<SUBMISSION>
<ACCESSION-NUMBER>0000930413-08-006704
<TYPE>10-Q
<PUBLIC-DOCUMENT-COUNT>5
<PERIOD>20080930
<FILING-DATE>20081114
<DATE-OF-FILING-DATE-CHANGE>20081114
<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>10-Q
<ACT>34
<FILE-NUMBER>000-33165
<FILM-NUMBER>081192523
</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>
</FILER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>c55673_10-q.htm
<TEXT>

<HTML>
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   <TITLE>rider.htm -- Converted by SEC Publisher, created by BCL Technologies Inc., for SEC Filing</TITLE>
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<P align="center">
<B><FONT size=2 face="serif">U.S. SECURITIES AND EXCHANGE COMMISSION </FONT></B><BR>
<FONT size=2 face="serif">Washington, D.C. 20549 </FONT><BR>
<FONT size=2 face="serif">FORM 10-Q </FONT></P>
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     <TD width=3%></TD>
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<TD align=left nowrap>
<FONT size=2 face="serif">[ X ]</FONT></TD>
<TD align=left nowrap>
<FONT size=2 face="serif">QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934</FONT></TD>
  </TR>
<TR valign="bottom">
<TD align=left nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
  </TR>
<TR valign="bottom">
<TD colspan="2" align=left nowrap><FONT size=2 face="serif">For the quarterly period ended
    <u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;September 30, 2008&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u></FONT></TD>
  </TR>
<TR valign="bottom">
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>&nbsp;</TD>
<TD align=center nowrap><FONT size=2 face="serif">or</FONT> </TD>
  </TR>
<TR valign="bottom">
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
<FONT size=2 face="serif">[&nbsp;&nbsp;&nbsp;&nbsp;]</FONT></TD>
<TD align=left nowrap>
<FONT size=2 face="serif">TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934</FONT></TD>
  </TR>
<TR valign="bottom">
<TD align=left nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
  </TR>
<TR valign="bottom">
<TD align=left nowrap colspan=2>
<FONT size=2 face="serif">For the transition period ended &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;to &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
  </TR>
<TR valign="bottom">
  <TD align=left nowrap colspan=2>&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD align=center nowrap colspan=2 style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Commission File Number:
    000-33165 </FONT></TD>
</TR>
<TR valign="bottom">
  <TD align=center nowrap colspan=2>&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD align=center nowrap colspan=2 style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">ASSURED PHARMACY,
    INC.</FONT></TD>
</TR>
<TR valign="bottom">
  <TD align=center nowrap colspan=2><FONT size=2 face="serif">(Exact name of registrant
    as specified in its charter) </FONT></TD>
</TR>
<TR valign="bottom">
  <TD align=left nowrap colspan=2>&nbsp;</TD>
</TR>

</TABLE>

<TABLE width="100%" border=0 cellspacing=0 cellpadding=0>
<TR>
     <TD width=59%></TD>
     <TD width=2%></TD>
     <TD width=38%></TD></TR>
<TR valign="bottom">
<TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">Nevada</FONT></TD>
<TD>&nbsp;</TD>
<TD align=center nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">98-0233878</FONT></TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
<FONT size=2 face="serif">(State or other jurisdiction of incorporation or organization)</FONT></TD>
<TD>&nbsp;</TD>
<TD align=center nowrap>
<FONT size=2 face="serif">(I.R.S. Employer Identification No.)</FONT></TD>
</TR>
<TR>
<TD colspan=3>&nbsp;</TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">17935 Sky Park Circle Suite F, Irvine, CA</FONT></TD>
<TD>&nbsp;</TD>
<TD align=center nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">92614</FONT></TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
<FONT size=2 face="serif">(Address of principal executive offices)</FONT></TD>
<TD>&nbsp;</TD>
<TD align=center nowrap><FONT size=2 face="serif">(Zip Code)</FONT></TD>
</TR>
<TR valign="bottom">
  <TD align=left nowrap>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=center nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD colspan="3" align=center nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">(949) 222-9971 </FONT><BR></TD>
  </TR>
<TR valign="bottom">
  <TD colspan="3" align=center nowrap><FONT size=2 face="serif">(Registrant's telephone number,
    including area code) </FONT></TD>
  </TR>
</TABLE>
<BR>
<P align="center"><FONT size=2 face="serif">(Former name, former address and former fiscal year, if changed since last report)</FONT></P>
<P align="justify">
<FONT size=2 face="serif">Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  </FONT></P>
<P align="justify">
<FONT size=2 face="serif">        Yes [x] No [ ] </FONT></P>
<P align="justify">
<FONT size=2 face="serif">Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of &#147;large accelerated filer&#148;,
&#147;accelerated filer&#148; and &#147;smaller reporting company&#148; in Rule 12b-2 of the Exchange Act. (Check one): </FONT></P>
<TABLE width="100%" border=0 cellspacing=0 cellpadding=0>
<TR>
     <TD width=20%></TD>
     <TD width=2%></TD>
     <TD width=45%></TD>
     <TD width=2%></TD>
     <TD width=19%></TD>
     <TD width=2%></TD>
     <TD width=8%></TD></TR>
<TR valign="bottom">
<TD align=left nowrap>
<FONT size=2 face="serif">Large accelerated filer</FONT></TD>
<TD><FONT size=2 face="serif">[&nbsp;&nbsp;&nbsp;]</FONT></TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>
<FONT size=2 face="serif">Accelerated filer</FONT></TD>
<TD><FONT size=2 face="serif">[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]</FONT> </TD>
<TD align=left nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
<FONT size=2 face="serif">Non-accelerated filer</FONT></TD>
<TD><FONT size=2 face="serif">[&nbsp;&nbsp;&nbsp;]</FONT></TD>
<TD align=left nowrap>
<FONT size=2 face="serif">(Do not check if a smaller reporting company)</FONT></TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>
<FONT size=2 face="serif">Smaller reporting company</FONT></TD>
    <TD align=left nowrap><FONT size=2 face="serif">[&nbsp;X&nbsp;]</FONT></TD>
    <TD align=left nowrap>&nbsp;</TD>
</TR>
</TABLE>
<BR>
<P align="justify">
<FONT size=2 face="serif">Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).</FONT></P>
<P align="center">
<FONT size=2 face="serif">APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY</FONT><BR>
<FONT size=2 face="serif">PROCEEDINGS DURING THE PRECEDING FIVE YEARS: </FONT></P>
<P align="justify">
<FONT size=2 face="serif">Indicate by check mark whether the registrant has filed
all documents and reports required to be filed by Sections 12, 13 or 15 (d) of
the Securities Exchange Act of 1934 subsequent to the distribution of securities
under a plan confirmed by a court. </FONT></P>
<P align="center"><FONT size=2 face="serif">Yes [&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;] &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No [&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]</FONT></P>
<P align="center">
<FONT size=2 face="serif">APPLICABLE ONLY TO CORPORATE ISSUERS:</FONT></P>
<P align="justify">
<FONT size=2 face="serif">Indicate the number of shares outstanding of the common stock, &#36;0.001 par value, as of October 31, 2008: 56,606,113 </FONT></P>

<HR NOSHADE ALIGN=CENTER WIDTH="100%" SIZE=4>



<P align="left" style="page-break-before:always"></P><PAGE>


<P align="center">
<B><FONT size=2 face="serif">ASSURED PHARMACY, INC. AND SUBSIDIARIES </FONT></B><FONT size=2 face="serif"> </FONT><BR>
<BR>
<B><FONT size=2 face="serif">TABLE OF CONTENTS</FONT></B><FONT size=2 face="serif"> </FONT></P>
<TABLE width="100%" border=0 cellspacing=0 cellpadding=0>
<TR>
     <TD width=5%></TD>
     <TD width=3%></TD>
     <TD></TD>
     <TD width=5%></TD></TR>
<TR valign="bottom">
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=center nowrap>
<FONT size=2 face="serif">Page No.</FONT></TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap colspan=3>
<FONT size=2 face="serif"><a href="#part1">PART I - FINANCIAL INFORMATION</a></FONT></TD>
<TD align=right nowrap><FONT size=2 face="serif">3</FONT></TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
<FONT size=2 face="serif"><a href="#item1a">Item 1.</a></FONT></TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>
<FONT size=2 face="serif"><a href="#item1a">Condensed Consolidated Financial Statements</a></FONT></TD>
<TD align=right nowrap><FONT size=2 face="serif">3</FONT></TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>
<FONT size=2 face="serif"><a href="#balance1a">Condensed Consolidated Balance Sheets as of September 30 2008 (unaudited) and</a></FONT></TD>
<TD align=right nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>
<FONT size=2 face="serif"><a href="#balance1a">December 31, 2007 (audited)</a></FONT></TD>
<TD align=right nowrap><FONT size=2 face="serif">3</FONT></TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>
<FONT size=2 face="serif"><a href="#operations1a">Condensed Consolidated Statements
of Operations for the Three Months  and Nine Months</a></FONT></TD>
<TD align=right nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>
<FONT size=2 face="serif"><a href="#operations1a">Ended September 30, 2008 and September 30, 2007 (unaudited)</a></FONT></TD>
<TD align=right nowrap><FONT size=2 face="serif">4</FONT></TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>
<FONT size=2 face="serif"><a href="#cash1a">Condensed Consolidated Statements
of Cash Flows for the Nine Months</a></FONT></TD>
<TD align=right nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>
<FONT size=2 face="serif"><a href="#cash1a">Ended September 30, 2008 and September 30, 2007 (unaudited)</a></FONT></TD>
<TD align=right nowrap><FONT size=2 face="serif">5</FONT></TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>
<FONT size=2 face="serif"><a href="#notes1">Notes to Condensed Consolidated Financial Statements</a></FONT></TD>
<TD align=right nowrap>
<FONT size=2 face="serif">6</FONT></TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
<FONT size=2 face="serif"><a href="#item2a">Item 2.</a></FONT></TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>
<FONT size=2 face="serif"><a href="#item2a">Management's Discussion and Analysis of Financial</a></FONT></TD>
<TD align=right nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>
<FONT size=2 face="serif"><a href="#item2a">Condition and Results of Operations</a></FONT></TD>
<TD align=right nowrap><FONT size=2 face="serif">22</FONT></TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap><FONT size=2 face="serif"><a href="#item3a">Item 3.</a></FONT></TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>
<FONT size=2 face="serif"><a href="#item3a">Quantitative and Qualitative Disclosures</a></FONT></TD>
<TD align=right nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>
<FONT size=2 face="serif"><a href="#item3a">About Market Risk</a></FONT></TD>
<TD align=right nowrap><FONT size=2 face="serif">30</FONT></TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
<FONT size=2 face="serif"><a href="#item4ta">Item 4.</a></FONT></TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>
<FONT size=2 face="serif"><a href="#item4ta">Controls and Procedures</a></FONT></TD>
<TD align=right nowrap>
<FONT size=2 face="serif">30</FONT></TD>
</TR>
<TR>
<TD colspan=4>&nbsp;</TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap colspan=3>
<FONT size=2 face="serif"><a href="#part2a">PART II - OTHER INFORMATION</a></FONT></TD>
<TD align=right nowrap>
<FONT size=2 face="serif">31</FONT></TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
<FONT size=2 face="serif"><a href="#item1b">Item 1.</a></FONT></TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>
<FONT size=2 face="serif"><a href="#item1b">Legal Proceedings</a></FONT></TD>
<TD align=right nowrap>
<FONT size=2 face="serif">31</FONT></TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
<FONT size=2 face="serif"><a href="#item2b">Item 2.</a></FONT></TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>
<FONT size=2 face="serif"><a href="#item2b">Unregistered Sales of Securities and Use of Proceeds</a></FONT></TD>
<TD align=right nowrap>
<FONT size=2 face="serif">31</FONT></TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
<FONT size=2 face="serif"><a href="#item3b">Item 3.</a></FONT></TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>
<FONT size=2 face="serif"><a href="#item3b">Defaults Upon Senior Securities</a></FONT></TD>
<TD align=right nowrap>
<FONT size=2 face="serif">31</FONT></TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
<FONT size=2 face="serif"><a href="#item4b">Item 4.</a></FONT></TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>
<FONT size=2 face="serif"><a href="#item4b">Submission of Matters to a Vote of Security Holders</a></FONT></TD>
<TD align=right nowrap>
<FONT size=2 face="serif">31</FONT></TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
<FONT size=2 face="serif"><a href="#item5b">Item 5.</a></FONT></TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>
<FONT size=2 face="serif"><a href="#item5b">Other Information</a></FONT></TD>
<TD align=right nowrap>
<FONT size=2 face="serif">32</FONT></TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
<FONT size=2 face="serif"><a href="#item6b">Item 6.</a></FONT></TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>
<FONT size=2 face="serif"><a href="#item6b">Exhibits</a></FONT></TD>
<TD align=right nowrap>
<FONT size=2 face="serif">32</FONT></TD>
</TR>
<TR valign="bottom">
  <TD align=left nowrap colspan=3>&nbsp;</TD>
  <TD align=right nowrap><FONT size=2 face="serif">32</FONT></TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap colspan=3>
<FONT size=2 face="serif"><a href="#sigs1">SIGNATURES</a></FONT></TD>
<TD align=right nowrap>
<FONT size=2 face="serif">33</FONT></TD>
</TR>
</TABLE>
<BR>

