105,600 on the issuance date, and at approximately
                $74,800 on December 31, 2004.

The common stock described in the preceding paragraph is "restricted" only by
the sale limitations of SEC Rule 144. There are no performance-based conditions
associated with such stock sale, which fully vested on the issuance date.

On December 20, 2003, we entered into agreements with our executive officers to
reduce their salaries and discontinue any automobile allowances for the period
from December 20, 2003 until such time as determined by our board of directors.
As a part of these agreements, David Parker's annual salary was reduced from
$180,000 to $135,000, A.J. LaSota's annual salary was reduced from $156,000 to
$117,000, and Ron Folse's annual salary was reduced from $132,000 to $99,000.


COMPENSATION TO DIRECTORS

Only our outside directors receive compensation for their services as director.
We have compensated our outside directors for their service on the board of
directors as follows:


       Outside Director           Year        Shares of Common
                                               Stock Received
--------------------------------------------------------------------
       Richard Falcone            2005            300,000
                                  2004             50,000
--------------------------------------------------------------------
      James Manfredonia           2005             300,000
                                  2004             50,000
--------------------------------------------------------------------
      Annette McEvoy(1)           2005             25,000
                                  2004             50,000
--------------------------------------------------------------------
    Geoffrey S. Carroll(2)        2005             25,000
                                  2004             50,000
--------------------------------------------------------------------


     (1)  On February 16, 2005, Annette McEvoy resigned as a member of our board
          of  directors

     (2)  On February 11,  2005,  Geoffrey  Carroll  resigned as a member of our
          board of directors.

Other than as set forth above, our outside directors currently receive $1,500
for attending any board of director's meeting in-person, $1,500 for any speaking
engagement on our behalf, and reimbursement for reasonable expenses incurred in
attending board or committee meetings.

SUMMARY OF OPTIONS GRANTS


There were no options granted to our executive officers in the year ended
December 31, 2004. A summary of options granted to our executive officers during
the year ended December 31, 2004 is set forth below.

        o       In August 2005, we issued options to purchase 250,000 shares of
                restricted common stock as a performance base bonus to our Chief
                Operation Officer, Mr. John Eric Mutter. These options vest
                one-third per year for a period of three years from the date of
                issuance and are exercisable at the exercise price of $0.60 per
                share.

        o       In September 2005, we entered into an employment agreement with
                our Chief Executive Officer, Robert DelVecchio. Pursuant to the
                terms of the employment agreement, we issued options to Mr.
                DelVecchio purchase 5,000,000 shares of our common stock for a
                period of ten years from the date of issuance and exercisable at
                the exercise price of $0.60 per share. These options became
                fully vested and exercisable upon issuance.

                                       52


<PAGE>


                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


AUDITED FINANCIAL STATEMENTS:

          F-1  Report of Independent Registered Public Accounting Firm

          F-2  Consolidated Balance Sheet as of December 31, 2004

          F-3  Consolidated  Statements of Operations - Years Ended December 31,
               2004 and  November 30, 2003 and the one month  transition  period
               ended December 31, 2003

          F-4  Consolidated  Statement of  Stockholders'  Equity  (Deficit)  and
               Comprehensive  Loss for the Years  Ended  December  31,  2004 and
               November  30,  2003 and the one  month  transition  period  ended
               December 31, 2003

          F-5  Consolidated  Statements  of  Cash  Flows  for  the  Years  Ended
               December  31,  2004  and  November  30,  2003  and the one  month
               transition period ended December 31, 2003

          F-6  Notes to Consolidated Financial Statements

UNAUDITED FINANCIAL STATEMENTS:


          F-33 Unaudited  Condensed  Consolidated  Balance Sheet as of September
               30, 2005

          F-34 Unaudited Condensed Consolidated Statements of Operations for the
               three and nine month periods ended September 30, 2005 and 2004

          F-35 Unaudited Condensed Consolidated  Statements of Cash Flow for the
               nine month periods ended September 30, 2005 and 2004

          F-36 Notes to Unaudited Condensed Consolidated Financial Statements.

                                       53


<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders



eRXSYS, Inc. (Formerly Known As Surforama.com, Inc.) And Subsidiaries

We have audited the accompanying  consolidated balance sheet of ERXSYS, Inc. and
Subsidiaries  (collectively  the  "Company"),  as of December 31, 2004,  and the
related  consolidated  statements of operations,  stockholders' equity (deficit)
and comprehensive  loss and cash flows for the years ended December 31, 2004 and
November 30, 2003 and for the  one-month  transition  period ended  December 31,
2003. These  consolidated  financial  statements are the  responsibility  of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
consolidated financial statements based on our audits.

We conducted our audits in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and  perform  the  audit  to  obtain  reasonable  assurance  about  whether  the
consolidated  financial statements are free of material  misstatement.  An audit
includes  examining,  on a test  basis,  evidence  supporting  the  amounts  and
disclosures in the  consolidated  financial  statements.  An audit also includes
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 consolidated  financial statements referred to above present
fairly, in all material  respects,  the financial  position of ERXSYS,  Inc. and
Subsidiary  as of December 31,  2004,  and the results of their  operations  and
their cash flows for years ended December 31, 2004 and November 30, 2003 and for
the  one-month  transition  period ended  December 31, 2003 in  conformity  with
accounting principles generally accepted in the United States of America.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
consolidated  financial  statements,  the  Company had  negative  cash flow from
operations  of  approximately  $3.4 million in 2004, an  accumulated  deficit of
approximately  $10.5  million at  December  31, 2004 and  recurring  losses from
operations.  These  factors,  among others,  raise  substantial  doubt about the
Company's ability to continue as a going concern.  Management's  plans regarding
these  matters  are  also  described  in Note 1. The  accompanying  consolidated
financial  statements do not include any adjustments  that might result from the
outcome of this uncertainty.

/s/ SQUAR, MILNER, REEHL & WILLIAMSON, LLP
------------------------------------------

April 8, 2005
Newport Beach, California

                                       F-1

<PAGE>


                          eRXSYS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                                DECEMBER 31, 2004
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                     ASSETS
Current Assets
<S>                                                                         <C>
   Cash                                                                      $     86,325
   Inventories                                                                    158,009
   Prepaid expenses and other assets                                               34,812
                                                                             ------------
   Related party receivable                                                       279,146
                                                                             ------------
                                                                                  279,146
Property and Equipment, net                                                       740,194
                                                                             ------------
                                                                             $  1,019,340
                                                                             ============
                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities

   Accounts payable and accrued liabilities                                  $    830,692
   Notes payable to related party and stockholders                              1,063,465
                                                                             ------------
                                                                                1,894,157
Notes Payable to Related Party and Stockholder, net of current portion            370,000
                                                                             ------------
                                                                                2,264,157
Minority Interest                                                                 693,408

Commitments and contingencies

Stockholders' Deficit
   Preferred shares; par value $0.001 per share;
      authorized 5,000,000 shares; no preferred shares issued
      and outstanding                                                                  --
   Common shares; par value $0.001 per share;
      authorized 70,000,000 shares; 44,777,899 common shares issued and
      outstanding                                                                  44,978
   Additional paid-in capital, net                                              8,778,024
   Deferred compensation                                                         (217,200)
   Accumulated deficit                                                        (10,544,027)
                                                                             ------------
   Stockholders' deficit                                                       (1,938,225)
                                                                             ------------
                                                                             $  1,019,340
                                                                             ============
</TABLE>

               The accompanying notes are an integral part of the
                       consolidated Financial Statements.

                                       F-2

<PAGE>

                          eRXSYS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
   FOR THE YEARS ENDED DECEMBER 31, 2004, NOVEMBER 30, 2003 AND THE ONE MONTH
                   TRANSITION PERIOD ENDED DECEMBER 31, 2003
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                                        One Month
                                                                                       Transistion
                                                       Years Ended                     Period Ended
                                                       ------------    ------------    ------------
                                                       December 31,     November 30,    December 31,
                                                           2004             2003           2003
                                                       ------------    ------------    ------------
<S>                                                    <C>             <C>             <C>
GROSS SALES                                            $  1,164,568    $      1,038    $      7,982
COST OF SALES                                            (1,411,163)        (12,784)        (26,267)
                                                       ------------    ------------    ------------

GROSS LOSS                                                 (246,595)        (11,746)        (18,285)
                                                       ------------    ------------    ------------

OPERATING EXPENSES
Salaries and related                                      1,401,017         314,650         595,922
Consulting and other compensation                         2,253,848         805,455          80,526
Selling, general and administrative                       1,564,855         282,157          63,602
Impairment of intangible asset                            2,977,448              --              --
                                                       ------------    ------------    ------------
                                                          8,197,168       1,402,262         740,050
                                                       ------------    ------------    ------------

 OPERATING LOSS                                          (8,443,763)     (1,414,008)       (758,335)
                                                       ------------    ------------    ------------

OTHER (EXPENSE) INCOME
Interest expense                                            (92,468)        (38,346)         (4,605)
Interest income                                                  --           1,073           1,991
Other expense                                               (12,289)        (52,201)        (17,884)
                                                       ------------    ------------    ------------
                                                           (104,757)        (89,474)        (20,498)
                                                       ------------    ------------    ------------

LOSS BEFORE MINORITY INTEREST                            (8,548,520)     (1,503,482)       (778,833)
MINORITY INTEREST                                           537,233          44,487          27,085
                                                       ------------    ------------    ------------

 NET LOSS                                              $ (8,011,287)   $ (1,458,995)   $   (751,748)
                                                       ============    ============    ============

 Basic and diluted loss per common share               $      (0.19)   $      (0.06)   $      (0.02)
                                                       ============    ============    ============

 Basic and diluted weighted average number of common
   shares outstanding                                    41,112,800      24,115,700      35,875,700
                                                       ============    ============    ============
</TABLE>

               The accompanying notes are an integral part of the
                       consolidated Financial Statements.

                                       F-3

<PAGE>

                          eRXSYS, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
     (DEFICIT) AND COMPREHENSIVE LOSS FOR THE YEARS ENDED DECEMBER 31, 2004,
  NOVEMBER 30, 2003 AND THE ONE MONTH TRANSITION PERIOD ENDED DECEMBER 31, 2003
           AND THE ONE MONTH TRANSITION PERIOD ENDED DECEMBER 31, 2003
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                                                                       Total
                                   Common Stock       Additional  Cumulative Comprehensive                         Stockholders'
                                                       Paid in    Translation   Income    Deferred  (Accumulated)    (Deficit)
                                Shares       Amount    Capital    Adjustment    (Loss)  Compensation   Deficit)        Equity
---------------------------------------------------------------------------------------------------------------------------------
<S>                           <C>           <C>     <C>           <C>         <C>        <C>       <C>             <C>
BALANCE, NOVEMBER 30, 2002    19,828,899    $19,829 $   168,560   $ (2,508)   $   --     $     --  $   (321,997)   $   (136,116)
Issuance of common stock in
connection with a
private placement              5,323,000      5,323   1,325,427         --        --           --            --       1,330,750
Issuance of common stock
for services rendered          4,613,600      4,614   1,516,394         --        --     (972,000)           --         549,008
Issuance of common stock in
connection with the
conversion of debt             4,444,444      4,444   1,388,889         --        --           --            --       1,393,333
Issuance of common stock in
connection with the conversion
of related party note payable    220,429        221     133,387         --        --           --            --         133,608
Amortization of deferred
consulting fees                       --         --          --         --        --      120,000            --         120,000
Net loss                              --         --          --         --        --           --    (1,458,995)     (1,458,995)
Comprehensive Loss                    --         --          --         --     2,508           --            --           2,508
                              ----------     ------   ---------     ------     -----     --------    ----------       ---------
BALANCE, NOVEMBER 30, 2003    34,430,372     34,431   4,532,657     (2,508)    2,508     (852,000)   (1,780,992)      1,934,096
Issuance of common stock
for services rendered          1,544,149      1,544     662,440         --        --           --            --         663,984
Amortization of deferred
consulting fees                       --         --          --         --        --       59,600            --          59,600
Net loss                              --         --          --         --        --           --      (751,748)       (751,748)
Comprehensive Loss                    --         --          --         --        --           --            --              --
                              ----------     ------   ---------     ------     -----     --------    ----------       ---------
BALANCE, DECEMBER 31, 2003    35,974,521     35,975   5,195,097     (2,508)    2,508     (792,400)   (2,532,740)      1,905,932
Issuance of common stock in
connection with a private
placement                      7,391,750      7,392   2,642,760         --        --           --            --       2,650,152
Issuance of common stock
for services rendered          1,611,628      1,611     706,167         --        --           --            --         707,778
Fair market value of warrants
issued to consultants                 --         --     234,000         --        --           --            --         234,000
Amortization of deferred
consulting fees                       --         --          --         --        --      575,200            --         575,200
Net loss                              --         --          --         --        --           --    (8,011,287)     (8,011,287)
Comprehensive Loss
                              ----------     ------   ---------     ------     -----     --------    ----------       ---------
BALANCE, DECEMBER 31, 2004    44,977,899     44,978   8,778,024     (2,508)    2,508     (217,200)  (10,544,027)     (1,938,225)
</TABLE>

               The accompanying notes are an integral part of the
                       consolidated Financial Statements.

                                       F-4

<PAGE>

                          eRXSYS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
        FOR THE YEARS ENDED DECEMBER 31, 2004, NOVEMBER 30, 2003 AND THE
               ONE MONTH TRANSITION PERIOD ENDED DECEMBER 31, 2003


<TABLE>
<CAPTION>
                                                                                                           ONE MONTH
                                                                                                           TRANSITION
                                                                            YEAR ENDED       YEAR ENDED    PERIOD ENDED
                                                                            DECEMBER 31,     NOVEMBER 30,  DECEMBER 31,
                                                                               2004            2003           2003
                                                                            -----------    -----------    -----------
<S>                                                                         <C>            <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net (loss)                                                               $(8,011,287)   $(1,458,995)   $  (751,748)
   Adjustments to reconcile net loss to net cash
   used in operating activities:
     Depreciation and amortization of property and equipment                     50,448          4,022            328
     Amortization of deferred consulting fee                                    575,200        120,000         59,600
     Impairment of intangible asset                                           2,977,448             --             --
     Minority interest in net loss of Joint Venture                            (537,233)       (44,487)       (27,085)
     Issuance of common stock for services                                      932,401        549,008        663,984
     Changes in operating assets and liabilities:
      Related party receivable                                                       --        (10,646)        10,646
      Inventories                                                              (119,961)       (40,900)         2,852
      Prepaid expenses and other current assets                                  (3,136)       (24,225)          (966)
      Other assets                                                                   --         (6,792)           307
      Accounts payable and accrued liabilities                                  718,651        273,459       (160,251)
      Related party payable                                                     (14,797)        14,797             --
                                                                            -----------    -----------    -----------
   Net cash used in operating activities                                     (3,432,266)      (624,759)      (202,333)
                                                                            -----------    -----------    -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchases of property and equipment                                         (719,872)       (76,288)            --
   Purchase of market license                                                        --        (37,000)            --
                                                                            -----------    -----------    -----------
   Net cash used in investing activities                                       (719,872)      (113,288)            --
                                                                            -----------    -----------    -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Principal repayments on notes payable                                        (15,000)
   Principal repayments on notes payable to related party and shareholder      (130,131)      (125,596)       (20,395)
   Proceeds from the issuance of notes payable                                   50,000             --             --
   Proceeds from the issuance of notes payable to related party and
   shareholder                                                                  109,409         15,000             --
   Issuance of common stock for cash                                          2,650,030      1,330,750             --
   Issuance of common stock in connection with issuance of notes payable          9,500             --             --
   Proceeds from development agreements with TPG and TAPG joint ventures        854,213        448,000             --
                                                                            -----------    -----------    -----------
   Net cash provided by (used for) financing activities                       3,528,021      1,668,154        (20,395)
                                                                            -----------    -----------    -----------
Foreign currency translation                                                         --          2,508             --
Net increase (decrease) in cash                                                (624,117)       932,615       (222,728)
Cash at beginning of period                                                     710,442            555        933,170
                                                                            -----------    -----------    -----------
Cash at end of period                                                       $    86,325    $   933,170    $   710,442
                                                                            ===========    ===========    ===========
Supplemental disclosure of cash flow information-
Cash paid during the year for:
   Interest                                                                 $    92,468    $    38,346    $     4,605
                                                                            ===========    ===========    ===========
   Income taxes                                                             $     4,912    $        --    $        --
                                                                            ===========    ===========    ===========
</TABLE>


               The accompanying notes are an integral part of the
                       consolidated Financial Statements.

                                       F-5

<PAGE>

                          eRXSYS, INC. AND SUBSIDIARIES
                     (Formerly Known As Surforama.com, Inc.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   For the Years Ended December 31, 2004,November 30, 2003, and the One Month
                    Transition Period Ended December 31, 2003

1. ORGANIZATION AND BASIS OF PRESENTATION

eRXSYS, Inc. was organized as a Nevada corporation on October 22, 1999 under the
name Surforama.com,  Inc. From October 1999 to August 2002, Surforama was in the
business of developing and marketing on-line  advertising for service providers,
corporations  and  individuals.  After  this  time,  Surforama  reorganized  its
operations  and became  engaged in the  business of  operating  pharmacies  that
specialize in the dispensing of highly  regulated  pain  medication by utilizing
technology  that allows  physicians  to transmit  prescriptions  from a wireless
hand-held device or desktop computer directly to our dedicated pharmacies,  thus
eliminating or reducing the need for paper  prescriptions.  Because the focus is
on  physicians  whose  practice  necessitates  that  they  frequently  prescribe
medication to manage their patients'  chronic pain,  non-prescription  drugs, or
health and beauty related  products such as walking canes,  bandages and shampoo
are not typically kept in inventory.  Revenues are derived  exclusively from the
sale of prescription drugs.

The  majority  of  the  business  is  derived  from   physicians   who  transmit
prescriptions directly to our store electronically. "Walk-in" prescriptions from
other physicians are limited.

In April 2003, Surforama entered into a joint venture with TPG Partners,  L.L.C.
("TPG") to form Safescript  Pharmacies of California,  L.L.C. ("Joint Venture").
This Joint  Venture was formed to establish  and operate  pharmacies.  Surforama
owns 51% of the Joint Venture with TPG owning the  remaining  49%. In June 2003,
the Joint Venture  formed a wholly owned  subsidiary,  Safescript of California,
Inc. ("Safescript"),  to own and operate the pharmacies.  Effective September 8,
2004, Safescript filed amended articles of incorporation and changed its name to
Assured Pharmacies, Inc. ("API").

In October 2003, Surforama changed its name to eRXSYS, Inc. ("eRXSYS").

In February 2004, eRXSYS entered into an agreement with TAPG, L.L.C. ("TAPG"), a
Louisiana  limited liability  company,  and formed  Safescript  Northwest,  Inc.
("Safescript  Northwest"),  a Louisiana corporation.  Effective August 19, 2004,
Safescript  Northwest filed amended  articles of  incorporation  and changed its
name to Assured  Pharmacies  Northwest,  Inc.  ("APN").  eRXSYS owns 75% of APN,
while  TAPG  owns  the  remaining  25%.  In  accordance  with  our  shareholders
agreement,  TAPG will  provide  start-up  costs in the  amount of  $335,000  per
pharmacy location established up to five pharmacies,  and eRXSYS will contribute
technology, consulting services, and marketing expertise.