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<P align="left" style="page-break-before:always"></P><PAGE>
<P align="center">
<B><FONT size=2 face="serif"><a name="part1"></a>PART I &#150; FINANCIAL INFORMATION</FONT></B></P>
<P align="justify">
<B><FONT size=2 face="serif"><a name="item1a"></a>Item 1. Financial Statements</FONT></B></P>
<P align="justify">
<FONT size=2 face="serif">These unaudited condensed consolidated financial statements
have been prepared in accordance with accounting principles generally accepted
in the United States of America for interim financial information and the SEC
 instructions to Form 10-Q. In the opinion of management, all adjustments considered
necessary for a fair presentation have been included. Operating results for the
interim period ended September 30, 2008 are not necessarily indicative of the
 results that can be expected for the full year.</FONT></P>
<P align=center><font face="serif" size="2">2</font></P>
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<P align="left" style="page-break-before:always"></P><PAGE>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
<TR>
     <TD width="64%"></TD>
     <TD width="6%"></TD>
     <TD width="1%"></TD>
     <TD width="10%"></TD>
     <TD width="1%"></TD>
     <TD width="5%"></TD>
     <TD width="1%"></TD>
     <TD width="10%"></TD>
     <TD width="2%"></TD>
</TR>
<TR valign="bottom">
  <TD colspan="9" align=center nowrap style="border-bottom:3px solid #000000;">&nbsp;</TD>
  </TR>
<TR valign="bottom">
  <TD colspan="9" align=center nowrap>
<B><FONT size=2 face="serif"><a name="balance1a"></a>ASSURED PHARMACY, INC. AND SUBSIDIARIES</FONT></B>&nbsp;                  </TD>
  </TR>
<TR valign="bottom">
  <TD colspan="9" align=center nowrap style="border-bottom:1px solid #000000;">
    <div align="center"><B><FONT size=2 face="serif">CONDENSED CONSOLIDATED BALANCE
          SHEETS</FONT></B>&nbsp;          </div>        </TD>
  </TR>
<TR>
  <TD colspan=9>&nbsp;  </TD>
</TR>
<TR>
  <TD colspan=9>&nbsp;  </TD>
</TR>
<TR>
  <TD colspan=9>&nbsp;  </TD>
</TR>

<TR valign="bottom">
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=center nowrap>
<B><FONT size=2 face="serif">September 30,</FONT></B></TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=center nowrap>
<B><FONT size=2 face="serif">December 31,</FONT></B></TD>
<TD align=left nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=center nowrap>
<B><FONT size=2 face="serif">2008</FONT></B></TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
<TD align=center nowrap>
<B><FONT size=2 face="serif">2007</FONT></B></TD>
<TD align=left nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
<TD align=center nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="serif">UNAUDITED</FONT></B></TD>
<TD align=left nowrap>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp;</TD>
<TD align=center nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="serif">AUDITED</FONT></B></TD>
<TD align=left nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#EAF9E8">
<TD align=center nowrap>
<B><FONT size=2 face="serif">ASSETS</FONT></B></TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
<B><FONT size=2 face="serif">Current Assets</FONT></B></TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR valign="bottom" bgcolor="#EAF9E8">
<TD align=left nowrap>
      <font size="2">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT face="serif">Cash</FONT></font> </TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>
<FONT size=2 face="serif">&#36;</FONT></TD>
<TD align=right nowrap>
<FONT size=2 face="serif">814,213</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>
<FONT size=2 face="serif">&#36;</FONT></TD>
<TD align=right nowrap>
<FONT size=2 face="serif">408,305</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
      <font size="2">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT face="serif">Accounts receivable, net</FONT></font> </TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=right nowrap>
<FONT size=2 face="serif">1,971,055</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=right nowrap>
<FONT size=2 face="serif">2,167,969</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR valign="bottom" bgcolor="#EAF9E8">
<TD align=left nowrap>
      <font size="2">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT face="serif">Inventories</FONT></font> </TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=right nowrap>
<FONT size=2 face="serif">658,341</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=right nowrap>
<FONT size=2 face="serif">440,354</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
      <font size="2">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT face="serif">Prepaid expenses and other assets</FONT></font> </TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">240,753</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD>&nbsp; </TD>
<TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp; </TD>
<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">166,852</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR valign="bottom" bgcolor="#EAF9E8">
<TD align=left nowrap>&nbsp; </TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=right nowrap>
<FONT size=2 face="serif">3,684,362</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=right nowrap>
<FONT size=2 face="serif">3,183,480</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
<B><FONT size=2 face="serif">Long Term Assets</FONT></B></TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR valign="bottom" bgcolor="#EAF9E8">
<TD align=left nowrap>
      <font size="2">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT face="serif">Accounts receivable - non-current, net</FONT></font> </TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=right nowrap>
<FONT size=2 face="serif">292,331</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=right nowrap>
<FONT size=2 face="serif">49,868</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
<B><FONT size=2 face="serif">Property and Equipment, net</FONT></B></TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=right nowrap>
<FONT size=2 face="serif">388,538</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=right nowrap>
<FONT size=2 face="serif">373,961</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR valign="bottom" bgcolor="#EAF9E8">
<TD align=left nowrap>
<B><FONT size=2 face="serif">Deferred costs</FONT></B></TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=right nowrap>
<FONT size=2 face="serif">330,112</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
<B><FONT size=2 face="serif">Goodwill</FONT></B></TD>
<TD>&nbsp; </TD>
<TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp; </TD>
<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">607,816</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD>&nbsp; </TD>
<TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp; </TD>
<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">607,816</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR valign="bottom" bgcolor="#EAF9E8">
<TD align=left nowrap>&nbsp; </TD>
<TD>&nbsp; </TD>
<TD align=left nowrap style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">&#36;</FONT></TD>
<TD align=right nowrap style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">5,303,159</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD>&nbsp; </TD>
<TD align=left nowrap style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">&#36;</FONT></TD>
<TD align=right nowrap style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">4,215,125</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR>
<TD colspan=9>&nbsp; </TD>
</TR>
<TR valign="bottom">
<TD align=center nowrap>
<B><FONT size=2 face="serif">LIABILITIES AND STOCKHOLDERS' DEFICIT</FONT></B></TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR valign="bottom" bgcolor="#EAF9E8">
<TD align=left nowrap>
<B><FONT size=2 face="serif">Current Liabilities</FONT></B></TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
      <font size="2">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT face="serif">Accounts payable and accrued expenses</FONT></font> </TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>
<FONT size=2 face="serif">&#36;</FONT></TD>
<TD align=right nowrap>
<FONT size=2 face="serif">2,939,397</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=right nowrap>
<FONT size=2 face="serif">2,306,415</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR valign="bottom" bgcolor="#EAF9E8">
<TD align=left nowrap>
      <font size="2">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT face="serif">Unsecured convertible notes payable</FONT></font> </TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=right nowrap>
<FONT size=2 face="serif">6,255,900</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=right nowrap>
<FONT size=2 face="serif">3,833,500</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
      <font size="2">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT face="serif">Notes payable to related parties and stockholders</FONT></font> </TD>
<TD>&nbsp; </TD>
<TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp; </TD>
<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">2,346,167</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD>&nbsp; </TD>
<TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp; </TD>
<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">1,136,630</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR valign="bottom" bgcolor="#EAF9E8">
<TD align=left nowrap>&nbsp; </TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=right nowrap>
<FONT size=2 face="serif">11,541,464</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=right nowrap>
<FONT size=2 face="serif">7,276,545</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
      <font size="2">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT face="serif">Notes payable to related parties and stockholders net of current portion</FONT></font> </TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=right nowrap>
<FONT size=2 face="serif">276,337</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR valign="bottom">
  <TD align=left nowrap>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=right nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#EAF9E8">
<TD align=left nowrap>
<B><FONT size=2 face="serif">Minority Interest</FONT></B></TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=right nowrap>
<FONT size=2 face="serif">674,708</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=right nowrap>
<FONT size=2 face="serif">676,748</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR valign="bottom">
  <TD align=left nowrap>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
<B><FONT size=2 face="serif">Commitments and Contingencies</FONT></B></TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR valign="bottom">
  <TD align=left nowrap>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#EAF9E8">
<TD align=left nowrap>
<B><FONT size=2 face="serif">Stockholders' Deficit</FONT></B></TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
      <font size="2">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT face="serif">Preferred
    shares; par value &#36;0.001 per share;</FONT></font> </TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
      <font size="2">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT face="serif">authorized 5,000,000 shares; no preferred shares issued</FONT></font> </TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
      <font size="2">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT face="serif">or outstanding</FONT></font> </TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=right nowrap>
<FONT size=2 face="serif">-</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD>&nbsp; </TD>

<TD align=left nowrap>&nbsp; </TD>
<TD align=center nowrap>
<FONT size=2 face="serif">-</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR valign="bottom" bgcolor="#EAF9E8">
<TD align=left nowrap>
      <font size="2">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT face="serif">Common
    shares; par value &#36;0.001 per share;</FONT></font> </TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR valign="bottom" bgcolor="#EAF9E8">
<TD align=left nowrap>
      <font size="2">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT face="serif">150,000,000
      shares authorized, 68,002,637 common shares issued and outstanding</FONT></font> </TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=right nowrap>
<FONT size=2 face="serif">68,002</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=right nowrap>
<FONT size=2 face="serif">65,659</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
      <font size="2">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT face="serif">Treasury stock at cost, 10,858,658 shares</FONT></font> </TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=right nowrap>
<FONT size=2 face="serif">(2,849,366</FONT></TD>
<TD align=left nowrap>
<FONT size=2 face="serif">)</FONT></TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=right nowrap>
<FONT size=2 face="serif">(2,849,366</FONT></TD>
<TD align=left nowrap>
<FONT size=2 face="serif">)</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#EAF9E8">
<TD align=left nowrap>
      <font size="2">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT face="serif">Additional paid-in capital, net</FONT></font> </TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=right nowrap>
<FONT size=2 face="serif">22,281,906</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=right nowrap>
<FONT size=2 face="serif">21,777,397</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
      <font size="2">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT face="serif">Accumulated deficit</FONT></font> </TD>
<TD>&nbsp; </TD>
<TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp; </TD>
<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">(26,413,555</FONT></TD>
<TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">)</FONT></TD>
<TD>&nbsp; </TD>
<TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp; </TD>
<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">(23,008,195</FONT></TD>
<TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">)</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#EAF9E8">
<TD align=left nowrap>
      <font size="2">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT face="serif">Stockholders' deficit</FONT></font> </TD>
<TD>&nbsp; </TD>
<TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp; </TD>
<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">(6,913,013</FONT></TD>
<TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">)</FONT></TD>
<TD>&nbsp; </TD>
<TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp; </TD>
<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">(4,014,505</FONT></TD>
<TD align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">)</FONT></TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>&nbsp; </TD>
<TD>&nbsp; </TD>
<TD align=right nowrap style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">&#36;</FONT></TD>
<TD align=right nowrap style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">5,303,159</FONT></TD>
<TD align=left nowrap style="border-bottom:3px double #000000;">&nbsp; </TD>
<TD>&nbsp; </TD>
<TD align=left nowrap style="border-bottom:3px double #000000;">&nbsp; </TD>
<TD align=right nowrap style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">4,215,125</FONT></TD>
<TD align=left nowrap style="border-bottom:3px double #000000;">&nbsp; </TD>
</TR>
<TR valign="bottom">
  <TD align=left nowrap style="border-bottom:3px solid #000000;">&nbsp;</TD>
  <TD style="border-bottom:3px solid #000000;">&nbsp;</TD>
  <TD align=right nowrap style="border-bottom:3px solid #000000;">&nbsp;</TD>
  <TD align=right nowrap style="border-bottom:3px solid #000000;">&nbsp;</TD>
  <TD align=left nowrap style="border-bottom:3px solid #000000;">&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=right nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD colspan="5" align=right>
   <FONT size=2 face="serif">The accompanying notes are an
    integral part of the consolidated financial statements. </FONT></TD>
  <TD>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=right nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
</TR>
</TABLE>
<BR>
<P align="center">
<FONT size=2 face="serif">3</FONT></P>

<HR NOSHADE ALIGN=CENTER WIDTH="100%" SIZE=4>
<P align="left" style="page-break-before:always"></P><PAGE>
<BR>
<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD colspan="14" align=center nowrap style="border-top:2px solid #000000;"><b><font size=2 face="serif"><a name="operations1a"></a>ASSURED
            PHARMACY, INC AND SUBSIDIARIES </font></b><br>
            <b><font size=2 face="serif">CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS</font></b><br>
    <b><font size=2 face="serif">(UNAUDITED)</font></b></TD>
  </TR>
  <TR valign="bottom">
    <TD colspan="7" align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD colspan="5">&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD colspan="7" align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD colspan="5">&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
  <TR valign="bottom">
    <TD colspan="7" align=left nowrap>&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
    <TD colspan="5">&nbsp;</TD>
    <TD align=left nowrap>&nbsp;</TD>
  </TR>
<TR valign="bottom">
<TD align=left nowrap>&nbsp; </TD>
<TD>&nbsp; </TD>
<TD align=right nowrap style="border-bottom:1px solid #000000;">&nbsp; </TD>
<TD align=center nowrap colspan=4 style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="serif">Three Months Ended September 30,</FONT></B></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp; </TD>
<TD align=center nowrap colspan=4 style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="serif">Nine Months Ended September 30,</FONT></B></TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>&nbsp; </TD>
<TD>&nbsp; </TD>
<TD align=right nowrap style="border-bottom:1px solid #000000;">&nbsp; </TD>
<TD align=center style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="serif">2008</FONT></B></TD>
<TD align=center>&nbsp; </TD>
<TD align=center>&nbsp; </TD>
<TD align=center style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="serif">2007</FONT></B></TD>
<TD align=center>&nbsp; </TD>
<TD align=center style="border-bottom:1px solid #000000;">&nbsp;  </TD>
<TD align=center style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="serif">2008</FONT></B></TD>
<TD align=center>&nbsp; </TD>
<TD align=center>&nbsp; </TD>
<TD align=center style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="serif">2007</FONT></B></TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR>
<TD colspan=14>&nbsp; </TD>
</TR>
<TR>
<TD colspan=14>&nbsp; </TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
<B><FONT size=2 face="serif">SALES</FONT></B></TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>
<FONT size=2 face="serif">&#36;</FONT></TD>
<TD align=right nowrap>
<FONT size=2 face="serif">4,039,524</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>
<FONT size=2 face="serif">&#36;</FONT></TD>
<TD align=right nowrap>
<FONT size=2 face="serif">3,676,798</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>
<FONT size=2 face="serif">&#36;</FONT></TD>
<TD align=right nowrap>
<FONT size=2 face="serif">11,775,937</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>
<FONT size=2 face="serif">&#36;</FONT></TD>
<TD align=right nowrap>
<FONT size=2 face="serif">9,716,372</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR>
<TD colspan=14>&nbsp; </TD>
</TR>
<TR valign="bottom" bgcolor="#EAF9E8">
<TD align=left nowrap>
<B><FONT size=2 face="serif">COST OF SALES</FONT></B></TD>
<TD>&nbsp; </TD>
<TD align=right nowrap style="border-bottom:1px solid #000000;">&nbsp; </TD>
<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">3,472,061</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp; </TD>
<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">2,826,026</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp; </TD>
<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">9,448,710</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp; </TD>
<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">7,287,141</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR>
<TD colspan=14>&nbsp; </TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
<B><FONT size=2 face="serif">GROSS PROFIT</FONT></B></TD>
<TD>&nbsp; </TD>
<TD align=right nowrap style="border-bottom:1px solid #000000;">&nbsp; </TD>
<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">567,463</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp; </TD>
<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">850,772</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp; </TD>
<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">2,327,227</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp; </TD>
<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">2,429,231</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR>
<TD colspan=14>&nbsp; </TD>
</TR>
<TR valign="bottom" bgcolor="#EAF9E8">
<TD align=left nowrap>
<B><FONT size=2 face="serif">OPERATING EXPENSES</FONT></B></TD>
<TD>&nbsp; </TD>
<TD align=right nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
      <font size="2">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT face="serif">Salaries and related expenses</FONT></font> </TD>
<TD>&nbsp; </TD>
<TD align=right nowrap>&nbsp; </TD>
<TD align=right nowrap>
<FONT size=2 face="serif">724,940</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=right nowrap>
<FONT size=2 face="serif">654,326</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=right nowrap>
<FONT size=2 face="serif">2,174,446</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=right nowrap>
<FONT size=2 face="serif">1,948,442</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR valign="bottom" bgcolor="#EAF9E8">
<TD align=left nowrap>
      <font size="2">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT face="serif">Consulting and other compensation</FONT></font> </TD>
<TD>&nbsp; </TD>
<TD align=right nowrap>&nbsp; </TD>
<TD align=right nowrap>
<FONT size=2 face="serif">113,234</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=right nowrap>
<FONT size=2 face="serif">224,650</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=right nowrap>
<FONT size=2 face="serif">470,495</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=right nowrap>
<FONT size=2 face="serif">672,285</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
      <font size="2">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT face="serif">Selling, general and administrative</FONT></font> </TD>
<TD>&nbsp; </TD>
<TD align=right nowrap style="border-bottom:1px solid #000000;">&nbsp; </TD>
<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">592,981</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp; </TD>
<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">526,742</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp; </TD>
<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">1,782,209</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp; </TD>
<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">1,569,023</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR valign="bottom" bgcolor="#EAF9E8">
<TD align=left nowrap>
<B><FONT size=2 face="serif">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;TOTAL OPERATING EXPENSES</FONT></B></TD>
<TD>&nbsp; </TD>
<TD align=right nowrap style="border-bottom:1px solid #000000;">&nbsp; </TD>
<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">1,431,155</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp; </TD>
<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">1,405,718</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp; </TD>
<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">4,427,150</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp; </TD>
<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">4,189,750</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR>
<TD colspan=14>&nbsp; </TD>
</TR>
<TR valign="bottom">
<TD align=left valign="bottom" nowrap>
<B><FONT size=2 face="serif">LOSS FROM OPERATIONS</FONT></B></TD>
<TD valign="bottom">&nbsp; </TD>
<TD align=right valign="bottom" nowrap style="border-bottom:1px solid #000000;">&nbsp; </TD>
<TD align=right valign="bottom" nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">(863,692</FONT></TD>
<TD align=left valign="baseline" nowrap>
<FONT size=2 face="serif">)</FONT></TD>
<TD align=left valign="bottom" nowrap style="border-bottom:1px solid #000000;">&nbsp; </TD>
<TD align=right valign="bottom" nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">(554,946</FONT></TD>
<TD align=left valign="baseline" nowrap>
<FONT size=2 face="serif">)</FONT></TD>
<TD align=left valign="bottom" nowrap style="border-bottom:1px solid #000000;">&nbsp; </TD>
<TD align=right valign="bottom" nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">(2,099,923</FONT></TD>
<TD align=left valign="baseline" nowrap>
<FONT size=2 face="serif">)</FONT></TD>
<TD align=left valign="bottom" nowrap style="border-bottom:1px solid #000000;">&nbsp; </TD>
<TD align=right valign="bottom" nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">(1,760,519</FONT></TD>
<TD align=left valign="bottom" nowrap>
<FONT size=2 face="serif">)</FONT></TD>
</TR>
<TR>
<TD colspan=14>&nbsp; </TD>
</TR>
<TR valign="bottom" bgcolor="#EAF9E8">
<TD align=left nowrap>
<B><FONT size=2 face="serif">OTHER EXPENSES</FONT></B></TD>
<TD>&nbsp; </TD>
<TD align=right nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap bgcolor="#EAF9E8">&nbsp;</TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
      <font size="2">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT face="serif">Interest expense</FONT></font> </TD>
<TD>&nbsp; </TD>
<TD align=right nowrap>&nbsp; </TD>
<TD align=right nowrap>
<FONT size=2 face="serif">(647,568</FONT></TD>
<TD align=left nowrap>
<FONT size=2 face="serif">)</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=right nowrap>
<FONT size=2 face="serif">(162,496</FONT></TD>
<TD align=left nowrap>
<FONT size=2 face="serif">)</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=right nowrap>
<FONT size=2 face="serif">(1,311,699</FONT></TD>
<TD align=left nowrap>
<FONT size=2 face="serif">)</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=right nowrap>
<FONT size=2 face="serif">(455,009</FONT></TD>
<TD align=left nowrap>
<FONT size=2 face="serif">)</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#EAF9E8">
<TD align=left valign="bottom" nowrap>
      <font size="2">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;<FONT face="serif">Other expense</FONT></font> </TD>
<TD valign="bottom">&nbsp; </TD>
<TD align=right valign="bottom" nowrap style="border-bottom:1px solid #000000;">&nbsp; </TD>
<TD align=center valign="bottom" nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">-</FONT></TD>
<TD align=left valign="bottom" nowrap>&nbsp; </TD>
<TD align=left valign="bottom" nowrap style="border-bottom:1px solid #000000;">&nbsp; </TD>
<TD align=right valign="bottom" nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">(111</FONT></TD>
<TD align=left nowrap>
<FONT size=2 face="serif">)</FONT></TD>
<TD align=left valign="bottom" nowrap style="border-bottom:1px solid #000000;">&nbsp; </TD>
<TD align=right valign="bottom" nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">4,294</FONT></TD>
<TD align=left valign="bottom" nowrap>&nbsp; </TD>
<TD align=left valign="bottom" nowrap style="border-bottom:1px solid #000000;">&nbsp; </TD>
<TD align=right valign="bottom" nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">(111</FONT></TD>
<TD align=left nowrap>
<FONT size=2 face="serif">)</FONT></TD>
</TR>
<TR valign="bottom">
<TD align=left valign="bottom" nowrap>
<B><FONT size=2 face="serif">&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;TOTAL OTHER EXPENSES</FONT></B></TD>
<TD valign="bottom">&nbsp; </TD>
<TD align=right valign="bottom" nowrap style="border-bottom:1px solid #000000;">&nbsp; </TD>
<TD align=right valign="bottom" nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">(647,568</FONT></TD>
<TD align=left nowrap>
<FONT size=2 face="serif">)</FONT></TD>
<TD align=left valign="bottom" nowrap style="border-bottom:1px solid #000000;">&nbsp; </TD>
<TD align=right valign="bottom" nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">(162,607</FONT></TD>
<TD align=left nowrap>
<FONT size=2 face="serif">)</FONT></TD>
<TD align=left valign="bottom" nowrap style="border-bottom:1px solid #000000;">&nbsp; </TD>
<TD align=right valign="bottom" nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">(1,307,405</FONT></TD>
<TD align=left nowrap>
<FONT size=2 face="serif">)</FONT></TD>
<TD align=left valign="bottom" nowrap style="border-bottom:1px solid #000000;">&nbsp; </TD>
<TD align=right valign="bottom" nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">(455,120</FONT></TD>
<TD align=left valign="bottom" nowrap>
<FONT size=2 face="serif">)</FONT></TD>
</TR>
<TR>
<TD colspan=14>&nbsp; </TD>
</TR>
<TR valign="bottom" bgcolor="#EAF9E8">
<TD align=left nowrap>
<B><FONT size=2 face="serif">LOSS BEFORE MINORITY INTEREST</FONT></B></TD>
<TD>&nbsp; </TD>
<TD align=right nowrap>&nbsp; </TD>
<TD align=right nowrap>
<FONT size=2 face="serif">(1,511,260</FONT></TD>
<TD align=left nowrap>
<FONT size=2 face="serif">)</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=right nowrap>
<FONT size=2 face="serif">(717,553</FONT></TD>
<TD align=left nowrap>
<FONT size=2 face="serif">)</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=right nowrap>
<FONT size=2 face="serif">(3,407,328</FONT></TD>
<TD align=left nowrap>
<FONT size=2 face="serif">)</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=right nowrap>
<FONT size=2 face="serif">(2,215,639</FONT></TD>
<TD align=left nowrap>
<FONT size=2 face="serif">)</FONT></TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
<B><FONT size=2 face="serif">MINORITY INTEREST</FONT></B></TD>
<TD>&nbsp; </TD>
<TD align=right nowrap style="border-bottom:1px solid #000000;">&nbsp; </TD>
<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">7,239</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp; </TD>
<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">(4,632</FONT></TD>
<TD align=left nowrap>
<FONT size=2 face="serif">)</FONT></TD>
<TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp; </TD>
<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">1,967</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp; </TD>
<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">(16,892</FONT></TD>
<TD align=left nowrap>
<FONT size=2 face="serif">)</FONT></TD>
</TR>
<TR>
<TD colspan=14>&nbsp; </TD>
</TR>
<TR valign="bottom" bgcolor="#EAF9E8">
<TD align=left valign="bottom" nowrap>
<B><FONT size=2 face="serif">NET LOSS</FONT></B></TD>
<TD valign="bottom">&nbsp; </TD>
<TD align=left valign="bottom" nowrap style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">&#36;</FONT></TD>
<TD align=right valign="bottom" nowrap style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">(1,504,021</FONT></TD>
<TD align=left valign="middle" nowrap>
<FONT size=2 face="serif">)</FONT></TD>
<TD align=left valign="bottom" nowrap style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">&#36;</FONT></TD>
<TD align=right valign="bottom" nowrap style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">(722,185</FONT></TD>
<TD align=left valign="middle" nowrap>
<FONT size=2 face="serif">)</FONT></TD>
<TD align=left valign="bottom" nowrap style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">&#36;</FONT></TD>
<TD align=right valign="bottom" nowrap style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">(3,405,361</FONT></TD>
<TD align=left valign="middle" nowrap>
<FONT size=2 face="serif">)</FONT></TD>
<TD align=left valign="bottom" nowrap style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">&#36;</FONT></TD>
<TD align=right valign="bottom" nowrap style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">(2,232,531</FONT></TD>
<TD align=left valign="middle" nowrap>
<FONT size=2 face="serif">)</FONT></TD>
</TR>
<TR>
<TD colspan=14>&nbsp; </TD>
</TR>
<TR valign="bottom">
<TD align=left valign="bottom" nowrap>
<B><FONT size=2 face="serif">Basic and diluted loss per common share</FONT></B></TD>
<TD valign="bottom">&nbsp; </TD>
<TD align=left valign="bottom" nowrap style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">&#36;</FONT></TD>
<TD align=right valign="bottom" nowrap style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">(0.03</FONT></TD>
<TD align=left valign="middle" nowrap>
<FONT size=2 face="serif">)</FONT></TD>
<TD align=left valign="bottom" nowrap style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">&#36;</FONT></TD>
<TD align=right valign="bottom" nowrap style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">(0.01</FONT></TD>
<TD align=left valign="middle" nowrap>
<FONT size=2 face="serif">)</FONT></TD>
<TD align=left valign="bottom" nowrap style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">&#36;</FONT></TD>
<TD align=right valign="bottom" nowrap style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">(0.06</FONT></TD>
<TD align=left valign="middle" nowrap>
<FONT size=2 face="serif">)</FONT></TD>
<TD align=left valign="bottom" nowrap style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">&#36;</FONT></TD>
<TD align=right valign="bottom" nowrap style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">(0.04</FONT></TD>
<TD align=left valign="middle" nowrap>
<FONT size=2 face="serif">)</FONT></TD>
</TR>
<TR>
<TD colspan=14>&nbsp; </TD>
</TR>
<TR valign="bottom" bgcolor="#EAF9E8">
<TD align=left nowrap bgcolor="#EAF9E8">
<B><FONT size=2 face="serif">Basic and diluted weighted average number of common</FONT></B></TD>
<TD>&nbsp; </TD>
<TD align=right nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR valign="bottom" bgcolor="#EAF9E8">
<TD align=left nowrap>
<B><FONT size=2 face="serif">shares outstanding</FONT></B></TD>
<TD>&nbsp; </TD>
<TD align=right nowrap style="border-bottom:3px double #000000;">&nbsp; </TD>
<TD align=right nowrap style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">56,759,196</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap style="border-bottom:3px double #000000;">&nbsp; </TD>
<TD align=right nowrap style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">54,510,539</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap style="border-bottom:3px double #000000;">&nbsp; </TD>
<TD align=right nowrap style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">55,543,874</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap style="border-bottom:3px double #000000;">&nbsp; </TD>
<TD align=right nowrap style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">54,541,131</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR valign="bottom">
  <TD align=left nowrap>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=right nowrap >&nbsp;</TD>
  <TD align=right nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=right nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=right nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=right nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD colspan="10" align=right nowrap style="border-top:2px double #000000;"><FONT size=2 face="serif">The
    accompanying notes are an integral part of the consolidated financial statements.</FONT></TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=right nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
</TR>
</TABLE>
<BR>
<P align="center">
<FONT size=2 face="serif">4</FONT></P>