                                       F-6

<PAGE>

                          eRXSYS, INC. AND SUBSIDIARIES
                     (Formerly Known As Surforama.com, Inc.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   For the Years Ended December 31, 2004,November 30, 2003, and the One Month
                    Transition Period Ended December 31, 2003

1. ORGANIZATION AND BASIS OF PRESENTATION

ORGANIZATION AND NATURE OF OPERATIONS (CONTINUED)

eRXSYS, Inc., API, Joint Venture, and APN are hereinafter  collectively referred
to as the "Company"

GOING CONCERN CONSIDERATIONS

The accompanying  consolidated  financial statements have been prepared assuming
the Company will continue as a going concern,  which  contemplates,  among other
things,  the  realization  of assets  and  satisfaction  of  liabilities  in the
ordinary  course of  business.  As of  December  31,  2004,  the  Company had an
accumulated  deficit of  approximately  $10.6  million,  recurring  losses  from
operations  and negative cash flow from  operating  activities of  approximately
$3.4 million for the year then ended.

The Company intends to fund operations  through  increased sales and debt and/or
equity  financing  arrangements,  which may be  insufficient to fund its capital
expenditures,  working  capital or other cash  requirements  for the year ending
December 31,  2005.  The Company  will be required to seek  additional  funds to
finance its immediate and long-term operations. The successful outcome of future
financing activities cannot be determined at this time and there is no assurance
that,  if  achieved,  the  Company  will have  sufficient  funds to execute  its
intended business plan or generate positive operating results.

These factors, among others, raise substantial doubt about the Company's ability
to  continue  as  a  going  concern.  The  accompanying  consolidated  financial
statements  do  not  include  any  adjustments  related  to  recoverability  and
classification  of asset carrying  amounts or the amount and  classification  of
liabilities  that might  result  should the  Company be unable to  continue as a
going concern.

In response to these problems, management has taken the following actions:

     o    The Company suspended the development of new pharmacies as part of the
          restructuring  activities  that  took  place  in the  fourth  calendar
          quarter  of 2004 and the  first  quarter  of 2005 (See Note 7 for more
          information)

     o    The Company is aggressively signing up new physicians.

     o    The Company is seeking investment capital through the public markets.

     o    The Company implemented a new marketing strategy to attract business.

                                       F-7

<PAGE>

                          eRXSYS, INC. AND SUBSIDIARIES
                     (Formerly Known As Surforama.com, Inc.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   For the Years Ended December 31, 2004,November 30, 2003, and the One Month
                    Transition Period Ended December 31, 2003

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The summary of significant  accounting  policies  presented below is designed to
assist in understanding the Company's  consolidated  financial statements.  Such
consolidated financial statements and accompanying notes are the representations
of the  Company's  management,  who  is  responsible  for  their  integrity  and
objectivity.   These  accounting  policies  conform  to  accounting   principles
generally  accepted in the United  States of America  ("GAAP")  in all  material
respects,  and have been  consistently  applied in  preparing  the  accompanying
consolidated financial statements.

PRINCIPLES OF CONSOLIDATION


The consolidated  financial statements include the accounts of eRXSYS, Inc., its
wholly owned  subsidiary,  Safescript,  its 51% owned Joint  Venture and its 75%
owned APN. In accordance with the joint venture  agreement the minority partners
do not have  participation  rights  that  will  allow  them to  block  decisions
proposed  by the  Company  and the  Company has the ability to control all daily
operations  and  management  of the joint  venture,  therefore  the  Company has
consolidated the joint venture into its consolidated  financial  statements with
distributions  made   proportionately  to  the  minority  joint  venturer.   All
significant  inter-company  accounts and  transactions  have been  eliminated in
consolidation.


TRANSITION PERIOD REPORTING

On February 2, 2004, the Company reported its decision to change its fiscal year
end from November 30 to December 31. This action  created a "transition  period"
(as defined),  which is the one month period ended December 31, 2003.  Under the
SEC's  reporting  rules,  a  registrant  is not  required  to  file  a  separate
transition  report for  transition  periods  that do not exceed one month.  Rule
13a-10  of the  Securities  and  Exchange  Act of  1934  (as  amended)  requires
registrants  that  have a  transition  period  of one  month or less to  include
audited  financial  statements for that  transition  period in the first audited
financial statements filed thereafter.  Accordingly,  the Company's December 31,
2003 audited  consolidated  balance  sheet and its  consolidated  statements  of
operations  and cash flows for the one month  transition  period  then ended are
included in accompanying financial statements.

USE OF ESTIMATES

The  preparation of  consolidated  financial  statements in conformity with GAAP
requires  management to make estimates and assumptions  that affect the reported
amounts of assets and  liabilities  and the disclosure of contingent  assets and
liabilities at the date of the financial statements, and the reported amounts of
revenues and expenses during the reporting period. Significant estimates made by
management  include  current and deferred  income taxes,  the deferred tax asset
valuation  allowance,  and  realization  of inventories  and long-lived  assets.
Actual results could materially differ from these estimates.

                                       F-8

<PAGE>

                          eRXSYS, INC. AND SUBSIDIARIES
                     (Formerly Known As Surforama.com, Inc.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   For the Years Ended December 31, 2004,November 30, 2003, and the One Month
                    Transition Period Ended December 31, 2003

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

RISKS AND UNCERTAINTIES

The Company operates in a highly competitive industry that is subject to intense
competition.  The  Company  has a limited  operating  history  since it has just
finished  its first year of  operations  and has not yet  generated  significant
revenue.  As a new operating  entity,  the Company faces risks and uncertainties
relating to its ability to successfully  implement its business strategy.  Among
other  things,  these risks  include the ability to develop and sustain  revenue
growth; managing expanding operations;  competition;  attracting,  retaining and
motivating  qualified  personnel;   maintaining  and  developing  new  strategic
relationships;  and the ability to anticipate and adapt to the changing  markets
and any changes in government regulations.

Therefore,  the  Company may be subject to the risks of delays in  obtaining  or
failing  to  obtain  regulatory  clearance  and other  uncertainties,  including
financial,  operational,  technological,  regulatory and other risks  associated
with an emerging business, including the potential risk of business failure.

The Company's  leased  pharmacies are subject to licensing and regulation by the
health,  sanitation,  safety,  building  and  fire  agencies  in  the  state  or
municipality where located. Difficulties or failures in obtaining or maintaining
the required  licensing or approvals  could prevent the  continued  operation of
such pharmacies. Management believes that the Company is operating in compliance
with all applicable laws and regulations.

The  Company  purchased  95% of its  inventory  of  prescription  drugs from one
wholesale  vendor during the year ended December 31, 2004.  Management  believes
that the wholesale  pharmaceutical and non-pharmaceutical  distribution industry
is highly competitive  because of the consolidation of the pharmacy industry and
the practice of certain large pharmacy chains to purchase  directly from product
manufacturers.  Although management believes we could obtain the majority of our
inventory through other  distributors at competitive prices and upon competitive
payment terms if our  relationship  with our primary  wholesale  drug vendor was
terminated,   there  can  be  no  assurance  that  the  termination  of  such  a
relationship would not adversely affect us.

The Company's  pharmacies  sell highly  regulated  and high-risk  drugs that are
prescribed by physicians. The Company's business may be directly affected by the
number of physicians that transmit to the pharmacies.

                                       F-9

<PAGE>

                          eRXSYS, INC. AND SUBSIDIARIES
                     (Formerly Known As Surforama.com, Inc.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   For the Years Ended December 31, 2004,November 30, 2003, and the One Month
                    Transition Period Ended December 31, 2003

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

RISKS AND UNCERTAINTIES (CONTINUED)

GOVERNMENTAL REGULATIONS

The pharmacy business is subject to extensive and often changing federal,  state
and local  regulations,  and our  pharmacies  are required to be licensed in the
states in which they are located or do business.  While management  continuously
monitors the effects of regulatory  activity on the Company's  operations and we
currently have a pharmacy  license for each pharmacy the Company  operates,  the
failure to obtain or renew any regulatory  approvals or licenses could adversely
affect the continued operations of the Company's business.

The  Company is also  subject to federal  and state laws that  prohibit  certain
types of direct and indirect payments between healthcare providers.  These laws,
commonly known as the fraud and abuse laws, prohibit payments intended to induce
or encourage the referral of patients to, or the recommendation of, a particular
provider of products  and/or  services.  Violation of these laws can result in a
loss of  licensure,  civil and criminal  penalties  and  exclusion  from various
federal  and  state  healthcare  programs.   The  Company  expends  considerable
resources in connection with compliance  efforts.  Management  believes that the
Company is in compliance  with federal and state  regulations  applicable to its
business.

The  Company  is  also  impacted  by  the  Health   Insurance   Portability  and
Accountability  Act of 1996 ("HIPAA"),  which mandates,  among other things, the
adoption of standards to enhance the efficiency and simplify the  administration
of the  healthcare  system.  HIPAA  requires the  Department of Health and Human
Services to adopt standards for electronic  transactions and code sets for basic
healthcare  transactions  such as payment and  remittance  advice  ("transaction
standards");   privacy  of  individually   identifiable  healthcare  information
("privacy   standards");   security   and   electronic   signatures   ("security
standards"),  as wells as unique  identifiers for providers,  employers,  health
plans and individuals;  and enforcement.  The Company is required to comply with
these standards and is subject to significant  civil and criminal  penalties for
failure to do so.  Management  believes the Company is in compliance  with these
standards.  There can be no  assurance,  however,  that future  changes will not
occur which the Company  may not be, or may have to incur  significant  costs to
be, in compliance with new standards or regulations. Management anticipates that
federal  and state  governments  will  continue  to review and assess  alternate
healthcare delivery systems,  payment methodologies and operational requirements
for  pharmacies.  Given the continuous  debate  regarding the cost of healthcare
services, management cannot predict with any degree of certainty what additional
healthcare  initiatives,  if any, will be  implemented  or the effect any future
legislation or regulation will have on the Company.

                                       F-10

<PAGE>

                          eRXSYS, INC. AND SUBSIDIARIES
                     (Formerly Known As Surforama.com, Inc.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   For the Years Ended December 31, 2004,November 30, 2003, and the One Month
                    Transition Period Ended December 31, 2003

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments with an original maturity of
three months or less, when purchased, to be cash equivalents.

INVENTORIES

Inventories are stated at the lower of cost  (first-in,  first-out) or estimated
market, and consist primarily of pharmaceutical  drugs.  Market is determined by
comparison with recent sales or net realizable  value.  Net realizable  value is
based on management's  forecasts for sales of the Company's products or services
in the ensuing  years and/or  consideration  and analysis of changes in customer
base,  product mix, payor mix,  third party  insurance  reimbursement  levels or
other issues that may impact the  estimated  net  realizable  value.  Management
regularly  reviews  inventory  quantities  on hand and  records  a  reserve  for
shrinkage and slow-moving,  damaged and expired inventory,  which is measured as
the difference  between the inventory cost and the estimated  market value based
on management's  assumptions  about market  conditions and future demand for the
Company's   products.   Such  reserve  was  insignificant  to  the  accompanying
consolidated financial statements.  Should the demand for the Company's products
prove to be  significantly  less than  anticipated,  the ultimate net realizable
value of the Company's inventories could be substantially less than reflected in
the accompanying consolidated balance sheet.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost, and are being  depreciated  using the
straight-line  method over the  estimated  useful  lives of the related  assets,
which generally range between three and five years.  Leasehold  improvements are
amortized  on a  straight-line  basis over the shorter of the  estimated  useful
lives of the assets or the remaining  lease terms.  Maintenance  and repairs are
charged  to  expense as  incurred.  Significant  renewals  and  betterments  are
capitalized.  At the time of  retirement,  other  disposition  of  property  and
equipment or termination of a lease,  the cost and  accumulated  depreciation or
amortization  are removed from the accounts  and any  resulting  gain or loss is
reflected in results of operations.

                                       F-11

<PAGE>

                          eRXSYS, INC. AND SUBSIDIARIES
                     (Formerly Known As Surforama.com, Inc.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   For the Years Ended December 31, 2004,November 30, 2003, and the One Month
                    Transition Period Ended December 31, 2003

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

GOODWILL AND INTANGIBLE ASSETS

Statement of Financial  Accounting standard ("SFAS") No. 142,"Goodwill and Other
Intangible Assets" ,which is effective for fiscal years beginning after December
15, 2001, addresses how intangible assets that are acquired individually or with
a group of other assets should be accounted for upon their acquisition and after
they have been initially  recognized in the financial  statements.  SFAS No. 142
requires that goodwill and identifiable  intangible  assets that have indefinite
lives not be amortized  but rather be tested at least  annually for  impairment,
and  intangible  assets that have finite  useful lives be  amortized  over their
estimated useful lives.

SFAS No. 142  provides  specific  guidance for testing  goodwill and  intangible
assets that will not be amortized  for  impairment.  In  addition,  SFAS No. 142
expands  the  disclosure  requirements  about  intangible  assets  in the  years
subsequent   to  their   acquisition.   Impairment   losses  for   goodwill  and
indefinite-life  intangible assets that arise due to the initial  application of
SFAS No. 142 are to be reported as a change in accounting principle.

For  additional   information,   see  the  discussion  in  "Long-Lived   Assets"
immediately below.

LONG-LIVED ASSETS

In July 2001, the Financial  Accounting Standards Board ("FASB") issued SFAS No.
144,"Accounting  for the  Impairment  of  Long-Lived  Assets and for  Long-Lived
Assets to be  Disposed  Of." SFAS No. 144  addresses  financial  accounting  and
reporting  for the  impairment or disposal of  long-lived  assets.  SFAS No. 144
requires that  long-lived  assets be reviewed for impairment  whenever events or
changes  in  circumstances  indicate  that  their  carrying  amount  may  not be
recoverable.  If the  cost  basis of a  long-lived  asset  is  greater  than the
projected future undiscounted net cash flows from such asset, an impairment loss
is recognized.  Impairment  losses are calculated as the difference  between the
cost basis of an asset and its estimated fair value.  SFAS No. 144 also requires
companies  to  separately  report  discontinued  operations,  and  extends  that
reporting to a component of an entity that either has been disposed of (by sale,
abandonment or in a  distribution  to owners) or is classified as held for sale.
Assets to be disposed of are reported at the lower of the carrying amount or the
estimated fair value less costs to sell.

In March 2004,  management  determined  that the license  underlying the license
agreement entered into with Safescript  Pharmacies,  Inc. was 100% impaired (See
Note 4).

                                       F-12

<PAGE>

                          eRXSYS, INC. AND SUBSIDIARIES
                     (Formerly Known As Surforama.com, Inc.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   For the Years Ended December 31, 2004,November 30, 2003, and the One Month
                    Transition Period Ended December 31, 2003

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

BUSINESS COMBINATIONS

SFAS No.  141,"Business  Combinations,"  which  is  effective  for  transactions
initiated  after June 30,  2001,  eliminates  the pooling of interest  method of
accounting for business combinations and requires that all business combinations
occurring  after July 1, 2001 be accounted  for using the purchase  method.  The
adoption  of SFAS No. 141 did not have an impact on the  Company's  consolidated
financial statements.

Emerging Issues Task Force ("EITF") No. 98-3, "Determining Whether a Nonmonetary
Transaction  Involves Receipt of a Productive  Asset or of a Business,"  defines
the  elements  necessary to evaluate  whether a business has been  received in a
nonmonetary   exchange   transaction.   EITF  98-3   defines  a  business  as  a
self-sustaining  integrated set of activities  and assets  conducted and managed
for the purpose of providing a return to investors.  A business  consists of (a)
inputs,  (b) processing  applied to those inputs, and (c) resulting outputs that
are used to generate  revenues.  Pursuant to EITF 98-3, since the acquisition of
certain  assets  (See  Note 4) did not  have  all the  required  elements  to be
considered the purchase of a business,  the Company  recorded the transaction as
an asset purchase.

REVENUE RECOGNITION

The Company  generates  revenue from prescription drug sales which primarily are
reimbursed  by  healthcare  insurance  carriers  and  government  agencies.  The
Company's  ultimate expected revenue may be adjusted for contractual  allowances
by such third parties and are adjusted to actual as cash is received and charges
are settled.  The Company is  monitoring  its revenues from these sources and is
creating  several  criteria in developing a historical  trend  analysis based on
actual claims paid in order to estimate these potential  contractual  allowances
on a monthly basis.  As the Company is considered to be in the startup stage and
lacks  sufficient  operational  history,  management  is unable to determine the
fixed settlement of such revenue.  Therefore, the Company is recognizing revenue
on a cash basis  until such time as  management  has  developed  the history and
trends to estimate potential contractual  adjustments.  On an accrual basis, the
Company  would have recorded  additional  revenue of  approximately  $221,000 in
2004.

                                       F-13

<PAGE>

                          eRXSYS, INC. AND SUBSIDIARIES
                     (Formerly Known As Surforama.com, Inc.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   For the Years Ended December 31, 2004,November 30, 2003, and the One Month
                    Transition Period Ended December 31, 2003

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

ADVERTISING

The Company  expenses the cost of advertising when incurred.  Advertising  costs
for the years ended  December 31, 2004 and November 30, 2003 were  immaterial to
the consolidated financial statements,  and are included in selling, general and
administrative   expenses  in  the  accompanying   consolidated   statements  of
operations.

EXIT AND DISPOSAL ACTIVITIES

The Company  accounts for expenses  related to  non-discretionary  restructuring
activities  (including  workforce  reductions) in accordance  with SFAS No. 146,
"Accounting  for Costs  Associated  with  Exit and  Disposal  Activities."  GAAP
prohibits  the  recognition  of an  exit-activity  liability  until (a)  certain
criteria  (which  demonstrate  that it is  reasonably  probable  that a  present
obligation to others has been  incurred) are met, and (b) the fair value of such
liability  can be reasonably  estimated.  The Company  recorded a  restructuring
charge of  approximately  $48,000 in calendar  2004.  See Note 7 for  additional
information.

STOCK-BASED COMPENSATION

The Company accounts for stock-based  compensation issued to employees using the
intrinsic  value based  method as  prescribed  by  Accounting  Principles  Board
("APB")  Opinion No.  25,"Accounting  for Stock issued to Employees" and related
interpretations. Under the intrinsic value based method, compensation expense is
the  excess,  if any,  of the fair value of the stock at the grant date or other
measurement  date over the amount an  employee  must pay to  acquire  the stock.
Compensation  expense, if any, is recognized over the applicable service period,
which is usually the vesting period.

SFAS No.  123,"Accounting  for  Stock-Based  Compensation,"  if  fully  adopted,
changes the method of accounting for employee  stock-based  compensation  to the
fair value based method. For stock options and warrants, fair value is estimated
using an option  pricing  model that takes into  account  the stock price at the
grant date,  the exercise  price,  the  expected  life of the option or warrant,
stock  volatility  and the  annual  rate of  quarterly  dividends.  Compensation
expense,  if any, is recognized  over the applicable  service  period,  which is
usually the vesting period.

                                       F-14

<PAGE>

                          eRXSYS, INC. AND SUBSIDIARIES
                     (Formerly Known As Surforama.com, Inc.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   For the Years Ended December 31, 2004,November 30, 2003, and the One Month
                    Transition Period Ended December 31, 2003

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

STOCK-BASED COMPENSATION (CONTINUED)

The adoption of the  accounting  methodology of SFAS No. 123 is optional and the
Company has elected to account for stock-based  compensation issued to employees
using APB No. 25; however, pro forma disclosures,  as if the Company had adopted
the cost recognition  requirement of SFAS No. 123, are required to be presented.
For stock-based compensation issued to non-employees,  the Company uses the fair
value method of accounting under the provisions of SFAS No. 123.

FASB  Interpretation  No. 44 ("FIN  44"),"Accounting  for  Certain  Transactions
Involving  Stock  Compensation,  an  Interpretation  of  APB  25,"clarifies  the
application  of APB No. 25 for (a) the  definition  of  employee  for purpose of
applying  APB No. 25, (b) the criteria  for  determining  whether a stock option
plan qualifies as a  non-compensatory  plan,  (c) the accounting  consequence of
various  modifications to the terms of a previously fixed stock option or award,
and (d) the  accounting  for an  exchange  of  stock  compensation  awards  in a
business  combination.   Management  believes  that  the  Company  accounts  for
transactions involving stock compensation in accordance with FIN 44.