<HR NOSHADE ALIGN=CENTER WIDTH="100%" SIZE=4>
<P align="left" style="page-break-before:always"></P><PAGE>

<TABLE width=100% border=0 cellpadding=0 cellspacing=0>
  <TR valign="bottom">
    <TD align=center nowrap colspan=8><B><FONT size=2 face="serif"><a name="cash1a"></a>ASSURED PHARMACY,
          INC. AND SUBSIDIARIES</FONT></B> </TD>
  </TR>
  <TR valign="bottom">
    <TD align=center nowrap colspan=8><B><FONT size=2 face="serif">CONDENSED CONSOLIDATED
          STATEMENTS OF CASH FLOWS</FONT></B> </TD>
  </TR>
  <TR valign="bottom">
    <TD colspan="8" align=center nowrap style="border-bottom:1px solid #000000;"><B><FONT size=2 face="serif">(UNAUDITED)</FONT></B>&nbsp; </TD>
  </TR>
  <TR>
    <TD colspan=8>&nbsp;</TD>
  </TR>
  <TR>
    <TD colspan=8>&nbsp;</TD>
  </TR>
  <TR>
    <TD colspan=8>&nbsp;</TD>
  </TR>
<TR valign="bottom">
<TD align=left nowrap>&nbsp; </TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=center nowrap colspan=4>
<B><FONT size=2 face="serif">NINE MONTHS ENDED</FONT></B></TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>&nbsp; </TD>
<TD>&nbsp; </TD>
<TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp; </TD>
<TD align=center nowrap colspan=4 style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="serif">SEPTEMBER 30,</FONT></B></TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>&nbsp; </TD>
<TD>&nbsp; </TD>
<TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp; </TD>
<TD align=center nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="serif">2008</FONT></B></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp; </TD>
<TD align=center nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="serif">2007</FONT></B></TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR>
<TD colspan=8>&nbsp; </TD>
</TR>
<TR valign="bottom" bgcolor="#EAF9E8">
<TD align=left nowrap>
<B><FONT size=2 face="serif">CASH FLOWS FROM OPERATING ACTIVITIES:</FONT></B></TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
<FONT size=2 face="serif">Net loss</FONT></TD>
<TD>&nbsp; </TD>
<TD align=right nowrap>
<FONT size=2 face="serif">&#36;</FONT></TD>
<TD align=right nowrap>
<FONT size=2 face="serif">(3,405,361</FONT></TD>
<TD align=left nowrap>
<FONT size=2 face="serif">)</FONT></TD>
<TD align=left nowrap>
<FONT size=2 face="serif">&#36;</FONT></TD>
<TD align=right nowrap>
<FONT size=2 face="serif">(2,232,531</FONT></TD>
<TD align=left nowrap>
<FONT size=2 face="serif">)</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#EAF9E8">
<TD align=left nowrap>
<FONT size=2 face="serif">Adjustments to reconcile net loss to net cash used in operating activities:</FONT></TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
<FONT size=2 face="serif">Depreciation and amortization of property and equipment</FONT></TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=right nowrap>
<FONT size=2 face="serif">171,708</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=right nowrap>
<FONT size=2 face="serif">131,817</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR valign="bottom" bgcolor="#EAF9E8">
<TD align=left nowrap>
<FONT size=2 face="serif">Amortization of debt discount</FONT></TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=right nowrap>
<FONT size=2 face="serif">21,000</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=right nowrap>
<FONT size=2 face="serif">349,895</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
<FONT size=2 face="serif">Amortization of deferred consulting fees</FONT></TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=right nowrap>
<FONT size=2 face="serif">147,035</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=right nowrap>
<FONT size=2 face="serif">362,622</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR valign="bottom" bgcolor="#EAF9E8">
<TD align=left nowrap>
<FONT size=2 face="serif">Issuance of common stock for debenture interest</FONT></TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=right nowrap>
<FONT size=2 face="serif">218,142</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=center nowrap>
<FONT size=2 face="serif">-</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
<FONT size=2 face="serif">Benefecial Conversion of debenture interest</FONT></TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=right nowrap>
<FONT size=2 face="serif">110,674</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=center nowrap>
<FONT size=2 face="serif">-</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR valign="bottom" bgcolor="#EAF9E8">
<TD align=left nowrap>
<FONT size=2 face="serif">Minority interest in net income /(loss) of joint venture</FONT></TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=right nowrap>
<FONT size=2 face="serif">(2,040</FONT></TD>
<TD align=left nowrap>
<FONT size=2 face="serif">)</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=right nowrap>
<FONT size=2 face="serif">16,892</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
<FONT size=2 face="serif">Issuance of common stock and options for director services</FONT></TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=right nowrap>
<FONT size=2 face="serif">21,000</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=right nowrap>
<FONT size=2 face="serif">120,000</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR valign="bottom" bgcolor="#EAF9E8">
<TD align=left nowrap>
<FONT size=2 face="serif">Return of common stock due to termination of contract</FONT></TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=right nowrap>
<FONT size=2 face="serif">(70,000</FONT></TD>
<TD align=left nowrap>
<FONT size=2 face="serif">)</FONT></TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
<FONT size=2 face="serif">Provision for doubtful accounts</FONT></TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=right nowrap>
<FONT size=2 face="serif">72,000</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=center nowrap>
<FONT size=2 face="serif">-</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR valign="bottom" bgcolor="#EAF9E8">
<TD align=left nowrap>
<I><FONT size=2 face="serif">Changes in operating assets and liabilities:</FONT></I></TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=center nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
      <font size="2">&nbsp; &nbsp; &nbsp; &nbsp;<FONT face="serif">Accounts receivable</FONT></font> </TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=right nowrap>
<FONT size=2 face="serif">(117,549</FONT></TD>
<TD align=left nowrap>
<FONT size=2 face="serif">)</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=right nowrap>
<FONT size=2 face="serif">(855,772</FONT></TD>
<TD align=left nowrap>
<FONT size=2 face="serif">)</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#EAF9E8">
<TD align=left nowrap>
      <font size="2">&nbsp; &nbsp; &nbsp; &nbsp;<FONT face="serif">Inventories</FONT></font> </TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=right nowrap>
<FONT size=2 face="serif">(217,987</FONT></TD>
<TD align=left nowrap>
<FONT size=2 face="serif">)</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=right nowrap>
<FONT size=2 face="serif">(486,634</FONT></TD>
<TD align=left nowrap>
<FONT size=2 face="serif">)</FONT></TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
      <font size="2">&nbsp; &nbsp; &nbsp; &nbsp;<FONT face="serif">Prepaid expenses and other current assets</FONT></font> </TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=right nowrap>
<FONT size=2 face="serif">(94,902</FONT></TD>
<TD align=left nowrap>
<FONT size=2 face="serif">)</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=right nowrap>
<FONT size=2 face="serif">(28,621</FONT></TD>
<TD align=left nowrap>
<FONT size=2 face="serif">)</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#EAF9E8">
<TD align=left nowrap>
      <font size="2">&nbsp; &nbsp; &nbsp; &nbsp;<FONT face="serif">Accounts payable and accrued liabilities</FONT></font> </TD>
<TD>&nbsp; </TD>
<TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp; </TD>
<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">632,983</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp; </TD>
<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">1,234,075</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR>
<TD colspan=8>&nbsp; </TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
<B><FONT size=2 face="serif">Net cash used in operating activities</FONT></B></TD>
<TD>&nbsp; </TD>
<TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp; </TD>
<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="serif">(2,443,298</FONT></B></TD>
<TD align=left nowrap>
<B><FONT size=2 face="serif">)</FONT></B></TD>
<TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp; </TD>
<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="serif">(1,458,257</FONT></B></TD>
<TD align=left nowrap>
<B><FONT size=2 face="serif">)</FONT></B></TD>
</TR>
<TR>
<TD colspan=8>&nbsp; </TD>
</TR>
<TR valign="bottom" bgcolor="#EAF9E8">
<TD align=left nowrap>
<FONT size=2 face="serif">CASH FLOWS FROM INVESTING ACTIVITIES:</FONT></TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
<FONT size=2 face="serif">Purchases of property and equipment</FONT></TD>
<TD>&nbsp; </TD>
<TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp; </TD>
<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">(186,283</FONT></TD>
<TD align=left nowrap>
<FONT size=2 face="serif">)</FONT></TD>
<TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp; </TD>
<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">(51,286</FONT></TD>
<TD align=left nowrap>
<FONT size=2 face="serif">)</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#EAF9E8">
<TD align=left nowrap>
<B><FONT size=2 face="serif">Net cash used in investing activities</FONT></B></TD>
<TD>&nbsp; </TD>
<TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp; </TD>
<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="serif">(186,283</FONT></B></TD>
<TD align=left nowrap>
<B><FONT size=2 face="serif">)</FONT></B></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="serif">(51,286</FONT></B></TD>
<TD align=left nowrap>
<B><FONT size=2 face="serif">)</FONT></B></TD>
</TR>
<TR>
<TD colspan=8>&nbsp; </TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
<FONT size=2 face="serif">CASH FLOWS FROM FINANCING ACTIVITIES:</FONT></TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR>
<TD colspan=8>&nbsp; </TD>
</TR>
<TR valign="bottom" bgcolor="#EAF9E8">
<TD align=left nowrap>
<FONT size=2 face="serif">Advances from factor</FONT></TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=right nowrap>
<FONT size=2 face="serif">649,804</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=center nowrap>
<FONT size=2 face="serif">-</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
<FONT size=2 face="serif">Repayment of advances from factor</FONT></TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=right nowrap>
<FONT size=2 face="serif">(649,804</FONT></TD>
<TD align=left nowrap>
<FONT size=2 face="serif">)</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=center nowrap>
<FONT size=2 face="serif">-</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR valign="bottom" bgcolor="#EAF9E8">
<TD align=left nowrap>
<FONT size=2 face="serif">Proceeds from issuance of notes payable to related parties and shareholders</FONT></TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=right nowrap>
<FONT size=2 face="serif">1,154,500</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=right nowrap>
<FONT size=2 face="serif">568,000</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
<FONT size=2 face="serif">Repayment of notes payable to related parties and shareholders</FONT></TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=right nowrap>
<FONT size=2 face="serif">(221,299</FONT></TD>
<TD align=left nowrap>
<FONT size=2 face="serif">)</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=right nowrap>
<FONT size=2 face="serif">(182,277</FONT></TD>
<TD align=left nowrap>
<FONT size=2 face="serif">)</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#EAF9E8">
<TD align=left nowrap>
<FONT size=2 face="serif">Proceeds from issuance of convertible debentures</FONT></TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=right nowrap>
<FONT size=2 face="serif">2,437,400</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=right nowrap>
<FONT size=2 face="serif">925,000</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
<FONT size=2 face="serif">Principal repayments on debentures</FONT></TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=right nowrap>
<FONT size=2 face="serif">(15,000</FONT></TD>
<TD align=left nowrap>
<FONT size=2 face="serif">)</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=center nowrap>
<FONT size=2 face="serif">-</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR valign="bottom" bgcolor="#EAF9E8">
<TD align=left nowrap>
<FONT size=2 face="serif">Issue of common stock on conversion of debentures</FONT></TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=right nowrap>
<FONT size=2 face="serif">10,000</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=center nowrap>
<FONT size=2 face="serif">-</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
<FONT size=2 face="serif">Deferred costs</FONT></TD>
<TD>&nbsp; </TD>
<TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp; </TD>
<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">(330,112</FONT></TD>
<TD align=left nowrap>
<FONT size=2 face="serif">)</FONT></TD>
<TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp; </TD>
<TD align=center nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">-</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR>
<TD colspan=8>&nbsp; </TD>
</TR>
<TR valign="bottom" bgcolor="#EAF9E8">
<TD align=left nowrap>
<B><FONT size=2 face="serif">Net cash provided by financing activities</FONT></B></TD>
<TD>&nbsp; </TD>
<TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp; </TD>
<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="serif">3,035,489</FONT></B></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp; </TD>
<TD align=right nowrap style="border-bottom:1px solid #000000;">
<B><FONT size=2 face="serif">1,310,723</FONT></B></TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR>
<TD colspan=8>&nbsp; </TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
<B><FONT size=2 face="serif">Net Increase/(decrease) in cash</FONT></B></TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=right nowrap>
<B><FONT size=2 face="serif">405,908</FONT></B></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=right nowrap>
<B><FONT size=2 face="serif">(198,820</FONT></B></TD>
<TD align=left nowrap>
<B><FONT size=2 face="serif">)</FONT></B></TD>
</TR>
<TR>
<TD colspan=8>&nbsp; </TD>
</TR>
<TR valign="bottom" bgcolor="#EAF9E8">
<TD align=left nowrap>
<B><FONT size=2 face="serif">Cash at beginning of period</FONT></B></TD>
<TD>&nbsp; </TD>
<TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp; </TD>
<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">408,305</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap style="border-bottom:1px solid #000000;">&nbsp; </TD>
<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">466,404</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR>
<TD colspan=8>&nbsp; </TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
<B><FONT size=2 face="serif">Cash at end of period</FONT></B></TD>
<TD>&nbsp; </TD>
<TD align=left nowrap style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">&#36;</FONT></TD>
<TD align=right nowrap style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">814,213</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">&#36;</FONT></TD>
<TD align=right nowrap style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">267,584</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR>
<TD colspan=8>&nbsp; </TD>
</TR>
<TR valign="bottom" bgcolor="#EAF9E8">
<TD align=left nowrap>
<FONT size=2 face="serif">Supplemental disclosure of cash flow information-</FONT></TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
<FONT size=2 face="serif">Cash paid during the period for:</FONT></TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR>
<TD colspan=8>&nbsp; </TD>
</TR>
<TR valign="bottom" bgcolor="#EAF9E8">
<TD align=left nowrap>
<FONT size=2 face="serif">Interest</FONT></TD>
<TD>&nbsp; </TD>
<TD align=left nowrap style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">&#36;</FONT></TD>
<TD align=right nowrap style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">48,200</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">&#36;</FONT></TD>
<TD nowrap style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">-</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR>
<TD colspan=8>&nbsp; </TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
<FONT size=2 face="serif">Income taxes</FONT></TD>
<TD>&nbsp; </TD>
<TD align=left nowrap style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">&#36;</FONT></TD>
<TD align=center nowrap style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">-</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">&#36;</FONT></TD>
<TD align=right nowrap style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">830</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR>
<TD colspan=8>&nbsp; </TD>
</TR>
<TR valign="bottom" bgcolor="#EAF9E8">
<TD align=left nowrap>
<FONT size=2 face="serif">NON-CASH INVESTING AND FINANCING ACTIVITIES :</FONT></TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
<FONT size=2 face="serif">Issuance of common stock for services rendered</FONT></TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>
<FONT size=2 face="serif">&#36;</FONT></TD>
<TD align=right nowrap>
<FONT size=2 face="serif">97,500</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>
<FONT size=2 face="serif">&#36;</FONT></TD>
<TD align=right nowrap>
<FONT size=2 face="serif">155,000</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR valign="bottom" bgcolor="#EAF9E8">
<TD align=left nowrap>
<FONT size=2 face="serif">Issuance of common stock in lieu of debenture note interest</FONT></TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>
<FONT size=2 face="serif">&#36;</FONT></TD>
<TD align=right nowrap>
<FONT size=2 face="serif">218,142</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>
<FONT size=2 face="serif">&#36;</FONT></TD>
<TD align=right nowrap>
<FONT size=2 face="serif">135,000</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
<FONT size=2 face="serif">Issuance of common stock for director services</FONT></TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>
<FONT size=2 face="serif">&#36;</FONT></TD>
<TD align=right nowrap>
<FONT size=2 face="serif">24,000</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>&nbsp; </TD>
</TR>
<TR valign="bottom" bgcolor="#EAF9E8">
<TD align=left nowrap>
<FONT size=2 face="serif">Return of common stock due to termination of contract</FONT></TD>
<TD>&nbsp; </TD>
<TD align=left nowrap>
<FONT size=2 face="serif">&#36;</FONT></TD>
<TD align=center nowrap>
<FONT size=2 face="serif">-</FONT></TD>
<TD align=left nowrap>&nbsp; </TD>
<TD align=left nowrap>
<FONT size=2 face="serif">&#36;</FONT></TD>
<TD align=right nowrap>
<FONT size=2 face="serif">(70,000</FONT></TD>
<TD align=left nowrap>
<FONT size=2 face="serif">)</FONT></TD>
</TR>
<TR valign="bottom">
  <TD align=left nowrap>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=right nowrap>&nbsp;</TD>
  <TD align=center nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=right nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD align=left nowrap>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD align=right nowrap>&nbsp;</TD>
  <TD align=center nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=right nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
  <TD colspan="4" align=right nowrap style="border-top:2px solid #000000;"><FONT size=2 face="serif">The
    accompanying notes are an integral part of the consolidated financial statements. </FONT></TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
  <TD align=right nowrap>&nbsp;</TD>
  <TD align=left nowrap>&nbsp;</TD>
</TR>
</TABLE>
<BR>
<P align="center">
<FONT size=2 face="serif">5</FONT></P>

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<div style="border-bottom:1px solid #000000;" align="center">
<div style="margin-bottom:10px;">
<FONT size=2 face="serif"><a name="notes1"></a>ASSURED PHARMACY, INC. AND SUBSIDIARIES <br>
FORMERLY KNOWN AS eRXSYS, Inc. <br>
</FONT><FONT size=2 face="serif">NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<br>
SEPTEMBER 30, 2008 </FONT></div></div>