SFAS  No.  148,  "Accounting  for  Stock-Based  Compensation  -  Transition  and
Disclosure,  an amendment  of SFAS No. 123," was issued in December  2002 and is
effective for fiscal years ending after December 15, 2002. SFAS No. 148 provides
alternative methods of transition for a voluntary change to the fair value based
method of accounting for stock-based employee  compensation.  In addition,  SFAS
No. 148 amends the disclosure  requirements of SFAS No. 123 to require prominent
disclosure in both annual and interim  financial  statements about the method of
accounting for stock-based  employee  compensation  and the effect of the method
used on reported  results.  At December 31, 2004 the Company has one stock-based
employee  compensation  plan  which  is  described  more  fully  in Note 6.  The
following table illustrates the effect on net loss and loss per common share for
the years ended  December 31, 2004 and November 31, 2003,  as if the Company had
applied  the fair value  recognition  provisions  of SFAS No. 123 for all of its
stock-based employee compensation plans.

                                       F-15

<PAGE>

                          eRXSYS, INC. AND SUBSIDIARIES
                     (Formerly Known As Surforama.com, Inc.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   For the Years Ended December 31, 2004,November 30, 2003, and the One Month
                    Transition Period Ended December 31, 2003

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Stock-Based Compensation (continued)

                                            2004             2003
                                       -------------    -------------
Net (loss) as reported                   $(8,011,287)     $(1,458,995)
Stock based compensation, net of tax          (8,550)              --
                                       -------------    -------------
Pro forma net (loss)                     $(8,019,837)     $(1,458,995)
                                       -------------    -------------
Basic and diluted (loss)
           per common share:
                                       -------------    -------------
As reported                              $     (0.18)     $     (0.06)
                                       -------------    -------------
Pro forma                                $     (0.18)     $     (0.06)
                                       =============    =============

The  assumptions  used in the Black Scholes  option  pricing model for the years
ended December 31, 2004 and November 30, 2003 were as follows:

                                            2004            2003
                                       -------------    -------------

Discount rate                                5%              --
Volatility                                  1.3              --
Expected life (years)                       3.0              --
Expected dividend yield                      --              --

The  above   proforma   effects  of  applying  SFAS  123  are  not   necessarily
representative of the impact on the results of operations for future years.

BASIC AND DILUTED LOSS PER COMMON SHARE


The Company  computes  loss per common  share using SFAS No. 128  "Earnings  Per
Share".  Basic loss per share is  computed by dividing  net loss  applicable  to
common  shareholders by the weighted average number of common shares outstanding
for the reporting period. Diluted loss per share reflects the potential dilution
that could occur if  securities  or other  contracts,  such as stock options and
warrants to issue common stock,  were  exercised or converted into common stock.
There were no dilutive potential common shares at December 31, 2004. Because the
Company has incurred net losses and there are no potential common shares,  basic
and diluted loss per common share are the same.  There were  4,145,875  warrants
and  options,  convertible  into one  share of the  Company's  common  stock per
warrant or option,  issued and  outstanding at December 31, 2004. As a result of
the  Companies  net loss,  the basic and diluted  loss per common  share are the
same.


                                       F-16

<PAGE>

                          eRXSYS, INC. AND SUBSIDIARIES
                     (Formerly Known As Surforama.com, Inc.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   For the Years Ended December 31, 2004,November 30, 2003, and the One Month
                    Transition Period Ended December 31, 2003

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

INCOME TAXES

The Company  accounts  for income  taxes under the  provisions  of SFAS No. 109,
"Accounting for Income Taxes". SFAS No. 109 requires recognition of deferred tax
liabilities and assets for the expected  future tax  consequences of events that
have been included in the financial statements or income tax returns. Under this
method  deferred  tax  liabilities  and  assets  are  determined  based  on  the
difference  between  the  financial  statement  and  tax  bases  of  assets  and
liabilities  using enacted tax rates for the year in which the  differences  are
expected to reverse (See Note 9).

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In January 2003, the FASB issued  Interpretation  ("FIN") No. 46, "Consolidation
of  Variable  Interest  Entities,  an  Interpretation  of ARB 51."  The  primary
objectives  of FIN No.  46 are to  provide  guidance  on the  identification  of
entities for which  control is achieved  through  means other than voting rights
(variable  interest  entities,  or "VIEs"),  and how to determine when and which
business enterprise should consolidate the VIE. This new model for consolidation
applies to an entity for which  either  (1) the equity  investors  do not have a
controlling  financial  interest;  or (2)  the  equity  investment  at  risk  is
insufficient to finance that entity's  activities  without receiving  additional
subordinated  financial  support from other  parties.  In  addition,  FIN No. 46
requires  that both the primary  beneficiary  and all other  enterprises  with a
significant variable interest in a VIE make additional  disclosures.  As amended
in December 2003, the effective dates of FIN No. 46 for public entities that are
small business issuers, as defined ("SBIs"),  are as follows:  (a) For interests
in special-purpose entities:  periods ended after December 15, 2003; and (b) For
all other VIEs:  periods  ended after  December  15,  2004.  The  December  2003
amendment of FIN No. 46 also includes  transition  provisions that govern how an
SBI which previously  adopted the  pronouncement  (as it was originally  issued)
must account for  consolidated  VIEs.  Management has concluded that the Company
does not have a significant variable interest in any VIEs.

In April 2003,  the FASB issued SFAS No. 149,  "Amendments  of Statement  133 on
Derivative  Instruments  and Hedging  Activities,"  which  amends and  clarifies
financial accounting and reporting for derivative instruments, including certain
derivative  instruments  embedded in other contracts and for hedging  activities
under SFAS No. 133. This  pronouncement is effective for contracts  entered into
or  modified  after June 30,  2003 (with  certain  exceptions),  and for hedging
relationships  designated  after June 30, 2003. The adoption of SFAS No. 149 did
not have a material impact on the Company's consolidated financial statements.

                                       F-17

<PAGE>

                          eRXSYS, INC. AND SUBSIDIARIES
                     (Formerly Known As Surforama.com, Inc.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   For the Years Ended December 31, 2004,November 30, 2003, and the One Month
                    Transition Period Ended December 31, 2003

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In May 2003,  the FASB issued SFAS No. 150,  "Accounting  for Certain  Financial
Instruments with  Characteristics  of both Liabilities and Equity." SFAS No. 150
establishes  standards  for  how  a  company  classifies  and  measures  certain
financial  instruments with  characteristics of both liabilities and equity, and
is effective for public  companies as follows:  (i) in November  2003,  the FASB
issued  FASB Staff  Position  ("FSP") FAS 150-03  ("FSP  150-3"),  which  defers
indefinitely (a) the measurement and classification guidance of SFAS No. 150 for
all  mandatorily  redeemable   non-controlling  interests  in  (and  issued  by)
limited-life  consolidated  subsidiaries,  and (b)  SFAS No.  150's  measurement
guidance for other types of mandatorily  redeemable  non-controlling  interests,
provided  they  were  created  before  November  5,  2003;  (ii)  for  financial
instruments  entered  into or  modified  after May 31, 2003 that are outside the
scope of FSP 150-3; and (iii)  otherwise,  at the beginning of the first interim
period  beginning  after June 15, 2003. The Company  adopted SFAS No. 150 on the
aforementioned  effective dates. The adoption of this pronouncement did not have
a material impact on the Company's results of operations or financial condition.

In November 2004, the FASB issued SFAS No. 151,  "Inventory Costs - an Amendment
of ARB No. 43, Chapter 4," which  clarifies the accounting for abnormal  amounts
of idle  facility  expense,  freight,  handling  costs and wasted  material.  In
Chapter 4 of ARB 43,  paragraph  five  previously  stated  that  "...under  some
circumstances,  items such as idle facility expense,  excessive spoilage, double
freight,  and  re-handling  costs may be so abnormal as to require  treatment as
current period  charges...." SFAS No. 151 requires that such items be recognized
as current-period charges,  regardless of whether they meet the criterion of "so
abnormal" (an undefined term). This  pronouncement also requires that allocation
of fixed  production  overhead to the costs of conversion be based on the normal
capacity of the production  facilities.  SFAS No. 151 is effective for inventory
costs incurred in years beginning after June 15, 2005.

                                       F-18

<PAGE>

                          eRXSYS, INC. AND SUBSIDIARIES
                     (Formerly Known As Surforama.com, Inc.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   For the Years Ended December 31, 2004,November 30, 2003, and the One Month
                    Transition Period Ended December 31, 2003

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In December 2004, the FASB issued SFAS No. 123-R,  "Share-Based  Payment," which
requires that the compensation cost relating to share-based payment transactions
(including  the  cost  of all  employee  stock  options)  be  recognized  in the
financial  statements.  That cost will be measured  based on the estimated  fair
value of the equity or  liability  instruments  issued.  SFAS No. 123-R covers a
wide range of share-based  compensation  arrangements  including  share options,
restricted share plans, performance-based awards, share appreciation rights, and
employee  share  purchase  plans.  SFAS  No.123-R  replaces  SFAS No.  123,  and
supersedes APB Opinion No. 25. Small Business Issuers are required to apply SFAS
No. 123-R in the first interim  reporting  period that begins after December 15,
2005.  Thus, the Company's  consolidated  financial  statements  will reflect an
expense for (a) all share-based compensation arrangements granted after December
31,  2005  and for any  such  arrangements  that  are  modified,  cancelled,  or
repurchased after that date, and (b) the portion of previous  share-based awards
for which the requisite  service has not been rendered as of that date, based on
the grant-date estimated fair value.

In  December  2004,  the FASB issued SFAS No.  153,  "Exchanges  of  Nonmonetary
Assets,  an  Amendment  of  APB  Opinion  No.  29,  Accounting  for  Nonmonetary
Transactions."  The  amendments  made by SFAS No. 153 are based on the principle
that exchanges of nonmonetary assets should be measured using the estimated fair
value of the assets exchanged.  SFAS No. 153 eliminates the narrow exception for
nonmonetary  exchanges  of similar  productive  assets,  and  replaces it with a
broader  exception  for  exchanges  of  nonmonetary  assets  that  do  not  have
commercial substance.  A nonmonetary exchange has "commercial  substance" if the
future cash flows of the entity are expected to change significantly as a result
of the transaction. This pronouncement is effective for nonmonetary exchanges in
fiscal periods beginning after June 15, 2005.

Other  recent  accounting  pronouncements  issued  by the  FASB  (including  its
Emerging  Issues  Task  Force),  the  American  Institute  of  Certified  Public
Accountants,  and the Securities and Exchange  Commission (the "SEC") did not or
are not  believed  by  management  to have a  material  impact on the  Company's
present or future consolidated financial statements.

                                       F-19

<PAGE>

                          eRXSYS, INC. AND SUBSIDIARIES
                     (Formerly Known As Surforama.com, Inc.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   For the Years Ended December 31, 2004,November 30, 2003, and the One Month
                    Transition Period Ended December 31, 2003

3. PROPERTY AND EQUIPMENT

Property and equipment consisted of the following at December 31, 2004:

   Furniture and equipment                          $  41,961
   Computer equipment and information systems         296,816
   Leasehold improvements                             454,475
                                                      793,252
   Less accumulated depreciation and amortization     (53,058)
                                                    ---------
                                                    $ 740,194
                                                    =========

4. INTANGIBLE ASSETS


In 2003, the Company acquired the rights to an exclusive license  ("License") to
operate Safescript Pharmacies in California, Oregon, Washington, and Alaska from
Safescript  Pharmacies,  Inc.,  formerly  known  as RTIN  Holdings,  Inc.,  (the
"Licensor").  In connection  with this  transaction,  the Company assumed a note
payable  to the  Licensor  (see Note 5),  executed a new note  payable  with its
former Chief Executive Officer (see Note 5) and paid $37,000 in cash.


On March 12,  2004,  the Company  entered into a  technology  license  agreement
("Technology  License") with Network Technology,  Inc. ("RxNT").  The Technology
License  grants the  Company  the right to use RxNT's  e-prescribing  technology
under the Company's  brand name  "Assured  Script".  Pursuant to the  Technology
License  agreement,  the  Company  paid RxNT  $50,000  at the  execution  of the
agreement  and  $50,000  at the launch of the  Company's  branded  pharmacy.  At
December  31, 2004,  the Company has paid  $100,000  which has been  recorded in
property and equipment in the accompanying consolidated balance sheet.

On March 17, 2004, the Company filed a lawsuit in Nevada State Court against the
Licensor  seeking  damages,  declaratory  relief,  to rescind the License and to
recover the consideration paid therefore.  On March 19, 2004, the Licensor filed
for Chapter 11 bankruptcy  protection.  The litigation in Nevada State Court has
been stayed by reason of the Licensor filing for bankruptcy. The Company refiled
substantially  the  same  claim as an  adversary  proceeding  in the  Licensor's
bankruptcy case in the U.S. Bankruptcy court in Tyler, Texas. In July 2004, this
case was  transferred  to the U.S.  District  Court for the Eastern  District of
Texas located in Tyler, Texas.

                                       F-20

<PAGE>

                          eRXSYS, INC. AND SUBSIDIARIES
                     (Formerly Known As Surforama.com, Inc.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   For the Years Ended December 31, 2004,November 30, 2003, and the One Month
                    Transition Period Ended December 31, 2003

4. INTANGIBLE ASSETS (continued)

As of March 31, 2004,  management  determined that the License was 100% impaired
based on (a) the  uncertainty of the  Licensor's  ability to continue as a going
concern, which created substantial doubt about the Licensor's ability to support
their e-prescribing technology, (b) the Company's dispute with the Licensor, and
(c) the  Company's  implementation  of the RxNT  technologies  at its  first two
pharmacies.  Accordingly,  the Company  impaired the entire  intangible asset of
approximately   $2,997,000  in  the  accompanying   consolidated   statement  of
operations.

5. NOTES PAYABLE TO RELATED PARTY AND STOCKHOLDERS


In May 2003,  the Company  assumed a note  payable  ("Note A") of  approximately
$3,177,000 in connection  with  acquisition  of a License (see Note 4), of which
$2,000,000  was converted  into  4,444,444  shares of the  Company's  restricted
common stock. The remaining  balance of approximately  $1,177,000 was payable in
monthly  installments  of  $25,000  including  interest  at 5% per annum  with a
balloon  payment of  approximately  $802,000  due in  December  2004.  Note A is
secured by the License.  At December 31, 2004, the total  outstanding  principal
balance of Note A approximated $1,013,000,  and monthly installments were eleven
months in arrears due to the Company's dispute with the Licensor (See Note 4).

In  December  2003,  the  Company  executed  a note  payable  ("Note  B") with a
stockholder  for $370,000 in connection  with the  acquisition of a License (see
Note 4).  Note B accrues  interest  at a fixed rate of 5% per  annum.  Note B is
secured by the License and matures in December  2007. At December 31, 2004,  the
total outstanding  principal balance on Note B was $370,000 and accrued interest
expense  of  approximately   $20,000  has  been  included  in  the  accompanying
consolidated balance sheet.


                                       F-21

<PAGE>

                          eRXSYS, INC. AND SUBSIDIARIES
                     (Formerly Known As Surforama.com, Inc.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   For the Years Ended December 31, 2004,November 30, 2003, and the One Month
                    Transition Period Ended December 31, 2003

5. NOTES PAYABLE TO RELATED PARTY AND STOCKHOLDERS (continued)

In  December  2004,  the  Company  executed  a note  payable  ("Note  C") with a
shareholder for the purpose of purchasing  inventory for our pharmacies.  Note C
is for a maximum of $150,000  and matures on the earlier of March 6, 2005 or the
date that the Company is able to  consummate  an accounts  receivable  factoring
arrangement for its working capital. The outstanding  principal amount of Note C
bears interest at a rate of three percent (3%) per month.  In  consideration  of
Note  C,  the  Company  agreed  to pay an  administrative  fee of  $1,500  and a
financing fee of $2,100. In addition to these fees, the Company agreed to pay by
the fifth day of every month from  January  2005 until the  principal  amount is
repaid an  administrative  fee of $1,875 and a  financing  fee of $2,675.  As of
December  31,  2004,  the  total  outstanding  balance  on  Note C was  $50,000.
Subsequent to December 31, 2004, this shareholder was appointed as the Company's
Chief Executive Officer ("CEO").

6. EQUITY TRANSACTIONS

COMMON STOCK

During the one month  transition  period ended  December  31, 2003,  the Company
issued 1,544,149  shares of restricted  common stock to consultants for services
rendered valued at approximately  $664,000  (estimated to be fair value based on
the trading price on the issuance date).

During the year ended  December 31, 2004,  the Company  issued 500,000 shares of
restricted   common  stock  to  a  investment  banker  for  services  valued  at
approximately $280,000 (estimated to be fair value based on the trading price on
the  issuance  date)  included  in  consulting  and  other  compensation  in the
accompanying consolidated statement of operations.

During the year ended  December 31, 2004, in connection  with the extension of a
consulting  agreement with the  aforementioned  investment  banker,  the Company
issued  150,000  shares of restricted  common  stock,  with warrants to purchase
350,000 shares of the Company's common stock, exercisable at $0.60 per share for
a period of five years from the date of issuance,  to the investment  banker for
services rendered.  The 150,000 shares of restricted common stock were valued at
approximately  $70,500 (estimated to be fair value based on the trading price on
the  issuance  date) and the  350,000  warrants  were  valued  at  approximately
$196,000 (estimated to be fair value based on the Black-Scholes pricing model on
the issuance date).

                                       F-22

<PAGE>

                          eRXSYS, INC. AND SUBSIDIARIES
                     (Formerly Known As Surforama.com, Inc.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   For the Years Ended December 31, 2004,November 30, 2003, and the One Month
                    Transition Period Ended December 31, 2003

6. EQUITY TRANSACTIONS (continued)

COMMON STOCK (CONTINUED)

Such expense  included in consulting and other  compensation in the accompanying
consolidated  statement of  operations.  Subsequent  to December  31, 2004,  the
investment banking firm's president (who is the stockholder/creditor  referenced
in the third paragraph of Note 5) was appointed as the Company's CEO.

During the year ended  December 31, 2004,  the Company  issued 716,625 shares of
restricted   common  stock  to  consultants  for  services  rendered  valued  at
approximately $268,400 (estimated to be fair value based on the trading price on
the issuance date).

During the year ended  December 31, 2004,  the Company  issued  20,000 shares of
restricted  common  stock in  connection  with notes  payable  issued to certain
shareholders and third parties valued at approximately  $9,500  (estimated to be
fair value based on the trading price on the issuance date).

During the year ended December 31, 2004,  the Company  completed its offering of
common stock to accredited  investors through a private  placement.  The Company
offered  a maximum  of  4,375,000  units at a price of $0.80  per  unit,  with a
minimum  offering  of  625,000  units.  Each  unit  consisted  of two  shares of
restricted  common  stock and one  warrant to purchase  one share of  restricted
common stock at an exercise price of $0.60 per share exercisable for twenty-four
months after June 17,  2004.  The Company  agreed to commence  the  registration
process with the SEC for the common stock issued and the common stock underlying
the warrants  within ninety days after the (June 17, 2004)  termination  date of
this offering. If the average closing price of the Company's common stock on the
OTC  Bulletin  Board for the  thirty  consecutive  trading  days  following  the
effectiveness of the  registration  statement is equal to or greater than $1.20,
the Company  has the right to call the  warrants at the  exercise  price  within
fifteen business days of such occurrence. During the three months ended June 30,
2004, the Company  issued  7,391,750  shares of its  restricted  common stock in
connection  with  the  private  placement.  The  Company  received  proceeds  of
$2,650,152,  net of  broker/dealer  commission,  legal  fees,  and Blue Sky fees
related to the private  placement of $306,548  which were recorded in additional
paid-in capital in the accompanying consolidated balance sheet.