<P align="justify">
<FONT size=2 face="serif">1. ORGANIZATION AND BASIS OF PRESENTATION</FONT></P>
<P align="justify">
<I><FONT size=2 face="serif">A. Organization:</FONT></I></P>
<P align="justify">
<FONT size=2 face="serif">Assured Pharmacy, Inc. (&#147;Assured Pharmacy&#148;,
the &#147;Company&#148;, &#147;we&#148; or &#147;us&#148;) was organized as a
Nevada  corporation on October 22, 1999 under the name Surforama.com, Inc. and
previously operated under the name eRXSYS, Inc. The Company is engaged in the
business of operating specialty pharmacies that primarily dispense highly regulated
pain medication.  During 2006, the Company expanded its business beyond pain
management to service customers that require prescriptions to treat cancer, psychiatric,
and neurological conditions. The Company offers physicians the ability to electronically
transmit  prescriptions to its pharmacies. The Company derives its revenue primarily
from the sale of prescription drugs and does not keep in inventory non-prescription
drugs or health and beauty related products inventoried at traditional pharmacies.
The  majority of the Company&#146;s business is derived from repeat business
from its customers. </FONT> <FONT size=2 face="serif">&#147;Walk-in&#148; </FONT> <FONT size=2 face="serif">prescriptions
from physicians are limited. </FONT></P>
<P align="justify">
<FONT size=2 face="serif">The Company currently has six operating pharmacies. Four of those pharmacies are wholly owned and the Company has a 94.8% ownership interest in the two other pharmacies.</FONT></P>
<P align="justify">
<FONT size=2 face="serif">The Company commenced operations at its Las Vegas, Nevada pharmacy during the first quarter of 2008. In February 2008, the Company consolidated the operations of its two pharmacies in Portland, Oregon, into one location.
This consolidation is expected to allow it to further leverage its existing infrastructure and is expected to result in a reduction of costs.</FONT></P>
<P align="justify">
<FONT size=2 face="serif">The Company has plans in the future to open one more
pharmacy in Oak Lomita, California . The Company has executed a lease agreement,
received the requisite license to operate the pharmacy and plans on opening at
such time that it has sufficient capital resources to commence operations. </FONT></P>
<P align="justify">
<I><FONT size=2 face="serif">Agreement with TPG, L.L.C.</FONT></I></P>
<P align="justify">
<FONT size=2 face="serif">On April 24, 2003, the Company entered into an agreement with TPG, L.L.C. (&#147;TPG&#148;) for the purpose of funding the establishment and operations of pharmacies. Under this agreement, TPG contributed &#36;460,000 in
capital for the establishment of the initial two pharmacies and held the right to fund on a joint venture basis fifty pharmacies that it established. The agreement provided that in exchange for contributing financing in the amount of &#36;230,000
per pharmacy location, TPG acquired a 49% ownership interest in each pharmacy established under this agreement and the Company owned the remaining 51%. Under the terms of the agreement with TPG, the Company&#146;s contribution to establish
pharmacies primarily consisted of the right to utilize its intellectual property rights and to provide sales and marketing services. </FONT></P>
<P align="justify">
<FONT size=2 face="serif">Assured Pharmacies, Inc. (&#147;API&#148;) 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, the Company owned
51% of API and TPG owned the remaining 49%.</FONT></P>
<P align="justify">
<FONT size=2 face="serif">Under this joint venture, the Company established its first pharmacy in Santa Ana, California and its second pharmacy in Riverside, California. On December 15, 2006, the Company entered into a Purchase Agreement with TPG
and acquired all of its right, title and interest in 49 shares of common stock of API for &#36;460,000 and the issuance of 50,000 shares of its common stock. The Company granted TPG a security interest in all of the Company&#146;s right, title and
interest of the 49 shares of common stock of API that the Company acquired as security for the performance of the Purchase Agreement. Of the &#36;460,000, &#36;15,000 was paid on December 15, 2006 and the balance is payable over the period ending
February 15, 2009. (See Note 5).</FONT></P>
<P align="justify">
<FONT size=2 face="serif">As a result of this acquisition, the Company increased its ownership interest in API to 100% making it a wholly-owned subsidiary and consequently resulting in the termination of its joint venture with TPG.</FONT></P>

<P align="center">
<FONT size=2 face="serif">6</FONT></P>

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<P align="left" style="page-break-before:always"></P><PAGE>

<div style="border-bottom:1px solid #000000;" align="center">
<div style="margin-bottom:10px;">
<FONT size=2 face="serif">ASSURED PHARMACY, INC. AND SUBSIDIARIES <br>
FORMERLY KNOWN AS eRXSYS, Inc. <br>
</FONT><FONT size=2 face="serif">NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<br>
SEPTEMBER 30, 2008 </FONT></div></div>

<P align="justify">
<FONT size=2 face="serif">1. ORGANIZATION AND BASIS OF PRESENTATION (continued)</FONT></P>
<P align="justify">
<I><FONT size=2 face="serif">Agreement with TAPG, L.L.C.</FONT></I></P>
<P align="justify">
<FONT size=2 face="serif">In February 2004, the Company entered into an agreement (the &#147;TAPG Agreement&#148;) with TAPG, L.L.C. (&#147;TAPG&#148;), a Louisiana limited liability company, and formed Safescript Northwest, Inc. (&#147;Safescript
Northwest&#148;), a Louisiana corporation. Safescript Northwest was formed to establish and operate up to five pharmacies. On June 30, 2004, Safescript Northwest changed its name to Assured Pharmacies Northwest, Inc. (&#147;APN&#148;). The Company
initially owned 75% of APN, while TAPG owned the remaining 25%.</FONT></P>
<P align="justify">
<FONT size=2 face="serif">The TAPG Agreement provided that TAPG will contribute start-up costs in the amount of &#36;335,000 per pharmacy location established not to exceed five pharmacies. The Company&#146;s contribution under the TAPG Agreement
consisted of granting the right to utilize its intellectual property rights and to provide sales and marketing services. Between March and October 2004, APN received from TAPG start-up funds in the amount of &#36;854,213 as its capital contribution
for three pharmacies. This capital contribution funded the opening of a pharmacy in Kirkland, Washington in August 2004 and another pharmacy in Portland, Oregon in September 2004. Included in these monies was a partial capital contribution in the
amount of &#36;190,000 for the establishment of its second pharmacy location in Portland, Oregon. TAPG remains obligated to contribute an additional &#36;150,787 to satisfy their full contribution. TAPG is also obligated to contribute their
proportionate share of the start-up costs in excess of their initial capital contribution of &#36;335,000 per pharmacy. The TAPG Agreement defined start-up costs as any costs associated with the opening of any open pharmacy location that accrue
within one hundred eighty days following the opening of that particular pharmacy.</FONT></P>
<P align="justify">
<FONT size=2 face="serif">Following the start-up period, the Company advanced interest-free loans to sustain operations at the pharmacies operated by APN. On March 6, 2006, these loans were converted into APN capital stock. Following the conversion
of this debt into equity, the Company increased its ownership interest in APN from 75% to 94.8% . TAPG owns the remaining 5.2% interest.</FONT></P>
<P align="justify">
<I><FONT size=2 face="serif">License Agreement with Network Technology, Inc. ("RxNT")</FONT></I></P>
<P align="justify">
<FONT size=2 face="serif">On March 15, 2004, the Company entered into a technology license agreement (&#147;Technology License&#148;) with Network Technology, Inc. (&#147;RxNT&#148;). The Technology License grants the Company the right to use
RxNT&#146;s prescribing technology under the brand name &#147;Assured Script&#148; and enables the Company to accept prescriptions electronically transmitted to its
pharmacies. Pursuant to the Technology License, the Company paid RxNT a licensing fee of &#36;100,000 and is also responsible for paying RxNT a royalty equal to twenty five percent (25%) of the gross profit from sales of the &#147;Assured
Script&#148; product, which refers to the licensed products and technology set forth in the Technology License and not prescription drug sales. Given that the Company is in the business of owning and operating pharmacies, management does not
anticipate that it would make any sales of the &#147;Assured Script&#148; product resulting in a royalty payment to RxNT. On March 16, 2007, the Company renewed this agreement for a period of three years and agreed to pay an annual license fee of
&#36;54,000. </FONT></P>
<P align="justify">
<I><FONT size=2 face="serif">Other Subsidiaries:</FONT></I></P>
<P align="justify">
<FONT size=2 face="serif">The Company&#146;s management determined that its business could be expanded through developing arrangements with third party health plan providers to accept traditional co-payments and fill prescriptions for their members
who rely upon overnight courier for delivery of their prescription. The Company&#146;s management believes that such arrangements will broaden its consumer base and enable it to access a particular niche of consumer that receives their prescriptions
exclusively via courier as opposed to patronizing traditional retail pharmacy locations. On January 3, 2006, the Company incorporated Assured Pharmacy Plus, Corp. as a wholly-owned subsidiary to develop this opportunity.</FONT><FONT face="serif">
</FONT></P>

<P align="center">
<FONT size=2 face="serif">7</FONT></P>

<HR NOSHADE ALIGN=CENTER WIDTH="100%" SIZE=4>
<P align="left" style="page-break-before:always"></P><PAGE>

<div style="border-bottom:1px solid #000000;" align="center">
<div style="margin-bottom:10px;">
<FONT size=2 face="serif">ASSURED PHARMACY, INC. AND SUBSIDIARIES <br>
FORMERLY KNOWN AS eRXSYS, Inc. <br>
</FONT><FONT size=2 face="serif">NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<br>
SEPTEMBER 30, 2008 </FONT></div></div>

<P align="justify">
<FONT size=2 face="serif">1. ORGANIZATION AND BASIS OF PRESENTATION (continued) </FONT></P>
<P align="justify">
<FONT size=2 face="serif">Also on January 3, 2006, the Company incorporated Assured Pharmacy DME, Corp. as a wholly-owned subsidiary for the purpose of facilitating and making available specialized medical equipment to its consumers. The
Company&#146;s consumers who require treatment for chronic pain commonly require specialized medical equipment and/or rehabilitative equipment.</FONT></P>
<P align="justify">
<FONT size=2 face="serif">During the third quarter of 2006, the Company incorporated three wholly-owned subsidiaries for the purpose of operating additional pharmacies. On July 21, 2006, the Company incorporated Assured Pharmacy Gresham, Inc., on
August 11, 2006, the Company incorporated Assured Pharmacy Irvine, Inc., and on September 25, 2006, the Company incorporated Assured Pharmacy Los Angeles 1, Inc. </FONT></P>
<P align="justify">
<FONT size=2 face="serif">On June 19, 2007, the Company incorporated Assured Pharmacy Las Vegas Inc., as a wholly-owned subsidiary for the purpose of operating its new pharmacy in Las Vegas, Nevada. </FONT></P>
<P align="justify">
<FONT size=2 face="serif">On August 9, 2007 the Company incorporated APHY Henderson Inc. as a wholly-owned subsidiary in anticipation of opening a new pharmacy in Henderson, Nevada.</FONT></P>
<P align="justify">
<I><FONT size=2 face="serif">Quotation on OTCBB</FONT></I></P>
<P align="justify">
<FONT size=2 face="serif">The Company&#146;s common stock is quoted on the Over-the-Counter Bulletin Board (the &#147;OTCBB&#148;) under the symbol &#147;APHY&#148;.</FONT></P>
<P align="justify">
<I><FONT size=2 face="serif">B. Basis of Presentation</FONT></I></P>
<P align="justify">
<FONT size=2 face="serif">The Company&#146;s management, without audit, prepared the condensed consolidated financial statements for the three and nine months ended September 30, 2008 and 2007. The information furnished has been prepared in
accordance with accounting principles generally accepted in the United States of America (&#147;GAAP&#148;) for interim financial reporting. Accordingly, certain disclosures normally included in financial statements prepared in accordance with GAAP
have been condensed, consolidated or omitted. In the opinion of management, all adjustments considered necessary for the fair presentation of the Company&#146;s financial position, results of operations and cash flows have been included and are only
of a normal recurring nature. The results of operations for the three and nine months ended September 30, 2008 and 2007 are not necessarily indicative of the results of operations for the year ending December 31, 2008.</FONT></P>
<P align="justify">
<FONT size=2 face="serif">The consolidated financial statements include the accounts of Assured Pharmacy, Inc., its wholly-owned subsidiaries, and majority-owned subsidiaries. All inter-company accounts and transactions have been eliminated in
consolidation.</FONT></P>
<P align="justify">
<FONT size=2 face="serif">These condensed consolidated financial statements should be read in conjunction with the Company&#146;s audited consolidated financial statements as of December 31, 2007, which are included in the Company&#146;s Annual Report on Form
10-KSB that was filed with the Securities and Exchange Commission (the &#147;SEC&#148;) on March 31, 2008. </FONT></P>
<P align="justify">
<I><FONT size=2 face="serif">Going Concern Considerations</FONT></I></P>
<P align="justify">
<FONT size=2 face="serif">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, 2008, the Company had an accumulated deficit of &#36;26,413,555, recurring losses from operations and negative cash flow from operating activities for the nine month period ended
September 30, 2008 of &#36;2,443,298. The Company also had a negative working capital of &#36;7,857,102.</FONT></P>