On December 15, 2004, the Company filed the registration  statement described in
the preceding paragraph (the "Registration Statement") with the SEC. The Company
has since received comments on the Registration Statement from the SEC. However,
pending the filing of the Company's  December 31, 2004 Form 10-KSB,  the Company
had not amended the Registration Statement as of April 8, 2005. Thus, as of that
date, the Registration Statement had not been declared effective.

                                       F-23

<PAGE>

                          eRXSYS, INC. AND SUBSIDIARIES
                     (Formerly Known As Surforama.com, Inc.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   For the Years Ended December 31, 2004,November 30, 2003, and the One Month
                    Transition Period Ended December 31, 2003

6. EQUITY TRANSACTIONS (continued)

COMMON STOCK (CONTINUED)

During the year ended  December 31, 2004,  the Company  issued 225,003 shares of
restricted  common stock to two of its directors for services rendered valued at
approximately  $80,000 (estimated to be fair value based on the trading price on
the issuance date). Such amount is included in consulting and other compensation
in the accompanying consolidated statement of operations.

WARRANTS

During  the year  ended  December  31,  2004,  in  connection  with the  private
placement described above, the Company issued 3,695,875 warrants to purchase one
share of restricted  common stock at an exercise price of $0.60  exercisable for
twenty-four months from June 17, 2004.

During the year ended December 31, 2004, the Company issued warrants to purchase
100,000 shares of the Company's common stock, exercisable at $0.60 per share for
a period of five years from the date of issuance, to a consultant.  The warrants
are valued at  approximately  $56,000  (estimated  to be fair value based on the
Black-Scholes  pricing model on the issuance date).  Such expense is included in
consulting and other compensation in the accompanying  consolidated statement of
operations.

The number of  outstanding  and  exercisable  warrants as of  December  31, 2004
provided below:

                                                        Weighted Average
                                           Number of        Exercise
                                            Shares           Price
                                           ---------     -----------
Warrants outstanding and exercisable at           --     $        --
       January 1, 2004
              Granted                      4,145,875     $      0.60

Warrants outstanding and exercisable at
       December 31, 2004                   4,145,875     $      0.60
                                           =========

No warrants were issued prior to January 1, 2004.

                                       F-24

<PAGE>

                          eRXSYS, INC. AND SUBSIDIARIES
                     (Formerly Known As Surforama.com, Inc.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   For the Years Ended December 31, 2004,November 30, 2003, and the One Month
                    Transition Period Ended December 31, 2003

6. EQUITY TRANSACTIONS (continued)

STOCK OPTIONS

During the year ended  November  30,  2003,  the  Company's  Board of  Directors
approved an  Incentive  Stock Option Plan  ("ISOP") to grant  options to its key
personnel. There are two types of options that can be granted under the ISOP: i)
options  intended to qualify as incentive stock options under Section 422 of the
Internal  Revenue  Code  ("Qualified  Stock  Options"),   and  ii)  options  not
specifically  qualified  for favorable  income tax treatment  under the Internal
Revenue Code  ("Non-Qualified  Stock Options").  The ISOP is administered by the
Company's   board   of   directors   or   the   compensation    committee   (the
"Administrator").  The Company is authorized to grant qualified stock options to
any of its employees or directors.

The purchase  price for the shares  subject to any option shall be determined by
the ISOP  Administrator at the time of the grant, but shall not be less than 85%
of the fair market  value per share of the  Company's  common stock on the grant
date.  Except as described  below,  the purchase price for the shares subject to
any Qualified  Stock Option shall not be less than 100% of fair market value per
share of common  stock on the grant  date.  In the case of any  Qualified  Stock
Option  granted to an employee  who owns stock  possessing  more than 10% of the
total  combined  voting power of all classes of stock of the Company,  or any of
its  subsidiaries,  the  option  price  shall  not be less than 110% of the fair
market value per share of the Company's common stock on the grant date.

                                       F-25

<PAGE>
                          eRXSYS, INC. AND SUBSIDIARIES
                     (Formerly Known As Surforama.com, Inc.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   For the Years Ended December 31, 2004,November 30, 2003, and the One Month
                    Transition Period Ended December 31, 2003

6. EQUITY TRANSACTIONS (continued)

STOCK OPTIONS (CONTINUED)

No option shall be exercisable  after the expiration of the earliest of: (a) ten
years  after  the  option is  granted,  (b) three  months  after the  optionee's
employment with the Company and its subsidiaries  terminates,  or a non-employee
director  or  consultant  ceases to provide  services  to the  Company,  if such
termination  or cessation is for any reason other than  disability or death,  or
(c)  one  year  after  the  optionee's  employment  with  the  Company  and  its
subsidiaries  terminates,  or a  non-employee  director or consultant  ceases to
provide services to the Company, if such termination or cessation is a result of
death or disability;  provided,  however,  that the agreement for any option may
provide for shorter periods in each of the foregoing instances.

The ISOP  Administrator has the right to set the period within which each option
shall  vest or be  exercisable  and to  accelerate  such time  frames;  provided
however  each option shall be  exercisable  at the rate of at least 20% per year
from the grant date. Unless otherwise provided by the ISOP  Administrator,  each
option will not be subject to any vesting requirements.

For the year ended  December  31,  2004,  under the ISOP,  the  Company  granted
options to  purchase  165,000  shares of common  stock to  employees.  The stock
options  have an  exercise  price of $0.50  per share  and vest  one-third  each
consecutive  year following the date of grant.  Such stock options expire on the
earlier of three  years  after  vesting  or ninety  days  after  termination  of
employment with the Company.

                                                     Weighted Average
                                          Number of      Exercise
                                           Shares         Price
                                          -------        --------
Options outstanding and exercisable at         --        $     --
       January 1, 2004
              Granted                     165,000        $   0.50
        Cancelled or forfeited           (110,000)       $   0.50
                                         ========
Options outstanding at
       December 31, 2004                   55,000
                                         ========


The number of  outstanding  and  exercisable  options as of December 31, 2004 is
provided below:


<TABLE>
<CAPTION>
                                    Outstanding                                                Exercisable
                -----------------------------------------------------      -----------------------------------------------------
  Range of        Number     Weighted-Average     Weighted-Average           Number    Weighted Average     Weighted Average
Exercise Price  of Shares     Exercise Price    Remaining Life (Years)     of Shares    Exercise Price    Remaining Life (Years)
--------------------------------------------------------------------------------------------------------------------------------
<S>             <C>           <C>               <C>                        <C>          <C>                <C>
     $0.50        55,000          $0.50                   0.8                  --           $   --                 --

</TABLE>

                                       F-26

<PAGE>


                          eRXSYS, INC. AND SUBSIDIARIES
                     (Formerly Known As Surforama.com, Inc.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   For the Years Ended December 31, 2004,November 30, 2003, and the One Month
                    Transition Period Ended December 31, 2003

7. RESTRUCTURING COSTS

Because the Company's  revenue and  operating  margin had not grown in line with
managements  original  expectations,  the  Company  adopted a  non-discretionary
restructuring  plan that  resulted  in a  workforce  reduction  and  other  cost
reductions  (collectively,  the  "Restructuring")  intended  to  strengthen  the
Company's  future  operating  performance.   The  Company  has  implemented  the
Restructuring  during the fourth quarter of calendar  2004. The Company's  total
charge related to this Restructuring was approximately $48,000.

The Restructuring  charge recognized during 2004 is comprised  primarily of: (i)
severance pay (including related payroll taxes) and associated one-time employee
termination costs related to the reduction of the Company's workforce;  (ii) the
closure and; (iii) terminating the construction of leasehold improvements at two
of the  Company's  planned  pharmacies  and  vacating  the  premises;  and  (iv)
professional fees incurred to improve the financial and competitive  position of
the  Company.  The Company  accounts  for the costs  associated  with exiting an
activity,  including  costs  associated  with  the  reduction  of the  Company's
workforce, in accordance with SFAS 146.

The following  table  summarizes  the Company's  Restructuring-related  expenses
incurred during the year ended December 31, 2004:

                    Employee termination costs   $18,000
                    Professional fees             30,000
                                                 $48,000
                                                 =======

As part of the  Restructuring,  the Company has reduced its workforce by a total
of seventy one employees,  from 22 to 17 (which includes voluntary resignations)
or approximately 23% of its workforce.

8. OTHER RELATED PARTY TRANSACTIONS

During the fiscal year ended  December 31,  2004,  the Company  appointed  three
physicians,   who  are  also  customers,  to  its  Professional  Advisory  Board
("Advisory Board").  Pursuant to the Advisory Board agreement, the Company is to
issue  10,000  shares  of  restricted  common  stock  annually,  compensate  the
physicians $1,500 per speaking engagement and $1,500 per Advisory Board meeting.

For the years  ended  December  31,  2004 and  November  30,  2003,  the Company
recorded  approximately  $320,000 and $414,000 of revenue from these physicians,
respectively.

On January 26, 2004,  the Company  entered into an  agreement  with  Brockington
Securities,  Inc.  ("Brockington") to act as its financial  advisor,  investment
banker, and placement agent.  Pursuant to this agreement,  Brockington  received
500,000  shares  of its  common  stock.  As more  fully  described  in the third
paragraph  of Note 6, on June 18,  2004,  our  board of  directors  approved  an
extension for an  additional  term of eighteen  months to the agreement  entered
into  with  Brockington.   Mr.  Robert  DelVecchio,  who  is  the  President  of
Brockington, became the Company's CEO on February 3, 2005.

                                       F-27

<PAGE>

                          eRXSYS, INC. AND SUBSIDIARIES
                     (Formerly Known As Surforama.com, Inc.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   For the Years Ended December 31, 2004,November 30, 2003, and the One Month
                    Transition Period Ended December 31, 2003

9. INCOME TAXES

A reconciliation  of income taxes computed at the U.S. Federal  Statutory income
tax rate to the provision for income taxes is as follows:

                                           2004        2003
                                      ------------   --------

U.S. Federal Statutory tax at 34%      $(2,907,000) $(527,000)
State Taxes, net of federal benefit       (513,000)   (93,000)
Valuation Allowance                      3,420,000    620,000

Provision for income taxes             $        --   $     --
                                      ============   ========

The net  deferred  income tax asset  (liability)  consists of the  following  at
December 31, 2004 and November 30, 2003:

                                          2004           2003
                                      -----------    -----------
Net Operating Losses                  $ 2,904,000    $   620,000
Depreciable Assets                      1,191,000             --
                                      -----------    -----------
D Deferred Tax Assets                   4,095,000        620,000
Valuation Allowance                    (4,095,000)      (620,000)
                                      -----------    -----------
                                      $        --    $        --
                                      ===========    ===========

Based upon the net operating  losses  incurred since  inception,  management has
determined  that it is more likely than not that the  deferred  tax assets as of
December 31, 2004 and 2003 will not be recognized. Consequently, the Company has
established a valuation allowance against the entire deferred tax assets.

As of December 31, 2004, the Company has federal and state net operating  losses
of  approximately  $7,300,000  that begin to expire in 2022 and 2009 for federal
and state purposes, respectively.

The  utilization  of some or all of the Company's  net  operating  losses may be
severely restricted now or in the future by a significant change in ownership as
defined  under the  provisions  of Section 382 of the  Internal  Revenue Code of
1986,  as amended.  In addition,  utilization  of the Company's  California  net
operating  losses for the years  beginning  in 2002 and 2003 has been  suspended
under state law.

                                       F-28

<PAGE>

                          eRXSYS, INC. AND SUBSIDIARIES
                     (Formerly Known As Surforama.com, Inc.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   For the Years Ended December 31, 2004,November 30, 2003, and the One Month
                    Transition Period Ended December 31, 2003

10. LOSS PER COMMON SHARE

The following is a  reconciliation  of the  numerators and  denominators  of the
basic and  diluted  loss per  common  share  computations  for the  years  ended
December 31, 2004 and November 30, 2003.

                                                  Year Ended     Year Ended
                                                   December       November
                                                   31, 2004       30, 2003
                                                ------------    ------------
Numerator for basic and diluted loss
                  per common share:
     Net loss charged to common stockholders    $ (8,011,287)   $ (1,458,995)

Denominator for basic and diluted loss
              per common share:
Weighted average number of shares outstanding     41,112,800      24,115,700
                                                ------------    ------------

Basic and diluted loss per common share         $      (0.19)   $      (0.06)
                                                ============    ============

11. COMMITMENTS AND CONTINGENCIES

OPERATING LEASES

The Company occupies buildings and retail space under operating lease agreements
expiring on various dates through June 2010 with monthly  payments  ranging from
approximately  $600 to $5,600.  Certain leases include future rental escalations
and renewal options.

                                       F-29

<PAGE>

                          eRXSYS, INC. AND SUBSIDIARIES
                     (Formerly Known As Surforama.com, Inc.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   For the Years Ended December 31, 2004,November 30, 2003, and the One Month
                    Transition Period Ended December 31, 2003

11. COMMITMENTS AND CONTINGENCIES (continued)

OPERATING LEASES (CONTINUED)

At December 31, 2004 future minimum payments under operating leases approximated
the following for the years ending December 31, 2005 and thereafter:

                           2005                   $   296,684
                           2006                       265,680
                           2007                       271,046
                           2008                       265,155
                           2009                       187,184
                           Thereafter                  33,980
                                                  -----------
                                                  $ 1,319,729
                                                  ===========

Total rent  expense for the years ended  December 31, 2004 and November 30, 2003
was  approximately  $217,000  and $20,000 is included in selling,  general,  and
administrative   expenses  in  the   accompanying   consolidated   statement  of
operations.

LEGAL MATTERS

From time to time,  the Company may be  involved  in various  claims,  lawsuits,
disputes with third parties,  actions involving allegations of discrimination or
breach of contract actions incidental to the normal operations of the business.

Providing pharmacy services entails an inherent risk of medical and professional
malpractice liability.  The Company may be named as a defendant in such lawsuits
and thus become subject to the attendant risk of substantial  damage awards. The
Company  believes it possesses  adequate  professional  and medical  malpractice
liability  insurance  coverage.  There can be no  assurance,  however,  that the
Company will not be sued,  that any such  lawsuit will not exceed our  insurance
coverage,  or that it will be able to maintain such coverage at acceptable costs
and on favorable terms.

                                       F-30

<PAGE>

                          eRXSYS, INC. AND SUBSIDIARIES
                     (Formerly Known As Surforama.com, Inc.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   For the Years Ended December 31, 2004,November 30, 2003, and the One Month
                    Transition Period Ended December 31, 2003

11. COMMITMENTS AND CONTINGENCIES (continued)

Legal Matters (continued)

Safescript Pharmacies,  Inc. (formerly known as RTIN, Inc.) failed to provide us
with essential  services as set forth in the license agreement that they entered
into and this has forced us to terminate our use of all technology granted under
the license agreement entered into with Safescript Pharmacies, Inc. On March 17,
2004,  we filed a lawsuit in Nevada State Court against  Safescript  Pharmacies,
Inc. seeking damages,  declaratory relief, to rescind the License and to recover
the consideration paid. On March 19, 2004, Safescript Pharmacies, Inc. filed for
Chapter 11 bankruptcy protection.  The litigation in Nevada State Court has been
stayed by reason of  Safescript  Pharmacies,  Inc.'s filing for  bankruptcy.  We
refiled  substantially  the same claim as an adversary  proceeding in Safescript
Pharmacies,  Inc.'s  bankruptcy case,  which was pending in the U.S.  Bankruptcy
Court located in Tyler,  Texas.  In July 2004,  this case was transferred to the
U.S. District Court for the Eastern District of Texas located in Tyler, Texas.

On April 14, 2004, a former officer filed a lawsuit  against us in Orange County
California Superior Court. The former officer is seeking additional compensation
in the  amount of  $213,000  and other  relief  that the  court  deems  just and
appropriate.  This  lawsuit  is in the  early  stages  and  its  outcome  is not
reasonably predictable. Management believes the lawsuit is without merit and the
Company is aggressively defending this case.

Other than as disclosed  herein,  the Company is not  currently  involved in any
litigation  which it  believes  could  have a  material  adverse  effect  on its
financial position or results of operations.

12. SUBSEQUENT EVENTS

On February  1, 2005,  the  Company  entered  into  Termination  and  Settlement
Agreements  ("Settlement  Agreement") with Mr. David Parker and Mr. A.J. LaSota.
Mr.  Parker  and Mr.  LaSota  resigned  from their  positions  as  officers  and
directors. In accordance with the terms of these agreements,  Mr. Parker and Mr.
LaSota  returned to the corporate  treasury  5,400,000 and 429,353 shares of the
Company's  common  stock  respectively.  Also on February  1, 2005,  the Company
entered into a Settlement  Agreement with Ron Folse,  the former  Executive Vice
President. In accordance with the terms of this agreement, Mr. Folse returned to
the corporate treasury 429,353 shares of the Company's common stock.

                                       F-31

<PAGE>

                          eRXSYS, INC. AND SUBSIDIARIES
                     (Formerly Known As Surforama.com, Inc.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   For the Years Ended December 31, 2004,November 30, 2003, and the One Month
                    Transition Period Ended December 31, 2003

12. SUBSEQUENT EVENTS (continued)

On February 23, 2005, the Company entered into an accounts receivable  servicing
and line of credit  agreement  with Mosaic  Financial  Services,  LLC. Under the
terms of the line of  credit  agreement,  the  Company  can  draw a  maximum  of
$500,000 to purchase  inventory.  Beginning  July 1, 2005, the maximum amount of
the available line of credit will be increased to $700,000. These agreements are
for a term of one year and will automatically  renew for another one year period
unless either party provides notice to the other of termination  within 180 days
prior to the end of the effective term.

                                       F-32

<PAGE>

                  ASSURED PHARMACY, INC. AND SUBSIDIARIES
                   CONDENSED CONSOLIDATED BALANCE SHEET
                            SEPTEMBER 30, 2005
                                 UNAUDITED

                                  ASSETS
Current Assets
Cash                                                              $    144,394
Inventories                                                            379,332
Prepaid expenses and other assets                                       52,404
                                                                  ------------
                                                                       576,130
Property and Equipment, net                                            479,326
                                                                  ------------
                                                                  $  1,055,456
                                                                  ============

                   LIABILITIES AND STOCKHOLDERS' DEFICIT

Current Liabilities
Accounts payable and accrued liabilities                          $    949,415
Line of Credit                                                         636,635
    Notes payable to related parties and stockholders                  230,000
                                                                  ------------
Minority Interest                                                      442,778
Commitments and contingencies
Stockholders' Deficit
Preferred shares; par value $0.001 per share;
   authorized 5,000,000 shares; no preferred shares issued
   and outstanding                                                          --
Common shares; par value $0.001 per share;
  authorized 70,000,000 shares; 51,962,808 common shares issued
  and 41,104,150 outstanding                                            51,962
Treasury Stock                                                         (10,858)
Additional paid-in capital, net                                     13,431,790
Deferred compensation                                                 (282,950)
Accumulated deficit                                                (14,393,316)
                                                                  ------------
Stockholders' deficit                                               (1,203,372)
                                                                  ------------
                                                                  $  1,055,456
                                                                  ============

     See accompanying notes to condensed consolidated Financial Statements.


                                      F-33


<PAGE>

                     ASSURED PHARMACY, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                    UNAUDITED


<TABLE>
<CAPTION>

                                                   THREE MONTHS ENDED            NINE MONTHS ENDED
                                             -----------------------------------------------------------
                                                   SEPTEMBER 30,                   SEPTEMBER 30,
                                                2005           2004            2005            2004
                                             ------------   ------------    ------------   -------------
<S>                                         <C>             <C>            <C>            <C>

GROSS SALES                                    $ 980,181      $ 350,459     $ 2,417,988       $ 703,167

   COST OF SALES                                (835,268)      (395,618)     (2,116,798)       (960,629)
                                             ------------   ------------    ------------   -------------

   GROSS PROFIT (LOSS)                           144,913        (45,159)        301,190        (257,462)
                                             ------------   ------------    ------------   -------------

OPERATING EXPENSES
   Salaries and related                        2,458,950        412,091       3,144,970         889,484
   Consulting and other compensation             298,151        372,934       1,006,916       1,784,937
   Selling, general and administrative           269,345        478,974         940,768       1,047,411
   Impairment of intangible asset                      -              -               -       2,977,448
   Restructuring Charges                               -              -         193,881               -
                                             ------------   ------------    ------------   -------------
   TOTAL OPERATING EXPENSES                    3,026,446      1,263,999       5,286,535       6,699,280
                                             ------------   ------------    ------------   -------------

OPERATING LOSS                                (2,881,533)    (1,309,158)     (4,985,345)     (6,956,742)
                                             ------------   ------------    ------------   -------------

OTHER (EXPENSE) INCOME
   Interest expense                              (31,783)             -         (98,086)        (26,157)
   Interest income                                     -          4,476               -             436
   Other income / (expense)                        4,370            (87)        (76,889)           (507)
   Forgiveness of debt                                 -              -       1,060,400               -
                                             ------------   ------------    ------------   -------------
   TOTAL OTHER (EXPENSE)                         (27,413)         4,389         885,425         (26,228)
                                             ------------   ------------    ------------   -------------

LOSS BEFORE MINORITY INTEREST                 (2,908,946)    (1,304,769)     (4,099,920)     (6,982,970)
   MINORITY INTEREST                              73,069        172,346         250,629         391,299
                                             ------------   ------------    ------------   -------------

NET PROFIT                                   $ (2,835,877)  $ (1,132,423)   $ (3,849,291)  $ (6,591,671)
                                             ============   ============    ============   =============

Earnings per common share:
   Basic                                         $ (0.07)       $ (0.03)        $ (0.10)        $ (0.17)
                                             ============   ============    ============   =============
   Diluted                                       $ (0.07)       $ (0.03)        $ (0.10)        $ (0.17)
                                             ============   ============    ============   =============

Weighted average number of shares outstanding:
   Basic                                      39,434,857     44,717,842      40,114,227      38,584,715
                                             ============   ============    ============   =============
   Diluted                                    39,434,857     44,717,842      40,114,227      38,584,715
                                             ============   ============    ============   =============
</TABLE>



     See accompanying notes to condensed consolidated Financial Statements.


                                       F-34


<PAGE>

                    ASSURED PHARMACY, INC. AND SUBSIDIARIES
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   UNAUDITED

<TABLE>
<CAPTION>
                                                                                         NINE                      NINE
                                                                                     MONTHS ENDED              MONTHS ENDED
                                                                                  SEPTEMBER 30, 2005        SEPTEMBER 30, 2004
                                                                                  --------------------------------------------
<S>                                                                               <C>                       <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss)                                                                           $(3,849,291)             $(6,591,671)
Adjustments to reconcile net loss to net cash
used in operating activities:
   Depreciation and amortization of property and equipment                               123,556                   27,871
   Impairment of property and equipment related to restructuring                         137,312                       --
   Amortization of deferred consulting fee                                               268,750                  456,400
   Loss on settlement of debt                                                             87,960                       --
   Gain on forgiveness of debt                                                        (1,011,522)                      --
   Impairment of intangible asset                                                             --                2,977,448
   Minority interest in net loss of Joint Venture                                       (250,629)                (391,299)
   Issuance of common stock for services                                               2,326,392                  864,401
   Changes in operating assets and liabilities:
   Inventories                                                                          (221,323)                (303,257)
   Prepaid expenses and other current assets                                             (17,592)                 (13,966)
   Restricted cash                                                                            --                 (150,000)
   Accounts payable and accrued liabilities                                              244,843                  445,616
   Related party payable                                                                      --                  (14,797)
                                                                                     -----------              -----------
 Net cash used in operating activities                                                (2,161,544)              (2,693,254)
                                                                                     -----------              -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchases of property and equipment                                                        --                 (490,821)
                                                                                     -----------              -----------
   Net cash used in investing activities                                                      --                 (490,821)
                                                                                     -----------              -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from the issuance of line of credit                                        2,472,000                       --
   Proceeds from the issuance of notes payable to related parties and shareholders       355,000                  109,409
   Principal repayments on line of credit                                             (1,835,365)                      --
   Proceeds from issuance of common stock for cash                                     1,412,978                2,650,030
   Principal repayments on notes payable to related parties and shareholders            (185,000)                (145,131)
   Issuance of common stock in connection with issuance of notes payable                      --                    9,500
   Proceeds from development agreement with TAPG joint venture                                --                  704,213
                                                                                     -----------              -----------
   Net cash provided by financing activities                                           2,219,613                3,328,021
                                                                                     -----------              -----------
Net increase in cash                                                                      58,069                  143,946

Cash at beginning of period                                                               86,325                  710,442
                                                                                     -----------              -----------
Cash at end of period                                                                $   144,394              $   854,388
                                                                                     ===========              ===========
Supplemental disclosure of cash flow information-
Cash paid during the quarter for:
    Interest                                                                         $    98,085              $        --
                                                                                     -----------              -----------
</TABLE>

Please refer to the accompanying notes to the condensed financial statements for
       information regarding non-cash investing and financing activities.

               The accompanying notes are an integral part of the
                       consolidated Financial Statements.


                                       F-35


<PAGE>

                     ASSURED PHARMACY, INC. AND SUBSIDIARIES
                         FORMERLY KNOWN AS ERXSYS, INC.
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2005
--------------------------------------------------------------------------------

1. ORGANIZATION AND BASIS OF PRESENTATION

eRXSYS,  Inc.  ("eRXSYS")  was organized as a Nevada  corporation on October 22,
1999 under the name  Surforama.com,  Inc.  ("Surforama") and previously operated
under the name eRXSYS,  Inc. The Company  changed its name to Assured  Pharmacy,
Inc.  in October  2005.  The  Company is engaged in the  business  of  operating
pharmacies that specialize in dispensing  highly  regulated pain medication that
allows physicians to transmit  prescriptions from a wireless hand-held device or
desktop  computer  directly to our pharmacies,  thus eliminating or reducing the
need for paper prescriptions.  Because the focus is on physicians whose practice
necessitates that they frequently prescribe medication to manage their patients'
chronic pain, non-prescription drugs, or health and beauty related products such
as walking canes, bandages and shampoo are not typically kept in inventory.  The
Company derives its revenue from the sale of prescription drugs. The majority of
the business is derived from physicians who transmit  prescriptions  directly to
its  pharmacy  electronically.   "Walk-in"  prescriptions  from  physicians  are
limited.

In April 2003,  the Company  entered  into a joint  venture  with TPG  Partners,
L.L.C.  ("TPG") to form  Safescript  Pharmacies of  California,  L.L.C.  ("Joint
Venture").  This Joint Venture was formed to establish  and operate  pharmacies.
The  Company  owns 51% of the  Joint  Venture  and TPG owns  the  remaining  49%
(minority  owner).  In June  2003,  the  Joint  Venture  formed a  wholly  owned
subsidiary,  Safescript of California,  Inc. ("Safescript"),  to own and operate
the pharmacies.  In accordance with the shareholders  agreement with TPG, TPG is
obligated to  contribute  start-up  costs in the amount of $230,000 per pharmacy
location  established up to fifty (50)  pharmacies.  In June 2003 and July 2003,
TPG advanced $230,000 and $218,000,  respectively, for a total of $448,000. This
capital  contribution  funded the opening of our first two  pharmacies  in Santa
Ana, CA in October 2003 and in Riverside,  CA in June 2004. No additional  funds
have been received from TPG since 2003.  TPG remains  obligated to contribute an
additional  $12,000  to  satisfy  their  full  capital  contribution.  Effective
September  8, 2004,  Safescript  filed  amended  articles of  incorporation  and
changed its name to Assured Pharmacies, Inc. ("API").

In February  2004,  the Company  entered  into an  agreement  with TAPG,  L.L.C.
("TAPG"),  a Louisiana limited liability  company,  and incorporated  Safescript
Northwest,  Inc.  ("Safescript  Northwest"),  under  the  laws of the  State  of
Louisiana.  The  Company  owns 75% of  Safescript  Northwest  and TAPG  owns the
remaining 25%.  Effective  August 19, 2004,  Safescript  Northwest filed amended
articles of incorporation and changed its name to Assured Pharmacies  Northwest,
Inc.  ("APNI").  Assured  Pharmacy,  Inc.  API,  Joint  Venture,  and  APNI  are
hereinafter  collectively  referred to as the "Company." In September 2005, APNI
filed articles of conversion to convert the entity to a Nevada  corporation.  In
accordance  with the  shareholders  agreement  with TAPG,  TAPG is  obligated to
contribute  start-up  costs in the  amount of  $335,000  per  pharmacy  location
established  up to five (5)  pharmacies  and Assured  Pharmacy  will  contribute
technology, consulting services, and marketing expertise. Between March 2004 and
October 2004,  the Company  received  from TAPG start-up  funds in the amount of
$854,213  as  its  capital  contribution  for  three  pharmacies.  This  capital
contribution funded the opening of two pharmacies in Kirkland, WA in August 2004
and  Portland,  OR in  September  2004.  Included in these  monies was a partial
capital  contribution in the amount of $190,000 for the establishment of another
pharmacy located in Portland,  OR. TAPG is obligated to contribute an additional
$145,000 to satisfy their full contribution. The Company and APNI requested that
TAPG provide the $145,000 balance of its full capital contribution.


                                      F-36


<PAGE>

                     ASSURED PHARMACY, INC. AND SUBSIDIARIES
                         FORMERLY KNOWN AS ERXSYS, INC.
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2005
--------------------------------------------------------------------------------

On October 21, 2005,  the Company held its annual meeting of  shareholders.  The
shareholders  approved an amendment to the articles of incorporation to complete
a name change of the Company from  eRXSYS,  Inc. to ASSURED  PHARMACY,  Inc. The
Company's  common stock is now trading on the  over-the-counter  bulletin  board
under the trading symbol "APHY."

GOING CONCERN CONSIDERATIONS

The accompanying  condensed consolidated financial statements have been prepared
assuming the Company will continue as a going concern, which contemplates, among
other things,  the realization of assets and  satisfaction of liabilities in the
ordinary  course of  business.  As of  September  30,  2005,  the Company had an
accumulated  deficit  of  $14,393,316,  recurring  losses  from  operations  and
negative  cash flow from  operating  activities  for the nine month period ended
September  30,  2005 of  $2,161,544.  The  Company  also had a negative  working
capital of $1,239,920 as of September 30, 2005.

The Company intends to fund operations  through  increased sales and debt and/or
equity  financing  arrangements,  which may be  insufficient to fund its capital
expenditures,  working  capital or other cash  requirements  for the year ending
December  31,  2005.  The  Company is seeking  additional  funds to finance  its
immediate and long-term  operations.  The successful outcome of future financing
activities  cannot be determined at this time and there is no assurance  that if
achieved,  the  Company  will have  sufficient  funds to  execute  its  intended
business plan or generate positive operating results.

These factors, among others, raise substantial doubt about the Company's ability
to  continue  as  a  going  concern.  The  accompanying  condensed  consolidated
financial  statements do not include any adjustments  related to  recoverability
and classification of asset carrying amounts or the amount and classification of
liabilities  that might  result  should the  Company be unable to  continue as a
going concern.

In response to these problems, management has taken the following actions:

     o    During the last quarter of 2004, the Company suspended the development
          of new  pharmacies  for a  period  of time in order  to  evaluate  the
          potential  in  existing  pharmacies  and,  where  needed,  restructure
          current operations. (See Note 7 for additional information).

     o    The Company is aggressively signing up new physicians.

     o    The Company is seeking  investment  capital through the public markets
          (See Note 6 for additional information).

BASIS OF PRESENTATION

The Company's  management,  without audit,  prepared the condensed  consolidated
financial  statements for the three and nine months ended September 30, 2005 and
2004. The information  furnished has been prepared in accordance with accounting
principles  generally  accepted  in the United  States of America  ("GAAP")  for
interim financial reporting.  Accordingly, certain disclosures normally included
in financial statements prepared in accordance with GAAP have been condensed and
consolidated  or  omitted.  In  the  opinion  of  management,   all  adjustments
considered  necessary  for the  fair  presentation  of the  Company's  financial
position, results of operations and cash flows have been included and (except as
described  in Note 3) are only of a normal  recurring  nature.  The  results  of
operations  for the three  and nine  months  ended  September  30,  2005 are not
necessarily indicative of the results of


                                       F-37
<PAGE>


                     ASSURED PHARMACY, INC. AND SUBSIDIARIES
                         FORMERLY KNOWN AS ERXSYS, INC.
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2005
--------------------------------------------------------------------------------

operations for the year ending December 31, 2005.

The consolidated  financial statements include the accounts of Assured Pharmacy,
Inc., its wholly owned subsidiary, API, its 51% owned Joint Venture, and its 75%
owned APNI. All inter-company  accounts and transactions have been eliminated in
consolidation.

These condensed  consolidated financial statements should be read in conjunction
with the Company's audited consolidated  financial statements as of December 31,
2004,  which are included in the Company's Annual Report on Form 10-KSB that was
filed with the Securities and Exchange Commission (the "SEC") on April 15, 2005.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

INVENTORIES

As of September 30, 2005, inventories are stated at the lower of cost (first-in,
first-out) or estimated market,  and consist primarily of pharmaceutical  drugs.
Market is determined by comparison  with recent sales or net  realizable  value.
Net  realizable  value is  based  on  management's  forecasts  for  sales of the
Company's  products or services in the ensuing  years and/or  consideration  and
analysis  of changes in  customer  base,  product  mix,  payor mix,  third party
insurance reimbursement levels or other issues that may impact the estimated net
realizable value.  Management regularly reviews inventory quantities on hand and
records a reserve for shrinkage and slow-moving,  damaged and expired inventory,
which is measured as the difference between the inventory cost and the estimated
market  value based on  management's  assumptions  about market  conditions  and
future demand for the Company's  products.  Such reserve is insignificant to the
accompanying condensed consolidated financial statements.  Should demand for the
Company's  products  prove  to  be  less  than  anticipated,  the  ultimate  net
realizable value of the Company's  inventories could be substantially  less than
reflected in the accompanying condensed consolidated balance sheet.

GOODWILL AND INTANGIBLE ASSETS

Statement of Financial Accounting standard ("SFAS") No. 142, "Goodwill and Other
Intangible Assets," which is effective for fiscal years beginning after December
15, 2001, addresses how intangible assets that are acquired individually or with
a group of other assets should be accounted for upon their acquisition and after
they have been initially  recognized in the financial  statements.  SFAS No. 142
requires that goodwill and identifiable  intangible  assets that have indefinite
lives not be amortized  but rather be tested at least  annually for  impairment,
and  intangible  assets that have finite  useful lives be  amortized  over their
estimated useful lives.

SFAS No. 142  provides  specific  guidance for testing  goodwill and  intangible
assets that will not be amortized  for  impairment.  In  addition,  SFAS No. 142
expands  the  disclosure  requirements  about  intangible  assets  in the  years
subsequent   to  their   acquisition.   Impairment   losses  for   goodwill  and
indefinite-life  intangible assets that arise due to the initial  application of
SFAS No. 142 are to be reported as a change in accounting principle.


                                       F-38
<PAGE>


                     ASSURED PHARMACY, INC. AND SUBSIDIARIES
                         FORMERLY KNOWN AS ERXSYS, INC.
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2005
--------------------------------------------------------------------------------

For  additional   information,   see  the  discussion  in  "Long-Lived   Assets"
immediately below.

LONG-LIVED ASSETS

In July 2001, the Financial  Accounting Standards Board ("FASB") issued SFAS No.
144,  "Accounting  for the  Impairment of Long-Lived  Assets and for  Long-Lived
Assets to be  Disposed  Of." SFAS No. 144  addresses  financial  accounting  and
reporting  for the  impairment or disposal of  long-lived  assets.  SFAS No. 144
requires that  long-lived  assets be reviewed for impairment  whenever events or
changes  in  circumstances  indicate  that  their  carrying  amount  may  not be
recoverable.  If the  cost  basis of a  long-lived  asset  is  greater  than the
projected future undiscounted net cash flows from such asset, an impairment loss
is recognized.  Impairment  losses are calculated as the difference  between the
cost basis of an asset and its estimated fair value.

SFAS  No.  144  also  requires  companies  to  separately  report   discontinued
operations,  and extends that  reporting to a component of an entity that either
has been disposed of (by sale, abandonment or in a distribution to owners) or is
classified as held for sale.  Assets to be disposed of are reported at the lower
of the carrying amount or the estimated fair value less costs to sell.

In March 2004,  management  determined  that the license  underlying the license
agreement entered into with Safescript  Pharmacies,  Inc. was 100% impaired (See
Note 3).

REVENUE RECOGNITION

The  Company   generates   revenue  from   prescription  drug  sales  which  are
reimbursable  by third-party  insurance  carriers and government  agencies.  The
Company's  ultimate expected revenue may be adjusted for contractual  allowances
by these  third-party  insurance  carriers and/or government  agencies,  and are
adjusted to actual as cash is received and charges are  settled.  The Company is
monitoring its revenues from these sources and is creating  several  criteria in
developing a historical  trend  analysis based on actual claims paid in order to
estimate these potential  contractual  allowances on a monthly basis.  Since the
Company  is  considered  to  be in  the  start-up  stage  and  lacks  sufficient
operational history,  management may be unable to determine the fixed settlement
of such revenue.  Therefore,  the Company is recognizing revenue on a cash basis
until such time as  management  and the Board of Directors  have  developed  the
history and trends to estimate potential contractual adjustments.  On an accrual
basis,  the Company  would have  recorded  additional  revenue of  approximately
$172,000 and $115,000  for the three months ended  September  30, 2005 and 2004,
respectively,  and approximately $397,000 and $176,000 for the nine months ended
September 30, 2005 and 2004,  respectively.  Management is currently  evaluating
recognizing revenue on an accrual basis of accounting.

The Company accounts for shipping and handling fees and costs in accordance with
EITF 00-10  "Accounting for Shipping and Handling Fees and Costs." Such fees and
costs are immaterial to the operations of the Company.

EXIT AND DISPOSAL ACTIVITIES

The Company  accounts for expenses  related to  non-discretionary  restructuring
activities  (including  workforce  reductions) in accordance  with SFAS No. 146,
"Accounting for Costs Associated with Exit and Disposal


                                       F-39
<PAGE>


                     ASSURED PHARMACY, INC. AND SUBSIDIARIES
                         FORMERLY KNOWN AS ERXSYS, INC.
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2005
--------------------------------------------------------------------------------

Activities." GAAP prohibits the recognition of an exit-activity  liability until
(a) certain criteria (which  demonstrate  that it is reasonably  probable that a
present  obligation to others has been incurred) are met, and (b) the fair value
of such liability can be reasonably  estimated.  We suspended the development of
new pharmacies in order to restructure our current operations.

The Company recorded a restructuring  charge of $193,881 during the three months
ended March 31, 2005. No restructuring  costs have been incurred since March 31,
2005. See Note 7 for additional information.