<P align="center">
<FONT size=2 face="serif">8</FONT></P>

<HR NOSHADE ALIGN=CENTER WIDTH="100%" SIZE=4>
<P align="left" style="page-break-before:always"></P><PAGE>

<div style="border-bottom:1px solid #000000;" align="center">
<div style="margin-bottom:10px;">
<FONT size=2 face="serif">ASSURED PHARMACY, INC. AND SUBSIDIARIES <br>
FORMERLY KNOWN AS eRXSYS, Inc. <br>
</FONT><FONT size=2 face="serif">NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<br>
SEPTEMBER 30, 2008 </FONT></div></div>

<P align="justify">
<FONT size=2 face="serif">1. ORGANIZATION AND BASIS OF PRESENTATION (continued) </FONT></P>
<P align="justify">
<FONT size=2 face="serif">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, 2008. The Company is aggressively 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. </FONT></P>
<P align="justify">
<FONT size=2 face="serif">These factors, among others, raise substantial doubt about the Company&#146;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.</FONT></P>
<P align="justify">
<FONT size=2 face="serif">In response to these problems, management has taken
or will take the following actions: </FONT></P>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr valign="top">
    <td width="3%">&nbsp;</td>
    <td width="2%">&#149;</td>
    <td><FONT size=2 face="serif">The Company is expanding its revenue base beyond
        the pain management sector to service customers that</FONT> <FONT size=2 face="serif">require
    prescriptions to treat cancer, psychiatric, and neurological conditions.</FONT></td>
  </tr>
  <tr valign="top">
    <td width="3%">&nbsp;</td>
    <td width="2%">&#149;</td>
    <td><FONT size=2 face="serif">The Company is aggressively signing up new
    physicians.</FONT></td>
  </tr>
  <tr valign="top">
    <td width="3%">&nbsp;</td>
    <td width="2%">&#149;</td>
    <td><FONT size=2 face="serif">The Company retained additional sales personnel
    to attract business.</FONT></td>
  </tr>
  <tr valign="top">
    <td width="3%">&nbsp;</td>
    <td width="2%">&#149;</td>
    <td><FONT size=2 face="serif">The Company consolidated two pharmacies in
        Portland, Oregon into a single operation. This consolidation is expected
        to allow</FONT> <FONT size=2 face="serif">the Company to further leverage
        its existing infrastructure and is expected to result in a reduction
    of costs.</FONT></td>
  </tr>
  <tr valign="top">
    <td width="3%">&nbsp;</td>
    <td width="2%">&#149;</td>
    <td><FONT size=2 face="serif">In April 2008, the Company entered into a Credit
        Agreement for &#36;2,000,000, which can be extended up to &#36;3,000,000.
    (See</FONT> <FONT size=2 face="serif">Note 5).</FONT></td>
  </tr>
  <tr valign="top">
    <td width="3%">&nbsp;</td>
    <td width="2%">&#149;</td>
    <td><FONT size=2 face="serif">In the third quarter of 2008, the Company raised &#36;2,037,400
    through the issuance of convertible debentures.</FONT></td>
  </tr>
  <tr valign="top">
    <td>&nbsp;</td>
    <td>&#149;</td>
    <td><FONT size=2 face="serif">The Company will seek to extend the maturity
        dates of the related party payables (see Note 5) and unsecured convertible
        debentures (see Note 7).</FONT></td>
  </tr>
</table>
<P align="justify">
<FONT size=2 face="serif">2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES </FONT></P>
<P align="justify">
<FONT size=2 face="serif">The summary of significant accounting policies presented below is designed to assist in understanding the Company's consolidated financial statements. Such 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 (&#147;GAAP&#148;) in all material respects, and have
been consistently applied in preparing the accompanying consolidated financial statements. </FONT></P>
<P align="justify">
<I><FONT size=2 face="serif">Principles of Consolidation</FONT></I></P>
<P align="justify">
<FONT size=2 face="serif">The consolidated financial statements for the quarter ended September 30, 2008, include the accounts of the Company&#146;s 94.8% ownership interest in
APN and its wholly owned subsidiaries. In accordance with the joint venture agreement, the minority partner does not have participation rights that allow them to block decisions proposed by the Company. The minority joint venture has given the
Company the ability to control all daily operations and management of the joint venture; therefore, the Company has consolidated the joint venture in its financial statements. All significant inter-company accounts and transactions have been
eliminated in consolidation.</FONT></P>
<P align="justify">
<I><FONT size=2 face="serif">Use of Estimates</FONT></I></P>
<P align="justify">
<FONT size=2 face="serif">The preparation of 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 revenue recognition, the allowance for doubtful accounts, the
deferred tax asset valuation allowance, and the realization of inventories and long-lived assets. Actual results could materially differ from these estimates. </FONT></P>

<P align="center">
<FONT size=2 face="serif">9</FONT></P>

<HR NOSHADE ALIGN=CENTER WIDTH="100%" SIZE=4>
<P align="left" style="page-break-before:always"></P><PAGE>

<div style="border-bottom:1px solid #000000;" align="center">
<div style="margin-bottom:10px;">
<FONT size=2 face="serif">ASSURED PHARMACY, INC. AND SUBSIDIARIES <br>
FORMERLY KNOWN AS eRXSYS, Inc. <br>
</FONT><FONT size=2 face="serif">NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<br>
SEPTEMBER 30, 2008 </FONT></div></div>

<P align="justify">
<FONT size=2 face="serif">2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)</FONT></P>
<P align="justify">
<I><FONT size=2 face="serif">Risks and Uncertainties</FONT></I></P>
<P align="justify">
<FONT size=2 face="serif">The Company operates in a highly competitive industry that is subject to intense competition. 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 and 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. </FONT></P>
<P align="justify">
<FONT size=2 face="serif">As a result, the Company may be subject to the risk 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 risk of business failure. </FONT></P>
<P align="justify">
<FONT size=2 face="serif">The Company&#146;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 and/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. </FONT></P>
<P align="justify">
<FONT size=2 face="serif">During the nine months ended September 30, 2008, the Company purchased approximately 94% of its inventory of its prescription drugs from one wholesale vendor. Management believes that the wholesale pharmaceutical and
non-pharmaceutical distribution industry is highly competitive because of consolidation in the industry and the practice of certain large pharmacy chains to purchase directly from product manufacturers. Although management believes it could obtain
the majority of its inventory from other distributors at competitive prices and upon competitive payment terms if its relationship with its primary wholesale drug vendor was terminated, there can be no assurance that the termination of such
relationship would not adversely affect the Company. During the three months ended September 30, 2008, the Company entered into an agreement with another wholesale vendor which it expects to become its primary wholesale vendor over time. </FONT></P>
<P align="justify">
<I><FONT size=2 face="serif">Governmental Regulations</FONT></I></P>
<P align="justify">
<FONT size=2 face="serif">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&#146;s operations and it currently has 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&#146;s business.</FONT><I><FONT size=2 face="serif"> </FONT></I></P>
<P align="justify">
<FONT size=2 face="serif">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.
</FONT></P>

<P align="center">
<FONT size=2 face="serif">10</FONT></P>

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<div style="border-bottom:1px solid #000000;" align="center">
<div style="margin-bottom:10px;">
<FONT size=2 face="serif">ASSURED PHARMACY, INC. AND SUBSIDIARIES <br>
FORMERLY KNOWN AS eRXSYS, Inc. <br>
</FONT><FONT size=2 face="serif">NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<br>
SEPTEMBER 30, 2008 </FONT></div></div>

<P align="justify">
<FONT size=2 face="serif">2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) </FONT></P>
<P align="justify">
<FONT size=2 face="serif">The Company is also impacted by the Health Insurance Portability and Accountability Act of 1996 (&#147;HIPAA&#148;), which mandates, among other things, the adoption of standards to enhance the efficiency and simplify the
administration of the health care 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; privacy of
individually identifiable healthcare information; security and electronic signatures, as well 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. </FONT></P>
<P align="justify">
<I><FONT size=2 face="serif">Cash and Cash Equivalents</FONT></I></P>
<P align="justify">
<FONT size=2 face="serif">The Company considers all highly liquid investments with an original maturity of three months or less, when purchased, to be cash equivalents. </FONT></P>
<P align="justify">
<FONT size=2 face="serif">The financial instrument that potentially exposes the Company to a concentration of credit risk principally consists of cash. The Company deposits its cash with high credit financial institutions, and at times the balances
may exceed the insurance limit of the Federal Deposit Insurance Corp. Management believes that there is little risk of loss due to this policy. </FONT></P>
<P align="justify">
<I><FONT size=2 face="serif">Accounts Receivable, non-current</FONT></I></P>
<P align="justify">
<FONT size=2 face="serif">At September 30, 2008, the Company had &#36;456,644 of receivables which were primarily from Workmen&#146;s Compensation Board of State of California (&#147;CA Board&#148;). These receivables are due to disputes between the
claimant and the employer, with the CA Board, known as &#147;Green Liens&#148;. The settlement period for such Green Lien cases takes anywhere from 1 year to 5 years, and therefore management has classified such receivables as long-term assets. As
of September 30, 2008, management has provided &#36;164,313 as an allowance for doubtful accounts against these non-current receivables. </FONT></P>
<P align="justify">
<I><FONT size=2 face="serif">Allowance for Doubtful Accounts Receivable</FONT></I></P>
<P align="justify">
<FONT size=2 face="serif">The Company&#146;s receivables are from insurance companies.
Management periodically reviews the collectability of accounts receivable and
provides an allowance for doubtful accounts as management deems necessary. For
the three months ended September 30, 2008, management has not increased the allowance
for doubtful accounts. As of September 30, 2008 the allowance for doubtful accounts
was &#36;249,597 of which &#36;164,313 pertains to the non current
receivables.</FONT></P>

<P align="center">
<FONT size=2 face="serif">11</FONT></P>

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<div style="border-bottom:1px solid #000000;" align="center">
<div style="margin-bottom:10px;">
<FONT size=2 face="serif">ASSURED PHARMACY, INC. AND SUBSIDIARIES <br>
FORMERLY KNOWN AS eRXSYS, Inc. <br>
</FONT><FONT size=2 face="serif">NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<br>
SEPTEMBER 30, 2008 </FONT></div></div>