Stock-Based Employee Compensation

The Company accounts for stock-based  compensation issued to employees using the
intrinsic  value based  method as  prescribed  by  Accounting  Principles  Board
("APB")  Opinion No. 25,  "Accounting for Stock issued to Employees" and related
interpretations. Under the intrinsic value based method, compensation expense is
the  excess,  if any,  of the fair value of the stock at the grant date or other
measurement  date over the amount an  employee  must pay to  acquire  the stock.
Compensation  expense, if any, is recognized over the applicable service period,
which is usually the vesting period.

SFAS No. 123,  "Accounting  for  Stock-Based  Compensation,"  if fully  adopted,
changes the method of accounting for employee  stock-based  compensation  to the
fair value based method. For stock options and warrants, fair value is estimated
using an option  pricing  model that takes into  account  the stock price at the
grant date,  the exercise  price,  the  expected  life of the option or warrant,
stock  volatility  and the  annual  rate of  quarterly  dividends.  Compensation
expense,  if any, is recognized  over the applicable  service  period,  which is
usually the vesting period.

The adoption of the  accounting  methodology of SFAS No. 123 is optional and the
Company has elected to account for stock-based  compensation issued to employees
using APB No. 25; however, pro forma disclosures,  as if the Company had adopted
the cost recognition  requirement of SFAS No. 123, are required to be presented.
For stock-based compensation issued to non-employees,  the Company uses the fair
value method of accounting under the provisions of SFAS No. 123.

FASB  Interpretation  No. 44 ("FIN 44"),  "Accounting  for Certain  Transactions
Involving  Stock  Compensation,  an  Interpretation  of APB 25,"  clarifies  the
application  of APB No. 25 for (a) the  definition  of  employee  for purpose of
applying  APB No. 25, (b) the criteria  for  determining  whether a stock option
plan qualifies as a  non-compensatory  plan,  (c) the accounting  consequence of
various  modifications to the terms of a previously fixed stock option or award,
and (d) the  accounting  for an  exchange  of  stock  compensation  awards  in a
business  combination.   Management  believes  that  the  Company  accounts  for
transactions involving stock compensation in accordance with FIN 44.

SFAS  No.  148,  "Accounting  for  Stock-Based  Compensation  -  Transition  and
Disclosure,  an amendment  of SFAS No. 123," was issued in December  2002 and is
effective for fiscal years ending after December 15, 2002. SFAS No. 148 provides
alternative methods of transition for a voluntary change to the fair value based
method of accounting for stock-based employee  compensation.  In addition,  SFAS
No. 148 amends the disclosure  requirements of SFAS No. 123 to require prominent
disclosure in both annual and interim  financial  statements about the method of
accounting for stock-based  employee  compensation  and the effect of the method
used on


                                       F-40
<PAGE>


                     ASSURED PHARMACY, INC. AND SUBSIDIARIES
                         FORMERLY KNOWN AS ERXSYS, INC.
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2005
--------------------------------------------------------------------------------

reported results. At September 30, 2005 the Company has one stock-based employee
compensation plan.

<TABLE>
<CAPTION>
                                    Three Months Ended             Nine Months Ended
                                       September 30,                 September 30,
                                 --------------------------    --------------------------
                                     2005           2004           2005           2004
                                 -----------    -----------    -----------    -----------
<S>                              <C>            <C>            <C>            <C>
Net income (loss) applicable to
   common stockholders:

As reported                      $(2,835,877)   $(1,132,423)   $(3,849,291)   $(6,591,671)
Deduct: Total stock-based
employee
compensation expense
determined under fair
value based method for
all awards                            (1,125)        (5,875)        (3,375)       (17,625)
                                 -----------    -----------    -----------    -----------
Pro forma                        $(2,837,002)   $(1,138,298)   $(3,852,666)   $(6,609,296)
                                 ===========    ===========    ===========    ===========

Basic and diluted (loss)
   per common share:
As reported                      $     (0.07)   $     (0.03)   $     (0.10)   $     (0.17)
                                 ===========    ===========    ===========    ===========
Pro forma                        $     (0.07)   $     (0.03)   $     (0.10)   $     (0.17)
                                 ===========    ===========    ===========    ===========
</TABLE>

The  above   proforma   effects  of  applying  SFAS  123  are  not   necessarily
representative of the impact on the results of operations for future years.

BASIC AND DILUTED INCOME (LOSS) PER COMMON SHARE

The Company computes income (loss) per common share using SFAS No. 128 "Earnings
per Share."  Basic  income  (loss) per share is computed by dividing  net income
(loss)  applicable  to common  shareholders  by the weighted  average  number of
common shares  outstanding for the reporting  period.  Diluted income (loss) per
share  reflects the  potential  dilution that could occur if securities or other
contracts,  such as stock  options and  warrants  to issue  common  stock,  were
exercised or converted  into common stock.  There were  13,418,792  warrants and
options, convertible into one share of the Companies common stock per warrant or
option,  issued and outstanding at September 30, 2005 and 4,145,875 warrants and
options, convertible into one share of the Companies common stock per warrant or
option at December 31, 2004. As a result of the  Companies  net loss,  the basic
and diluted loss per common share are the same.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In December 2004, the FASB issued SFAS No. 123-R,  "Share-Based  Payment," which
requires that the compensation cost relating to share-based payment transactions
(including  the  cost  of all  employee  stock  options)  be  recognized  in the
financial  statements.  That cost will be measured  based on the estimated  fair
value of the equity or  liability  instruments  issued.  SFAS No. 123-R covers a
wide range of share-based  compensation  arrangements  including  share options,
restricted share plans, performance-based awards, share appreciation


                                       F-41
<PAGE>


                     ASSURED PHARMACY, INC. AND SUBSIDIARIES
                         FORMERLY KNOWN AS ERXSYS, INC.
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2005
--------------------------------------------------------------------------------

rights,  and employee share purchase plans. SFAS No.123-R replaces SFAS No. 123,
and supersedes APB Opinion No. 25.

Small Business Issuers are required to apply SFAS No. 123-R in the first interim
reporting  period of the next fiscal year that begins  after  December 15, 2005.
Thus, the Company's  consolidated  financial  statements will reflect an expense
for (a) all  share-based  compensation  arrangements  granted after December 31,
2005 and for any such arrangements that are modified,  cancelled, or repurchased
after that date,  and (b) the portion of previous  share-based  awards for which
the  requisite  service  has not been  rendered  as of that  date,  based on the
grant-date estimated fair value.

In May  2005,  the FASB  issued  SFAS No.  154,  "Accounting  Changes  and Error
Corrections,"  which  replaces APB Opinion No. 20 and FASB Statement No. 3. This
pronouncement  applies to all  voluntary  changes in accounting  principle,  and
revises the requirements for accounting for and reporting a change in accounting
principle.  SFAS No. 154 requires  retrospective  application  to prior periods'
financial statements of a voluntary change in accounting principle, unless it is
impracticable  to do so. This  pronouncement  also requires that a change in the
method of depreciation, amortization, or depletion for long-lived, non-financial
assets be accounted for as a change in accounting estimate that is affected by a
change in accounting principle.

SFAS No. 154 retains many provisions of APB Opinion 20 without change, including
those  related to  reporting a change in  accounting  estimate,  a change in the
reporting  entity,  and correction of an error. The  pronouncement  also carries
forward the provisions of SFAS No. 3 which govern reporting  accounting  changes
in interim  financial  statements.  SFAS No.  154 is  effective  for  accounting
changes and  corrections of errors made in fiscal years beginning after December
15,  2005.  The  Statement  does not change  the  transition  provisions  of any
existing  accounting  pronouncements,  including  those that are in a transition
phase as of the effective date of SFAS No. 154.

Other  recent  accounting  pronouncements  issued  by the  FASB  (including  its
Emerging  Issues  Task  Force),  the  American  Institute  of  Certified  Public
Accountants,  and the SEC did not or are not  believed by  management  to have a
material  impact  on the  Company's  present  or future  consolidated  financial
statements.

3. INTANGIBLE ASSETS

RTIN HOLDINGS, INC. (RTIN)

In 2003, the Company acquired the rights to an exclusive license  ("License") to
operate Safescript Pharmacies in California, Oregon, Washington, and Alaska from
Safescript  Pharmacies,  Inc.,  formerly  known  as RTIN  Holdings,  Inc.,  (the
"Licensor").  In connection  with this  transaction,  the Company assumed a note
payable to the  Licensor  (See Note 5),  executed a new note payable with one of
its  shareholders  who was also its former chief executive  officer (See Note 5)
and paid $37,000 in cash.

On March 17, 2004, the Company filed a lawsuit in Nevada State Court against the
Licensor  seeking  damages,  declaratory  relief,  to rescind the License and to
recover the  consideration  paid.  On March 19,  2004,  the  Licensor  filed for
Chapter 11  bankruptcy  protection.  The  litigation  in Nevada  State Court was
stayed  due  to  the  Licensor  filing  for  bankruptcy.  The  Company  re-filed
substantially  the  same  claim as an  adversary  proceeding  in the  Licensor's
bankruptcy case, with the U.S. Bankruptcy court in Tyler, Texas.


                                       F-42
<PAGE>


                     ASSURED PHARMACY, INC. AND SUBSIDIARIES
                         FORMERLY KNOWN AS ERXSYS, INC.
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2005
--------------------------------------------------------------------------------

During the quarter ended March 31, 2004,  management determined that the License
was 100% impaired  based on (a) the  uncertainty  of the  Licensor's  ability to
continue  as  a  going  concern,  which  creates  substantial  doubt  about  the
Licensor's ability to continue to support their  e-prescribing  technology,  (b)
the Company's dispute with the Licensor, and (c) the Company's implementation of
the  RxNT  technologies  at  its  first  two  pharmacies,   (see  the  following
paragraph). On June 30, 2005, the United Stated Bankruptcy Court for the Eastern
District of Texas located in Tyler,  Texas  approved a Settlement  Agreement and
Mutual  Release  (the  "Settlement  Agreement")  between  the  Company  and  the
Licensor. See Note 8 for additional information.

NETWORK TECHNOLOGY, INC. (RXNT)

On March 12,  2004,  the Company  entered into a  technology  license  agreement
("Technology  License") with Network Technology,  Inc. ("RxNT").  The Technology
License  grants the  Company  the right to use RxNT's  e-prescribing  technology
under the Company's  brand name  "Assured  Script".  Pursuant to the  Technology
License  agreement,  the  Company  paid RxNT  $50,000  at the  execution  of the
agreement and $50,000 upon implementation of the technology.

4. LINE OF CREDIT

In February  2005,  the Company  entered into an accounts  receivable  servicing
agreement  and a Line of Credit  agreement  (the "LOC")  with  Mosaic  Financial
Services,  Inc.  ("Mosaic").  This  agreement  allowed  the  Company  to  secure
financing for inventory  purchases  over an extended  period of time.  Under the
terms of the LOC  agreement,  the Company was able to draw a maximum of $500,000
to purchase  inventory.  Beginning  July 1, 2005, the LOC limit was increased to
$700,000.  These  agreements  were  for  one  year  term  with  a  provision  to
automatically  renew unless either party provided  notice of termination  within
180 days prior to the end of the effective term. The LOC had an interest rate of
1.25% of the then LOC  limit.  The LOC was  substantially  secured by all of the
Company's  existing and future assets.  The  outstanding  balance of the LOC was
approximately $637,000 as of September 30, 2005.

Within this agreement, the provider had a continuing conversion right during the
term to convert all or a portion of the  outstanding  amount of the  obligations
into a number of shares of the Company's common stock determined at a conversion
price equal to 80% of the average of the daily volume weighted  average price or
"VWAP" for the seven (7)  consecutive  trading days  immediately  proceeding the
date the  conversion  right is exercised.  Notwithstanding  the  foregoing,  the
conversion price shall not be less than twenty-five  cents ($0.25) nor more than
seventy-five  cents  ($0.75).  The  provider  shall  be  entitled  to  piggyback
registration  rights upon  exercise of this  conversion  right.  See Note 10 for
information about the conversion of this debt by the provider.

5. NOTES PAYABLE TO RELATED PARTIES AND STOCKHOLDERS

RTIN

In May 2003, the Company assumed a note payable from Safescript of approximately
$3,177,000 in connection  with  acquisition  of a License (See Note 3), of which
$2,000,000  was converted  into  4,444,444  shares of the  Company's  restricted
common  stock at  $0.45  per  share.  The  remaining  balance  of  approximately
$1,177,000 was payable in monthly  installments of $25,000 including interest at
5% per annum with a balloon payment of


                                       F-43
<PAGE>


                     ASSURED PHARMACY, INC. AND SUBSIDIARIES
                         FORMERLY KNOWN AS ERXSYS, INC.
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2005
--------------------------------------------------------------------------------

approximately  $802,000  due in  December  2004.  This note was  secured  by the
License.

At June 30, 2005, the total outstanding principal balance of the Safescript note
was  approximately  $1,013,000 and monthly  installments were fourteen months in
arrears due to the Company's  dispute with the Licensor (see Note 3 and Note 8).
On June 30,  2005,  the United  States  Bank  Bankruptcy  Court for the  Eastern
District of Texas located in Tyler,  Texas  approved a Settlement  Agreement and
Mutual  Release  (the  "Settlement  Agreement")  between  the  Company  and  the
Licensor.  Under the terms of the Settlement  Agreement,  the Licensor  retained
100,000  shares  of the  Company's  common  stock  and  returned  the  remaining
4,344,444  shares of common stock for  cancellation.  In addition,  we agreed to
issue the Licensor 500,000 additional shares of its common stock and dismiss the
lawsuit currently pending in the U.S. District Court for the Eastern District of
Texas located in Tyler, Texas with prejudice.  The Agreement  contained a mutual
release  which  resulted  in the  Licensor  releasing  the  Company  from of any
liability  with respect to the note payable due to the Licensor in the amount of
approximately $1,013,000.

For financial reporting purposes,  the Company has treated the 500,000 shares to
the  Licensor as  constructively  issued as of June 30, 2005.  Accordingly,  the
Company  recorded  for the quarter  ended in June 30,  2005,  a credit to common
stock for  $500;  a credit to  additional  paid in  capital  for  $148,000  (the
estimated  fair value of the stock based on the trading price on the  settlement
date);  and  recorded  a  gain  on  settlement  of  debt  of  $1,011,522  in the
accompanying  condensed  consolidated  statements of operations.  Therefore,  in
accordance with FASB 145 and APB 30, management  concluded that such gain is not
considered  extraordinary  and  is  presented  as a  component  of  income  from
continuing operations.

PARKER NOTE

In December 2003, the Company  entered into a note payable with Mr. Parker,  its
former Chief  Executive  Officer  ("Former CEO") for $370,000 in connection with
the acquisition of a License (see Note 3). This note accrued interest at a fixed
rate of 5% per annum.  The note was  secured by the License and was to mature in
December 31, 2007.

In a termination  and settlement  agreement  entered into with the former CEO on
February 1, 2005, the former CEO agreed to accept  $10,000 cash,  494,000 shares
of  restricted   common  stock  and  warrants   (fully  vested  and  immediately
exercisable,  five year period, at a price range of $0.75 to $1.25 per share) to
purchase  1,300,000 shares of the Company's  common stock and forever  discharge
the Company from all  liability  associated  with this debt.  During the quarter
ended September 30, 2005, the Company repaid the $10,000.

Accordingly,  the Company  recorded  for the quarter  ended in March 31, 2005, a
credit to subscribed  stock for $494; a credit to additional paid in capital for
$118,006  (the  estimated  fair value of the stock based on the trading price on
the settlement  date);  and recorded a credit to additional  paid in capital for
$329,000  (estimated  fair  value of the  warrants  based  on the  Black-Scholes
pricing model on the settlement  date) and recorded a loss on settlement of debt
of $87,960, clearing this debt.


                                       F-44
<PAGE>


                     ASSURED PHARMACY, INC. AND SUBSIDIARIES
                         FORMERLY KNOWN AS ERXSYS, INC.
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2005
--------------------------------------------------------------------------------

TAPG NOTE

In January 2005, the Company  entered into an agreement with TAPG where TAPG was
to  advance  $270,000  in  connection  with   establishing   pharmacies  in  the
Northwestern  United  States (see Note 3). The note was to be funded by TAPG LLC
in monthly installments of $45,000 up to a maximum of $270,000. The note accrued
interest  at a fixed rate of 7% per annum.  The note is secured by the assets of
the  Northwestern   pharmacies  of  APNI,  which  Assured  Pharmacy  has  a  75%
controlling interest. However, the Company received only $40,000 during the nine
month period ended September 30, 2005.

ADDITIONAL STOCKHOLDERS' NOTES


During the first quarter of 2005, the Company entered into four ninety day notes
payable with three separate  stockholders.  Three of the notes totaling $190,000
are unsecured and have a fixed interest rate of 3% per annum. The remaining note
in the amount of $50,000 is unsecured and has a fixed  interest rate of 7.5% per
annum.  On August 15, 2005,  the company  repaid the balance of the $50,000 note
payable together with accrued interest of $1,350. Also, during the quarter ended
September  30,  2005,  the Company was able to extend the  maturity  date of the
remaining  three notes  payable to January 31,  2006.  These notes have  accrued
interest of approximately $4,600 through September 30, 2005.


ROBERT JAMES, INC. NOTE

On or about  December  21,  2004,  the Company  received a loan  evidenced  by a
promissory  note from Robert  James,  Inc.,  a company  under the control of our
current CEO Mr. Robert DelVecchio,  for the purpose of purchasing  inventory for
our pharmacies.  The promissory note was for a maximum of $150,000,  and matured
on the earlier of March 6, 2005 or the date that we were able to  consummate  an
accounts  receivable   factoring   arrangement  for  our  working  capital.  The
outstanding  principal  amount of this  promissory  note bears interest at three
percent  (3%) per month and  monthly  financing  and  administrative  fees until
repaid.  On February  21,  2005,  the Company  paid the  outstanding  balance of
$125,000 in full including all accrued interest and related fees.

6. EQUITY TRANSACTIONS

COMMON STOCK

During March 2005, the Company issued 124,997 shares of restricted  common stock
to two (2)  consultants in connection  with services  rendered valued at $33,249
(estimated  to be the fair  value  based on the  trading  price on the  issuance
date).  These  securities were issued pursuant to Section 4(2) of the Securities
Act of 1933, as amended.

During the three months ended March 31, 2005,  the Company issued 100,000 shares
of its  common  stock to  directors  of the  Company in  consideration  for such
director's  services rendered during the three months ended March 31, 2005. Such
shares  are  valued at  $38,000  (estimated  to be the fair  value  based on the
trading price on the issuance  date).  These  securities were issued pursuant to
Section 4(2) of the Securities Act of 1933, as amended.


                                       F-45
<PAGE>


                     ASSURED PHARMACY, INC. AND SUBSIDIARIES
                         FORMERLY KNOWN AS ERXSYS, INC.
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2005
--------------------------------------------------------------------------------

During the three  months ended June 30,  2005,  the Company  commenced a private
equity  offering to  accredited  investors  and sold 910,000  units at $0.80 per
unit, for an aggregate of $728,000 in net proceeds. Each unit is priced at $0.80
and consists of two (2) shares of restricted common stock and one (1) warrant to
purchase one (1) share of restricted  common stock at an exercise price of $0.60
exercisable  for thirty six (36) months after the close of the  offering.  These
securities were issued pursuant to Rule 506 of Regulation D.


During the three months ended June 30, 2005,  the Company  issued 168,412 shares
of restricted  common stock to consultants in connection with services  rendered
valued at $49,042  (estimated to be the fair value based on the trading price on
the issuance date). These securities were issued pursuant to Section 4(2) of the
Securities Act of 1933, as amended.

Under the Terms of the  Settlement  Agreement,  the  Licensor  retained  100,000
shares of the Company's common stock and returned the remaining 4,344,444 shares
of common stock for cancellation.  Accordingly,  the Company recorded a debit to
treasury stock for $4,344. In addition, the Company agreed to issue the Licensor
500,000  additional  shares of its common stock.  These  securities  were issued
pursuant to Section 4(2) of the Securities Act of 1933, as amended.

During the three months ended September 30, 2005, the Company sold 856,250 units
at $0.80 per unit,  or an  aggregate  of $685,000  in  proceeds,  to  accredited
investors  in a  private  equity  offering.  Each  unit is  priced  at $0.80 and
consists  of two (2) shares of  restricted  common  stock and one (1) warrant to
purchase one (1) share of restricted  common stock at an exercise price of $0.60
exercisable  for thirty six (36) months after the close of the  offering.  These
securities were issued pursuant to Rule 506 of Regulation D.

During the three months ended  September 30, 2005,  the Company  issued  165,000
shares of restricted common stock to a consultant for services rendered,  valued
at $46,200  (estimated  to be the fair value based on the  trading  price on the
issuance  date).  This  security  was issued  pursuant  to  Section  4(2) of the
Securities Act of 1933, as amended.

During the three months ended  September 30, 2005, the Company issued  1,150,000
shares of restricted  common stock to  consultants  in connection  with one year
service agreements.  Such stock was valued at $334,500 (estimated to be the fair
value based on the trading  price on the  issuance  date).  As a result of these
transactions,  the Company recorded a debit to deferred compensation of $334,500
and a credit to common  stock  and  additional  paid-in  capital  of $1,150  and
$333,350,   respectively.   The  Company  amortized  $51,550  of  such  deferred
compensation  during the quarter  ended  September 30, 2005 leaving a balance of
$282,950 of deferred compensation at September 30, 2005 to be amortized over the
remaining  lives of such  consulting  contracts.  These  securities  were issued
pursuant to Section 4(2) of the Securities Act of 1933, as amended.


During the three months ended September 30, 2005, we issued 265,000  warrants to
purchase 265,000 shares of the Company's common stock,  exercisable at $0.60 per
share for a period of two years from the date of issuance,  to two  consultants.
These  warrants were issued  pursuant to Section 4(2) of the  Securities  Act of
1933, as amended.

During the three months ended  September 30, 2005, the Company issued  1,700,000
warrants to purchase 1,700,000 shares of the Company's common stock, exercisable
at $0.60 per share and exercisable  prior to September 29, 2017.  These warrants
become fully vested over three years  (566,667  warrants fully vest on September
29, 2005;  566,667  become fully vested on September  29, 2006;  566,666  become
fully vested on September 29, 2007).  These  securities  were issued pursuant to
Section 4(2) of the Securities Act of 1933, as amended.

                                       F-46


<PAGE>

                     ASSURED PHARMACY, INC. AND SUBSIDIARIES
                         FORMERLY KNOWN AS ERXSYS, INC.
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2005
--------------------------------------------------------------------------------

In August  2005,  the  Company  issued  500,000  shares of its  common  stock to
directors of the Company in consideration for services rendered during the three
months ended September 30, 2005. These shares were valued at $140,000 (estimated
to be the fair value based on the trading  price on the  issuance  date).  These
securities  were issued  pursuant to Section 4(2) of the Securities Act of 1933,
as amended.

In August 2005, the Company issued 250,000 shares of restricted common stock for
a performance  base bonus rendered  during the three months ended  September 30,
2005 to an officer of the Company  valued at $70,000  (estimated  to be the fair
value based on the trading price on the issuance date). The Company also granted
250,000  options  to  purchase  250,000  shares of the  Company's  common  stock
exercisable  one-third  per year for a period  of three  years  from the date of
issuance at the exercise price of $0.60 per share.  These securities were issued
pursuant to Section 4(2) of the Securities Act of 1933, as amended.

EMPLOYMENT AGREEMENT WITH CEO

In September  2005,  the Company  entered into an employment  agreement with its
Chief  Executive  Officer,  Robert  DelVecchio.  Pursuant  to the  terms  of the
employment  agreement,  the Company issued options to Mr. DelVecchio to purchase
5,000,000  shares  of common  stock  for a period of ten years  from the date of
issuance and exercisable at the exercise price of $0.60 per share. These options
became  fully  vested  and  exercisable  upon  issuance,  with a fair  value  of
$1,950,000  (using  Black  Scholes to be the fair value upon date of  issuance).
Such expense is included in salaries and related in the  accompanying  condensed
consolidated  profit and loss  statement.  These options were issued pursuant to
Section 4(2) of the Securities  Act of 1933, as amended.  The Board of Directors
issued  these  options to Mr.  DelVecchio  for his past  services to the Company
outside of his  services as a Company  employee  or  director.  Therefore,  such
options has been accounted for under SFAS No. 123.

7. RESTRUCTURING COSTS

Because the Company's  revenue and  operating  margin had not grown in line with
managements  original  expectations,  the  Company  adopted a  non-discretionary
restructuring  plan that  resulted  in a  workforce  reduction  and  other  cost
reductions  (collectively,  the  "Restructuring")  intended  to  strengthen  the
Company's   future   operating   performance.   The  Company   implemented   the
Restructuring  during the fourth  quarter of  calendar  2004  through  the first
quarter of 2005. The Company's  total charge related to this  Restructuring  was
approximately  $242,000,  which $48,000 was  recognized in the fourth quarter of
2004 and $194,000 in the first quarter of 2005. No restructuring costs have been
incurred since March 31, 2005.

The  Restructuring  charge  recognized  during  the  first  quarter  of 2005 was
comprised   primarily  of  fixed  asset   write-offs  from  the  termination  of
construction  work for the Regional  Office  built in Fort Worth,  Texas and the
pharmacy built in Santa Monica,  California.  The Company accounts for the costs
associated  with exiting an activity,  including  costs in accordance  with SFAS
146.


                                       F-47


<PAGE>

                     ASSURED PHARMACY, INC. AND SUBSIDIARIES
                         FORMERLY KNOWN AS ERXSYS, INC.
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2005
--------------------------------------------------------------------------------

8. COMMITMENTS AND CONTINGENCIES

LEGAL MATTERS

Providing pharmacy services entails an inherent risk of medical and professional
malpractice liability.  The Company may be named as a defendant in such lawsuits
and become  subject to the attendant  risk of  substantial  damage  awards.  The
Company  believes it possesses  adequate  professional  and medical  malpractice
liability  insurance  coverage.  There can be no assurance that the Company will
not be sued,  that any such lawsuit will not exceed our insurance  coverage,  or
that it will be able to  maintain  such  coverage  at  acceptable  costs  and on
favorable terms.

From time to time,  the Company may be  involved  in various  claims,  lawsuits,
disputes with third parties,  actions involving allegations of discrimination or
breach of contract actions  incidental to the normal operations of the business.
Other than as  disclosed  below,  the Company is not  currently  involved in any
litigation  which it  believes  could  have a  material  adverse  effect  on its
financial position or results of operations.

Safescript Pharmacies, Inc. (formerly known as RTIN, Inc.) failed to provide the
Company with essential  services as set forth in the license agreement that they
entered into and this forced the Company to terminate its use of all  technology
granted under the license  agreement  entered into with  Safescript  Pharmacies,
Inc.  On March 17,  2004,  the  Company  filed a lawsuit in Nevada  State  Court
against  Safescript  Pharmacies,  Inc. seeking damages,  declaratory  relief, to
rescind the License and to recover the  consideration  paid.  On March 19, 2004,
Safescript  Pharmacies,  Inc.  filed for Chapter 11 bankruptcy  protection.  The
litigation in Nevada State Court was stayed due to Safescript  Pharmacies,  Inc.
filing for bankruptcy.  The Company re-filed  substantially the same claim as an
adversary proceeding in Safescript Pharmacies, Inc.'s bankruptcy case, which was
pending in the U.S. Bankruptcy Court located in Tyler, Texas. In July 2004, this
case was  transferred  to the U.S.  District  Court for the Eastern  District of
Texas located in Tyler, Texas.

On June 30, 2005, the United Stated Bankruptcy Court for the Eastern District of
Texas  located  in Tyler,  Texas  ("District  Court")  approved  the  Settlement
Agreement between  Safescript  Pharmacies,  Inc., a Texas corporation f/k/a RTIN
Holdings,  Inc. and Safe Med Systems,  Inc., a Texas corporation  (collectively,
"Safescript"),  and the Company.  Under the Terms of the  Settlement  Agreement,
Safescript  retained 100,000 shares of the Company common stock and returned the
remaining  4,344,444 shares of common stock for cancellation.  In addition,  the
Company agreed to issue Safescript 500,000 additional shares of its common stock
and dismiss the lawsuit  currently pending in the District Court with prejudice.
The Agreement contained a mutual release which resulted in Safescript  releasing
the  Company  from of any  liability  with  respect to the note  payable  due to
Safescript in the amount of approximately $1,013,000.

On July 11,  2005,  a creditor of  Safescript  filed a motion with the  District
Court for  reconsideration  of its  approval  of the  Settlement  Agreement.  On
October  14,  2005,  the  District  Court  denied  the  creditor's   motion  for
reconsideration.  The creditor  appealed the  District  Court's  approval of the
Settlement  Agreement.  The  court  has  not  decided  that  appeal,  but  it is
substantially  unlikely,  based on the advice of  counsel,  that the court would
overturn the District Court's approval of the Settlement Agreement.


                                       F-48


<PAGE>

                     ASSURED PHARMACY, INC. AND SUBSIDIARIES
                         FORMERLY KNOWN AS ERXSYS, INC.
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2005
--------------------------------------------------------------------------------

On April 14,  2004,  a former  officer  filed a lawsuit  against  the Company in
Orange  County  California  Superior  Court.  The  former  officer  was  seeking
additional  compensation  in the amount of  $213,000  and other  relief that the
court deems just and appropriate.  This case went to trial in early August 2005.
On August 10, 2005,  the judge ruled in the  Company's  favor  deciding  that no
compensation was due to the former officer.

9. INCOME (LOSS) PER COMMON SHARE

The following is a  reconciliation  of the  numerators and  denominators  of the
basic and diluted  income  (loss) per common  share  computations  for the three
months and nine months ended September 30:

<TABLE>
<CAPTION>
                                  Three Months Ended              Nine Months Ended
                                     September 30,                  September 30,
                             ---------------------------     ----------------------------
                                 2005            2004            2005            2004
                             ------------    ------------    ------------    ------------
<S>                          <C>             <C>             <C>             <C>
Numerator for basic and
diluted income (loss) per
common share:

Net Loss to
common stockholders          $ (2,835,877)   $ (1,132,423)   $ (3,849,291)   $ (6,591,671)

Denominator for basic and
diluted income (loss) per
common shares:

Weighted average number of
shares outstanding             39,434,857      44,717,842      40,114,227      38,584,715
                             ============    ============    ============    ============
Basic and diluted Loss
per common share             $      (0.07)   $      (0.03)   $      (0.10)   $      (0.17)
                             ============    ============    ============    ============
</TABLE>

10. SUBSEQUENT EVENTS

NAME CHANGE

On October 21, 2005,  the Company held its annual meeting of  shareholders.  The
shareholders approved an amendment to the articles of incorporation to change of
the Company's  name from eRXSYS,  Inc. to Assured  Pharmacy,  Inc. The Company's
common stock is now trading  over-the-counter  bulletin  board under the trading
symbol "APHY."


                                       F-49


<PAGE>

                     ASSURED PHARMACY, INC. AND SUBSIDIARIES
                         FORMERLY KNOWN AS ERXSYS, INC.
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2005
--------------------------------------------------------------------------------

MELATON INVESTMENT LOAN

On October 25,  2005,  the Company  entered into a loan  agreement  with Melaton
Investment Corporation S.A. ("Melaton").  Under the terms of the agreement,  the
Company received $250,000 for a twelve (12) month term which can be extended for
an  additional  twelve  (12)  month  period  by mutual  consent.  On the date of
funding,  the Company will pay to the lender a one time  commitment fee equal to
3% of the initial  amount of the loan.  The loan has an interest rate of 15% per
annum to be paid in monthly installments.

Pursuant to the terms of this agreement, the Melaton has a continuing conversion
right during the term to convert all or a portion of the then outstanding amount
of the  obligations  into a number  of  shares  of the  Company's  common  stock
determined  at a  conversion  price equal to the  rolling  seven (7) trading day
weighted  average  closing bid price for the Common Stock on the OTC:BB (or such
other  equivalent  market on which the Common Stock is quoted)  calculated as of
the  trading  day  immediately  preceding  the  date  the  Conversion  Right  is
exercised.  The  Conversion  Price  shall not be less  than  $0.40 nor more than
$0.80. Metalon shall be entitled to piggyback  registration rights upon exercise
of this conversion right.

LINE OF CREDIT AGREEMENTS

On October 24, 2005, the Company authorized the issuance of 2,500,000 restricted
common  shares at $0.28 per share to  Mosaic in order to  convert  their  entire
outstanding  balance of $700,000  into  common  stock in  accordance  with their
conversion  right in the LOC  agreement.  The issuance of these shares to Mosaic
satisfied  in full the  Company's  obligations  under the LOC  agreement.  These
shares were issued pursuant to Section 4(2) of the Securities Act.

As of October 31, 2005, the Company entered into a new line of credit  agreement
for  $1,000,000  with Mosaic.  This line has a one time  commitment fee equal to
three  percent (3%) of the initial  amount of the line of credit.  The agreement
has a monthly interest rate of 1.5% of the then line of credit limit. The Lender
shall deduct the accrued finance  charges from the advances.  The line of credit
is secured by the Company's  open accounts  receivable  due from all sources and
substantially all assets of the Company.

Pursuant to the terms of this agreement,  the Lender has a continuing conversion
right during the term to convert all or a portion of the  outstanding  amount of
the obligations into a number of shares of the Company's common stock determined
at a  conversion  price  equal to the rolling  seven (7)  trading  day  weighted
average  closing  bid price for the  Common  Stock on the  OTC:BB (or such other
equivalent  market on which the  Common  Stock is quoted)  calculated  as of the
trading day  immediately  preceding the date the Conversion  Right is exercised.
The  Conversion  Price  shall not be less than  $0.40 nor more than  $0.80.  The
Lender shall be entitled to piggyback  registration rights upon exercise of this
conversion right.


                                       F-50
<PAGE>


                     ASSURED PHARMACY, INC. AND SUBSIDIARIES
                         FORMERLY KNOWN AS ERXSYS, INC.
         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2005
--------------------------------------------------------------------------------

CONSULTING AGREEMENTS

During  the  month of  October  2005,  the  Company  issued  165,590  shares  of
restricted  common stock to a consultant  in connection  with services  rendered
valued at $60,000  (average price per share of $0.36).  These shares were issued
pursuant to Section 4(2) of the Securities Act of 1933, as amended.

During the month of October 2005,  the Company issued 3,500 shares of restricted
common stock to a consultant in  connection  with  services  rendered  valued at
$1,400,  $0.40 per share  (estimated  to be the fair value  based on the trading
price on the issuance  date).  These shares were issued pursuant to Section 4(2)
of the Securities Act of 1933, as amended.

During October 2005, the Company  contracted  with a marketing  research firm in
exchange for 30,000 shares of the Company's restricted common stock. Such shares
are  valued at $0.48  per share  (estimated  to be the fair  value  based on the
trading price on the issuance  date).  These  securities were issued pursuant to
Section 4(2) of the Securities Act of 1933, as amended.

During October 2005, the Company contracted with sales and marketing  consulting
firms in exchange for 125,000 warrants to purchase shares of the Company's stock
at $.60 per share for a period of two years.


                                      F-51


<PAGE>


                  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS

We have had no changes in or disagreements with our accountants.

Until ________________, all dealers that effect transactions in these securities
whether or not  participating  in this  offering  may be  required  to deliver a
prospectus.  This  is in  addition  to the  dealers'  obligation  to  deliver  a
prospectus  when  acting  as  underwriters  and with  respect  to  their  unsold
allotments or subscriptions.

                                      54


<PAGE>

                                     PART II

                   INFORMATION NOT REQUIRED IN THE PROSPECTUS

ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Our officers and directors  are  indemnified  as provided by the Nevada  Revised
Statutes and our bylaws.

Under the governing  Nevada  statutes,  director  immunity  from  liability to a
company or its  shareholders  for  monetary  liabilities  applies  automatically
unless it is specifically limited by a company's articles of incorporation.  Our
articles  of  incorporation  do not  contain  any  limiting  language  regarding
director immunity from liability. Excepted from this immunity are:

1.   a willful  failure to deal fairly with the company or its  shareholders  in
     connection  with a matter in which the director has a material  conflict of
     interest;

2.   a violation of criminal law (unless the  director had  reasonable  cause to
     believe  that his or her  conduct  was  lawful  or no  reasonable  cause to
     believe that his or her conduct was unlawful);

3.   a transaction from which the director derived an improper  personal profit;
     and

4.   willful misconduct.

Our bylaws  provide that we will  indemnify  our  directors  and officers to the
fullest  extent not  prohibited by Nevada law;  provided,  however,  that we may
modify the  extent of such  indemnification  by  individual  contracts  with our
directors and officers; and, provided, further, that we shall not be required to
indemnify any director or officer in  connection  with any  proceeding  (or part
thereof) initiated by such person unless:

1.   such indemnification is expressly required to be made by law;

2.   the proceeding was authorized by our Board of Directors;

3.   such indemnification is provided by us, in our sole discretion, pursuant to
     the powers vested us under Nevada law; or;

4.   such indemnification is required to be made pursuant to the bylaws.


We have not entered into individual  contracts with our directors or officers to
modify the extent of such indemnification.


Our bylaws  provide  that we will advance to any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative, by
reason  of the  fact  that he or she is or was a  director  or  officer,  of the
company,  or is or was  serving at the  request of the  Company as a director or
executive officer of another company, partnership, joint venture, trust or other
enterprise, prior to the final disposition of the proceeding, promptly following
request  therefore,  all  expenses  incurred  by  any  director  or  officer  in
connection  with such  proceeding upon receipt of an undertaking by or on behalf
of such person to repay said amounts if it should be determined  ultimately that
such person is not entitled to be indemnified under our bylaws or otherwise.

Our  bylaws  provide  that no  advance  shall be made by us to an officer of the
company,  except by reason of the fact that such officer is or was a director of
the company in which event this paragraph shall not apply,  in any action,  suit
or proceeding,  whether civil, criminal,  administrative or investigative,  if a
determination  is reasonably and promptly made: (a) by the board of directors by
a majority vote of a quorum  consisting of directors who were not parties to the
proceeding,  or (b) if such quorum is not obtainable,  or, even if obtainable, a
quorum of disinterested  directors so directs, by independent legal counsel in a
written opinion,  that the facts known to the decision-making  party at the time
such determination is made demonstrate clearly and convincingly that such person
acted in bad faith or in a manner  that such  person did not believe to be in or
not opposed to the best interests of the company.

ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The estimated costs of this offering are as follows:


                                      55


<PAGE>


Securities and Exchange Commission
  registration fee                                    $   913
Federal Taxes                                         $   Nil
State Taxes and Fees                                  $   Nil
Transfer Agent Fees                                   $ 1,000
Accounting fees and expenses                          $45,000
Legal fees and expenses                               $25,000
                                                      -------
Total                                                 $71,913
                                                      =======


All amounts are estimates, other than the SEC's registration fee.

We are paying all expenses of the  offering  listed  above.  No portion of these
expenses will be borne by the selling  shareholders.  The selling  shareholders,
however,  will pay any other  expenses  incurred in selling  their common stock,
including any brokerage commissions or costs of sale.

ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES


During the three months ended  September 30, 2005, we issued  165,000  shares of
restricted common stock to a consultant for services rendered, valued at $46,200
(estimated  to be the fair  value  based on the  trading  price on the  issuance
date).  These shares were issued  pursuant to Section 4(2) of the Securities Act
of 1933, as amended.

During the three months ended September 30, 2005, we issued  1,150,000 shares of
restricted  common  stock to  consultants  in  connection  with one year service
agreements.  Such stock was valued at $334,500  (estimated  to be the fair value
based  on the  trading  price  on the  issuance  date).  As a  result  of  these
transactions,  we recorded a debit to deferred  compensation  of $334,500  and a
credit to common stock and  additional  paid-in  capital of $1,150 and $333,350,
respectively.  We amortized  $51,550 of such  deferred  compensation  during the
quarter  ended  September  30,  2005  leaving a balance of  $282,950 of deferred
compensation  at September 30, 2005 to be amortized over the remaining  lives of
such consulting contracts.  These shares were issued pursuant to Section 4(2) of
the Securities Act of 1933, as amended.  Each consultant  represented his or her
intention  to acquire the  securities  for  investment  only and not with a view
toward distribution.  Each consultant was given adequate information about us to
make  an  informed  investment  decision.  We did  not  engage  in  any  general
solicitation or advertising.  The stock certificates  issued had the appropriate
legends affixed to the restricted stock.

In August 2005, we issued 500,000 shares of our common stock to outside  members
of our board of directors in consideration  for services rendered as a member of
the board. These shares were valued at $140,000  (estimated to be the fair value
based on the  trading  price on the  issuance  date).  These  shares were issued
pursuant to Section 4(2) of the Securities  Act of 1933, as amended.  We did not
engage in any general solicitation or advertising. The stock certificates issued
had the appropriate legends affixed to the restricted stock.

In  August  2005,  we issued  250,000  shares of  restricted  common  stock as a
performance base bonus to an officer of the company valued at $70,000 (estimated
to be the fair value based on the trading  price on the issuance  date).  We did
not engage in any general  solicitation or advertising.  The stock  certificates
issued had the  appropriate  legends  affixed to the restricted  stock.  We also
granted to this officer  options to purchase  250,000 shares of our common stock
vesting one-third per year for a period of three years from the date of issuance
and  exercisable  at the  exercise  price of $0.60 per share.  These  shares and
options were issued  pursuant to Section 4(2) of the  Securities Act of 1933, as
amended.

In  September  2005,  we entered  into an  employment  agreement  with our Chief
Executive Officer,  Robert  DelVecchio.  Pursuant to the terms of the employment
agreement,  we issued options to Mr. DelVecchio purchase 5,000,000 shares of our
common stock for a period of ten years from the date of issuance and exercisable
at the exercise price of $0.60 per share.  These options became fully vested and
exercisable upon issuance,  with a fair value of $1,950,000  (calculated through
Black  Scholes to be the fair value upon date of  issuance).  These options were
issued pursuant to Section 4(2) of the Securities Act of 1933, as amended.

During the three months ended September 30, 2005, we issued 265,000  warrants to
purchase 265,000 shares of our common stock,  exercisable at $0.60 per share for
a period of two  years  from the date of  issuance,  to two  consultants.  These
warrants were issued  pursuant to Section 4(2) of the Securities Act of 1933, as
amended.

                                      56


<PAGE>


During the three months ended September 30, 2005, we issued  1,700,000  warrants
to purchase 1,700,000 shares of our common stock, exercisable at $0.60 per share
and exercisable  prior to September 29, 2017. These warrants become fully vested
over three years  (566,667  warrants  fully vest on September 29, 2005;  566,667
become  fully  vested on  September  29,  2006;  566,666  become fully vested on
September 29, 2007).  These  securities  were issued pursuant to Section 4(2) of
the Securities Act of 1933, as amended.

During  the three  months  ended  June 30,  2005,  we issued  168,412  shares of
restricted  common stock to four (4)  consultants  in  connection  with services
rendered.  These shares were issued  pursuant to Section 4(2) of the  Securities
Act. We did not engage in any general  solicitation  or  advertising.  The stock
certificates were issued with the appropriate  legends affixed to the restricted
stock.

During the second  quarter of 2005, we issued 1,500 shares of restricted  common
stock in  connection  with  consulting  services  rendered  by a  member  of our
advisory  board.  These  shares  were  issued  pursuant  to Section  4(2) of the
Securities Act. We did not engage in any general solicitation or advertising.


During the second quarter of 2005, we issued 494,000 shares of restricted common
stock to a former  officer  and  director  pursuant  to a  settlement  agreement
entered into on February 1, 2005.  These shares were issued  pursuant to Section
4(2) of the  Securities  Act. We did not engage in any general  solicitation  or
advertising.


During the first  quarter of 2005,  we commenced an exempt  offering of units to
accredited  investors  pursuant to Rule 506 of Regulation D under the Securities
Act. This offering closed on December 23, 2005. Each unit is priced at $0.80 and
consisted of two shares of  restricted  common stock and one warrant to purchase
one share of restricted  common stock at an exercise price of $0.60  exercisable
for thirty six months after the close of the offering.  We received  proceeds of
$1,527,880  from 18  accredited  investors  for a total of 1,858,250  units.  No
commissions  were  paid  on  the  issuance  of  these  shares.   Each  purchaser
represented  his or her intention to acquire the securities for investment  only
and not with a view  toward  distribution.  Each  investor  was  given  adequate
information about us to make an informed investment decision.  We did not engage
in any general solicitation or advertising. The stock certificates, when issued,
will have the appropriate legends affixed to the restricted stock.


During the first quarter of 2005, we issued 100,000 shares of restricted  common
stock to two consultants in connection with services rendered. These shares were
issued  pursuant to Section 4(2) of the Securities Act. We did not engage in any
general solicitation or advertising.

During the first quarter of 2005, we issued 124,997 shares of restricted  common
stock to four  independent  members  of our board of  directors  in  advance  of
services to be rendered for the year ended December 31, 2005.  These shares were
issued  pursuant to Section 4(2) of the Securities Act. We did not engage in any
general solicitation or advertising.

During the three months ended  December 31,  2004,  we issued  74,997  shares of
restricted  common stock in connection  with services  rendered  during the year
ended December 31, 2004 by four  independent  members of our board of directors.
These shares were issued  pursuant to Section 4(2) of the Securities Act. We did
not engage in any general solicitation or advertising.

During the three months ended  September  30, 2004,  we issued  25,003 shares of
restricted  common stock in connection with services rendered by two independent
members of our board of directors.  These shares were issued pursuant to Section
4(2) of the  Securities  Act. We did not engage in any general  solicitation  or
advertising.

During the three months ended  September  30, 2004,  we issued  40,000 shares of
restricted common stock in connection with consulting  services rendered by four
members of our advisory board. These shares were issued pursuant to Section 4(2)
of the  Securities  Act. Each advisory  board member  received  10,000 shares of
restricted  common  stock.  We did not  engage in any  general  solicitation  or
advertising.



                                       57
<PAGE>



On June 17,  2004,  we  completed  an exempt  offering of units to  thirty-eight
accredited  investors  pursuant to Rule 506 of Regulation D under the Securities
Act.  Each unit was priced at $0.80 and  consisted  of two shares of  restricted
common stock and one warrant to purchase one share of restricted common stock at
an exercise price of $0.60 exercisable for twenty-four months after the close of
the offering. We received proceeds of $2,650,153 net of broker/dealer commission
and legal fees  related to the  offering  in the amount of  $306,548.  We issued
7,391,750 shares of restricted common stock and 3,695,875 warrants in connection
with this offering.  Each purchaser  represented his or her intention to acquire
the securities for investment only and not with a view toward distribution. Each
investor was given adequate  information about us to make an informed investment
decision.  We did not engage in any  general  solicitation  or  advertising.  We
issued  the stock  certificates  and  affixed  the  appropriate  legends  to the
restricted stock.

During the three months ended June 30, 2004, in connection with the extension of
a consulting  agreement,  we issued 150,000  shares of restricted  common stock,
with 350,000 warrants to purchase 350,000 shares of common stock, exercisable at
$0.60  per  share  for a period of five  years  from the date of  issuance,  for
services valued at  approximately  $70,500  (estimated to be fair value based on
the trading  price on the issuance  date) and included in  consulting  and other
compensation  in  the   accompanying   condensed   consolidated   statements  of
operations.  These shares and warrants  were issued  pursuant to Section 4(2) of
the  Securities  Act.  We  did  not  engage  in  any  general   solicitation  or
advertising.  We issued  the stock  certificates  and  affixed  the  appropriate
legends to the restricted stock.

During  the three  months  ended  June 30,  2004,  we issued  126,625  shares of
restricted   common  stock  to  consultants  for  services  rendered  valued  at
approximately  $62,000 (estimated to be fair value based on the trading price on
the issuance  date).  These shares and warrants were issued  pursuant to Section
4(2) of the  Securities  Act. We did not engage in any general  solicitation  or
advertising.  We issued  the stock  certificates  and  affixed  the  appropriate
legends to the restricted stock.

During the three  months  ended June 30,  2004,  we issued  100,000  warrants to
purchase 100,000 shares of the Company's common stock,  exercisable at $0.60 per
share for a period of five years  from the date of  issuance,  to a  consultant.
These  warrants were issued  pursuant to Section 4(2) of the Securities Act . We
did not engage in any general solicitation or advertising.

During the three  months  ended March 31, 2004,  we issued  1,050,000  shares of
restricted   common  stock  to  consultants  for  services  rendered  valued  at
approximately $468,000 (estimated to be fair value based on the trading price on
the issuance  date).  These  shares were issued  pursuant to Section 4(2) of the
Securities Act. We did not engage in any general solicitation or advertising.

During  the three  months  ended  March 31,  2004,  we issued  20,000  shares of
restricted  common  stock in  connection  with notes  payable  issued to certain
shareholders and certain third parties valued at approximately $9,500 (estimated
to be fair value based on the trading price on the issuance date).  These shares
were issued pursuant to Section 4(2) of the Securities Act. We did not engage in
any general solicitation or advertising.

During the one month  transition  period  ended  December  31,  2003,  we issued
1,544,149 shares of restricted common stock to consultants for services rendered
valued  at  approximately  $664,000  (estimated  to be fair  value  based on the
trading  price on the  issuance  date).  These  shares were  issued  pursuant to
Section  4(2)  of  the  Securities  Act.  We  did  not  engage  in  any  general
solicitation or advertising.  We issued the stock  certificates  and affixed the
appropriate legends to the restricted stock.

On September  17, 2003,  we completed an exempt  offering of common stock at the
price  of  $0.25  per  share.   Twenty-nine  accredited  investors  and  fifteen
unaccredited  investors  purchased  shares in this  offering.  We received total
proceeds  in the  amount  of  $1,330,750  and  issued  5,323,000  shares  of our
restricted common stock. This exempt offering was conducted pursuant to Rule 506
of Regulation D under the Securities Act. Each purchaser  represented his or her
intention  to acquire the  securities  for  investment  only and not with a view
toward  distribution.  Each investor was given adequate  information about us to
make  an  informed  investment  decision.  We  did  not  engage  in  any  public
solicitation or general advertising.  No registration rights were granted to any
of the purchasers.  We issued the stock certificates and affixed the appropriate
legends to the  restricted  stock.  Subsequent  to November 30, 2003,  we issued
46,400  shares of  restricted  common stock to finders in  connection  with this
exempt offering.

During  the year  ended  November  30,  2003,  we  issued  4,013,600  shares  of
restricted  common  stock to  various  consultants  estimated  to be  valued  at
$1,329,008  based on the market prices on the issuance dates.  These shares were
issued  pursuant to an exemption  available under Section 4(2) of the Securities
Act. In  connection  with this  issuance,  there was no public  solicitation  or
general advertising used.


                                       58
<PAGE>


During  the year  ended  November  30,  2003,  we  issued  4,444,444  shares  of
restricted  common stock to retire  $2,000,000 of a note  payable.  These shares
were  issued  pursuant  to an  exemption  available  under  Section  4(2) of the
Securities  Act.  In  connection  with  this  issuance,   there  was  no  public
solicitation or general advertising used.

In November 2003, we agreed to issue 1,000,000 shares of restricted common stock
in connection with the extension of certain consulting contracts.  In accordance
with  this  agreement,  600,000  shares  were  issued in  November  2003 and the
remaining  400,000  shares were issued in December  2003 and January  2004.  The
estimated  fair value of the 1,000,000  shares was $320,000 based on the trading
price on the issuance  dates.  These shares were issued pursuant to an exemption
available  under Section 4(2) of the  Securities  Act. In  connection  with this
issuance, there was no public solicitation or general advertising used.

On September 5, 2003, we issued  1,273,600  shares to our officers and employees
in settlement of accrued consulting and salary expense. These shares were issued
pursuant to an exemption available under Section 4(2) of the Securities Act.


ITEM 27. EXHIBITS

Exhibit
Number            Description
-------           --------------------------------------------------------------
3.1               Articles of Incorporation, as amended (1)

3.2               By-laws, as amended (1)

4.1               Sample Share Certificate (1)

5.1               Opinion of Cane Clark LLP, with consent to use (1)

10.1              License Agreement  between RTIN Holdings,  Inc. and RxSystems,
                  Inc. (2)

10.2              Assignment  of  Safescript  Pharmacies  (f/k/a RTIN  Holdings,
                  Inc.) License from RxSystems, Inc. to Surforama.com, Inc. (2)

10.3              Amendment to the License Agreement (3)

10.4              Second Amendment to License Agreement (4)

10.5              Agreement  for  Payment  Pursuant  to  Assignment  of  License
                  Agreement (3)

10.6              Cancellation  of Debt  and  Assignment  Agreement  for CMSA of
                  Fresno, CA (5)

10.7              Amendment to Cancellation of Debt and Assignment Agreement for
                  CMSA of Fresno, CA (5)

10.8              Termination and Settlement Agreement with David Parker (6)

10.9              Settlement Agreement with Ronald Folse (6)

10.10             Termination and Settlement Agreement with A.J. LaSota (6)

10.11             Agreement with TPG (5)

10.12             Agreement with TAPG (7)

10.13             Promissory Note with Robert James, Inc. (8)

10.14             Loan and Security Agreement with TAPG LLC (8)

10.15             Secured Promissory Note with VVPH (8)

10.16             Secured Promissory Note with Steven Rosner (8)

10.17             Secured Promissory Note with Steven Rosner (8)

10.18             Accounts Receivable  Servicing Agreement with Mosaic Financial
                  Services LLC (8)

10.19             Line of Credit  Agreement with Mosaic  Financial  Services LLC
                  (8)



                                       59
<PAGE>



10.20             Promissory Note with Weil Consulting Corporation (8)


10.21             Line of Credit Agreement with Mosaic Financial  Services,  LLC
                  dated October 31, 2005 (9)

10.22             Employment Agreement with Chief Executive Officer (9)


23.1              Consent of Squar, Milner, Reehl & Williamson, LLP, Independent
                  Registered Public Accounting Firm

(1)  Previously  included as an exhibit to the  registration  statement filed on
     Form SB-2 on December 15, 2004

(2)  Incorporated by reference to Current Report on Form 8-K filed May 28, 2003

(3)  Incorporated by reference to Current Report on Form 8-K filed July 21, 2003

(4)  Incorporated by reference to Quarterly  Report on Form 10-QSB for the three
     month period ended August 31, 2003 and filed on October 20, 2003

(5)  Incorporated  by reference to Annual  Report on Form  10-KSB/A for the year
     ended November 30, 2003 filed on March 23, 2004

(6)  Incorporated  by reference to Current  Report on Form 8-K filed February 7,
     2005

(7)  Incorporated  by  reference  to Current  Report on Form 8-K filed April 21,
     2004


(8)  Incorporated  by reference  from Annual  Report on Form 10-KSB for the year
     ended December 31, 2004 and filed on April 15, 2005

(9)  Incorporated  by  reference  to  Quarterly  Report on Form  10-QSB  for the
     quarter ended September 30, 2004 and filed on November 14, 2005


ITEM 28. UNDERTAKINGS

The undersigned registrant hereby undertakes:

1.   To file,  during  any  period in which  offers or sales are being  made,  a
     post-effective amendment to this registration statement;

     (a)  to  include  any  prospectus  required  by  Section  10(a)(3)  of  the
          Securities Act ;

     (b)  to reflect in the  prospectus  any facts or events  arising  after the
          effective  date  of  this  registration   statement,  or  most  recent
          post-effective  amendment,  which,  individually  or in the aggregate,
          represent a fundamental  change in the  information  set forth in this
          registration statement, and;

     (c)  to  include  any  material  information  with  respect  to the plan of
          distribution not previously  disclosed in this registration  statement
          or any  material  change  to  such  information  in  the  registration
          statement.

2.   That,  for the purpose of  determining  any liability  under the Securities
     Act,  each  such  post-effective  amendment  shall  be  deemed  to be a new
     registration  statement  relating to the securities offered herein, and the
     offering of such  securities at that time shall be deemed to be the initial
     bona fide offering thereof.

3.   To remove from  registration by means of a post-effective  amendment any of
     the  securities  being  registered   hereby  which  remain  unsold  at  the
     termination of the offering.

Insofar as indemnification  for liabilities arising under the Securities Act may
be permitted to our directors,  officers and controlling persons pursuant to the
provisions  above,  or  otherwise,  we been  advised  that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act , and is, therefore, unenforceable.



                                       60
<PAGE>


In the event that a claim for  indemnification  against such liabilities,  other
than the  payment by us of expenses  incurred  or paid by one of our  directors,
officers,  or controlling  persons in the successful defense of any action, suit
or  proceeding,  is asserted by one of our directors,  officers,  or controlling
persons in connection with the securities being  registered,  we will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit  to a  court  of  appropriate  jurisdiction  the  question  whether  such
indemnification  is against  public policy as expressed in the  Securities Act ,
and we will be governed by the final adjudication of such issue.



                                       61
<PAGE>


                                   SIGNATURES


         In accordance with the  requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the  requirements  for filing on Form SB-2 and authorized  this  registration
statement to be signed on its behalf by the undersigned,  in the City of Irvine,
California on January 20, 2006.

Assured Pharmacy, Inc.

By:

                /s/   Robert DelVecchio
                ------------------------------------------------------------
                      Robert DelVecchio
                      Chief Executive Officer,
                      Chief Financial Officer, Principal Accounting Officer,
                      and Director


              In accordance with the requirements of the Securities Act of 1933,
this  registration  statement  was  signed  by  the  following  persons  in  the
capacities and on the date stated:


By:                                           By:
           /s/   James Manfredonia                   /s/ Richard Falcone
           -------------------------------          ----------------------------
                 James Manfredonia                        Richard Falcone
                 Director                                 Director
                 January 20, 2006                         January 20, 2006

 By:
           /s/   Haresh Sheth
           -------------------------------
                 Haresh Sheth
                 Director
                 January 20, 2006

                                     62


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23
<SEQUENCE>2
<FILENAME>ex231consent.txt
<DESCRIPTION>EX23.1 CONSENT
<TEXT>
EXHIBIT 23.1

            CONSENT ON INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the use in this Amendment No. 2 of the  Registration  Statement on
Form  SB-2 of our  report  dated  April 8,  2004 on the  consolidated  financial
statements  of  eRXSYS,  Inc.  and  subsidiaries  as of and for the  year  ended
December 31, 2004,  for the year ended  November 30, 2003, and for the one month
ended December 31, 2003, which appears in such Registration  Statement.  We also
consent to the reference to us under the heading  "Expert" in such  Registration
Statement.

/s/ SQUAR, MILNER, REEHL AND WILLIAMSON, LLP

Newport Beach, California
January 19, 2006


</TEXT>
</DOCUMENT>
</SUBMISSION>