<P align="justify">
<FONT size=2 face="serif">2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) </FONT></P>
<P align="justify">
<FONT size=2 face="serif">Inventories are stated at the lower of cost (first-in, first-out method) or estimated market value, and consist primarily of pharmaceutical drugs. Market value is determined by comparison with recent sales or net realizable
value. Net realizable value is based on management&#146;s forecast for sales of its products or services in the ensuing years and/or consideration and analysis of changes in customer base, product 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</FONT><I><FONT size=2 face="serif">
</FONT></I><FONT size=2 face="serif">is measured as the difference between the inventory cost and the estimated market value based on management&#146;s assumptions about market conditions and future demand for its products. No reserves were provided
at September 30, 2008 or December 31, 2007. Should the demand for the Company&#146;s products prove to be less than anticipated, the ultimate net realizable value of its inventories could be substantially less than reflected in the accompanying
consolidated balance sheet.</FONT></P>
<P align="justify">
<FONT size=2 face="serif">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 multiple wholesale vendors. The
Company&#146;s 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.</FONT></P>
<P align="justify">
<FONT size=2 face="serif">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 the Company&#146;s business model focuses on servicing doctors specializing in pain management and chronic pain patients, the Company carries in inventory a larger amount of Schedule II drugs than
most other pharmacies. The cost in acquiring Schedule II drugs is higher than Schedule III and IV drugs. </FONT></P>
<P align="justify">
<I><FONT size=2 face="serif">Long-Lived Assets:</FONT></I></P>
<P align="justify">
<FONT size=2 face="serif">The Company adopted Statement of Financial Accounting Standard (&#147;SFAS&#148;) No. 144, &#147;</FONT><I><FONT size=2 face="serif">Accounting for the Impairment or Disposal of Long-Lived Assets&#148;, </FONT></I><FONT size=2 face="serif">which 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.</FONT></P>
<P align="justify">
<FONT size=2 face="serif">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. </FONT></P>
<P align="justify">
<FONT size=2 face="serif">The Company's long-lived assets consist of computers, software, office furniture and equipment, store fixtures and leasehold improvements on pharmacy build-outs. The Company assesses the impairment of these long-lived
assets at least annually and makes adjustments accordingly. </FONT></P>
<P align="justify">
<I><FONT size=2 face="serif">Property and Equipment</FONT></I></P>
<P align="justify">
<FONT size=2 face="serif">Property and equipment is stated at cost, and is being
depreciated using the straight-line method over the estimated useful lives of
the related assets, which generally range between three and ten 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. </FONT></P>

<P align="center">
<FONT size=2 face="serif">12</FONT></P>

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<div style="border-bottom:1px solid #000000;" align="center">
<div style="margin-bottom:10px;">
<FONT size=2 face="serif">ASSURED PHARMACY, INC. AND SUBSIDIARIES <br>
FORMERLY KNOWN AS eRXSYS, Inc. <br>
</FONT><FONT size=2 face="serif">NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<br>
SEPTEMBER 30, 2008 </FONT></div></div>

<P align="justify">
<FONT size=2 face="serif">2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)</FONT></P>
<P align="justify">
<I><FONT size=2 face="serif">Intangible Assets</FONT></I></P>
<P align="justify">
<FONT size=2 face="serif">SFAS No. 142, &#147;</FONT><I><FONT size=2 face="serif">Goodwill and Other Intangible Assets</FONT></I><FONT size=2 face="serif">&#148;, 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. </FONT></P>
<P align="justify">
<FONT size=2 face="serif">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. </FONT></P>
<P align="justify">
<I><FONT size=2 face="serif">Advertising</FONT></I></P>
<P align="justify">
<FONT size=2 face="serif">The Company expenses the cost of advertising, including marketing and promotions, when incurred. Advertising costs for the three months ended September 30, 2008 and 2007 was &#36;0 and &#36;9,621 respectively. When
incurred, such expenses are included in selling, general and administrative expenses.</FONT></P>
<P align="justify">
<I><FONT size=2 face="serif">Revenue Recognition</FONT></I></P>
<P align="justify">
<FONT size=2 face="serif">The Company recognizes revenue on an accrual basis when the product is delivered to the customer. Payments are received directly from the customer at the point of sale, or the customer&#146;s insurance provider is billed.
Authorization, which assures payment, is obtained from the customer&#146;s insurance provider before the medication is dispensed to the customer. Authorizations are obtained for the vast majority of these sales electronically and a corresponding
authorization number is issued by the customer&#146;s insurance provider. </FONT></P>
<P align="justify">
<I><FONT size=2 face="serif">Share-based Employee Compensation</FONT></I></P>
<P align="justify">
<FONT size=2 face="serif">The Company accounts for share based compensation under
the provisions of statement of SFAS 123R, &#147;</FONT><I><FONT size=2 face="serif">Share-Based
Payments</FONT></I><FONT size=2 face="serif">&#148;, which was a
revision of SFAS No. 123. SFAS 123(R) requires all new share-based payments to
employees, including grants of employee stock options, to be recognized in the
financial statements based on their fair values. Pro forma disclosure of the
fair value of  new share-based payments is no longer an alternative to financial
statement recognition. </FONT></P>
<P align="justify">
<I><FONT size=2 face="serif">Basic and Diluted Loss per Common Share</FONT></I></P>
<P align="justify">
<FONT size=2 face="serif">The Company computes loss per common share using SFAS No. 128 &#147;</FONT><I><FONT size=2 face="serif">Earnings Per Share&#148;. </FONT></I><FONT size=2 face="serif">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. When there is a loss, diluted loss per share is not calculated, because to do so would be anti-dilutive. </FONT></P>

<P align="center">
<FONT size=2 face="serif">13</FONT></P>

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<div style="border-bottom:1px solid #000000;" align="center">
<div style="margin-bottom:10px;">
<FONT size=2 face="serif">ASSURED PHARMACY, INC. AND SUBSIDIARIES <br>
FORMERLY KNOWN AS eRXSYS, Inc. <br>
</FONT><FONT size=2 face="serif">NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<br>
SEPTEMBER 30, 2008 </FONT></div></div>

<P align="justify">
<FONT size=2 face="serif">2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)</FONT></P>
<P align="justify">
<I><FONT size=2 face="serif">Income Taxes</FONT></I></P>
<P align="justify">
<FONT size=2 face="serif">The Company accounts for income taxes under the provisions of SFAS No. 109, </FONT><I><FONT size=2 face="serif">&#147;Accounting for Income Taxes&#148;. </FONT></I><FONT size=2 face="serif">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. Valuation reserves are provided based on management&#146;s judgment of the
future realization of the deferred tax assets.</FONT></P>
<P align="justify">
<I><FONT size=2 face="serif">Fair Values of Financial Instruments</FONT></I></P>
<P align="justify">
<FONT size=2 face="serif">Management believes that the carrying amounts of the Company&#146;s financial instruments, consisting primarily of cash, accounts receivable, and accounts payable and accrued liabilities approximated their fair values at
September 30, 2008 and 2007 due to their short-term nature.</FONT></P>
<P align="justify">
<FONT size=2 face="serif">Management also believes that the September 30, 2008 and 2007 interest rate associated with the notes payable approximates the market interest rate for this type of debt instrument and as such, the carrying amount of the
notes payable approximates its fair value.</FONT></P>
<P align="justify">
<FONT size=2 face="serif">The fair values of related party transactions are not determinable due to their related party nature. </FONT></P>
<P align="justify">
<FONT size=2 face="serif">3. ACCOUNTS RECEIVABLE PURCHASE AGREEMENT</FONT></P>
<P align="justify">
<FONT size=2 face="serif">On March 1, 2008, the Company entered into an Accounts
Receivable Purchase Agreement (the &#147;Accounts Receivable Purchase Agreement&#148;)
with Horizon International Investments LLC (&#147;Horizon&#148;), pursuant
 to which Horizon advanced funds to the Company based on its account receivable
in exchange for repayment of the amount advanced and payment of certain commissions
and financing fees. On August 27, 2008, the Accounts Receivable Purchase Agreement
was terminated. Interest and finance charges amounted to &#36;47,986
for the nine months ended September 30, 2008. </FONT></P>
<P align="justify">
<FONT size=2 face="serif">4. DEFERRED COSTS</FONT></P>
<P align="justify">
<FONT size=2 face="serif">Costs in the amount of &#36;330,112 relating to the Securities Purchase Agreement as discussed in Note 12 below have been capitalized as of September 30, 2008. These costs consist primarily of legal, accounting and
consulting fees incurred by the Company in its due diligence efforts relating to the Securities Purchase Agreement. As further discussed in Note 12, on November 11, 2008, the Company was notified that the Securities Purchase Agreement was
terminated, effective immediately. The deferred costs will be charged to operations in the fourth quarter of 2008. </FONT></P>
<P align="justify">
<FONT size=2 face="serif">5. PAYABLES TO RELATED PARTIES AND STOCKHOLDERS</FONT></P>
<P align="justify">
<I><FONT size=2 face="serif">TPG, L.L.C Agreement</FONT></I></P>
<P align="justify">
<FONT size=2 face="serif">On December 15, 2006, the Company entered into a Purchase Agreement with TPG pursuant to which the Company purchased 49 shares of common stock of API for 50,000 shares of common stock of the Company and &#36;460,000, of
which &#36;15,000 was paid on December 15, 2006 and the balance is payable over the period ending February 15, 2009. Monthly installments of &#36;5,000 were paid from January 2007 through November 2007 and monthly installments of &#36;15,000 were
paid from December 2007 through October 2008. The balance is payable in monthly installments of &#36;15,000, ending in January 2009, with a final payment of &#36;180,000, together with interest accrued from December 15, 2006 on the unpaid amount at
the rate of prime plus 2%, due on February 15, 2009. The performance of obligations of the Company under the Purchase Agreement are secured by the Company&#146;s granting of a security interest in the 49 shares of API common stock. </FONT></P>

<P align="center">
<FONT size=2 face="serif">14</FONT></P>

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<div style="border-bottom:1px solid #000000;" align="center">
<div style="margin-bottom:10px;">
<FONT size=2 face="serif">ASSURED PHARMACY, INC. AND SUBSIDIARIES <br>
FORMERLY KNOWN AS eRXSYS, Inc. <br>
</FONT><FONT size=2 face="serif">NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<br>
SEPTEMBER 30, 2008 </FONT></div></div>

<P align="justify">
<FONT size=2 face="serif">5. PAYABLES TO RELATED PARTIES AND STOCKHOLDERS (continued) </FONT></P>
<P align="justify">
<FONT size=2 face="serif">As of September 30, 2008, the outstanding balance under the Purchase Agreement was &#36;223,668 after giving effect to a valuation discount of &#36;89,950. </FONT></P>
<P align="justify">
<I><FONT size=2 face="serif">TAPG Note</FONT></I></P>
<P align="justify">
<FONT size=2 face="serif">In January 2005, the Company entered into an agreement with TAPG where TAPG was to advance up to &#36;270,000, payable in installments of &#36;45,000 each, in connection with establishing pharmacies in the Pacific Northwest
of the United States (See Note 1). TAPG only advanced &#36;40,000 under the agreement. The principal advanced accrues interest at 7% per annum, payable in arrears quarterly. The loan is secured by the Company&#146;s assets exclusive of inventory and
accounts receivable, and is further secured by the Company&#146;s interest in APN. If the Company has obtained capital from third party sources in an amount sufficient to meet its cash flow requirements and taken steps necessary to contain its
operating costs, then TAPG may elect to convert the principal due under the note at &#36;0.60 per share. The loan matured in January 2006 and was not extended. As of September 30, 2008, the Company paid &#36;30,000 on this loan leaving an
outstanding balance of &#36;10,000 plus accrued interest of &#36;5,835.</FONT></P>
<P align="justify">
<I><FONT size=2 face="serif">Convertible Loans</FONT></I><BR>
<BR>
<I><FONT size=2 face="serif">VVPH Inc. Loans</FONT></I></P>
<P align="justify">
<FONT size=2 face="serif">On January 21, 2006, the Company entered into a loan agreement with VVPH Inc. (&#147;VVPH&#148;), a stockholder of the Company. Under the terms of the agreement, the Company borrowed &#36;400,000 for a 12 month term
extendable for an additional twelve 12 month period by mutual consent. The loan bears interest of 15% per annum to be paid in monthly installments. In January 2007, the parties entered into a modification and extension agreement to extend the
maturity date of this loan to January 2008 and modify the interest rates on these loans to 12% per annum on a going forward basis. Subsequently, the maturity date was further extended to September 30 2008.</FONT></P>
<P align="justify">
<FONT size=2 face="serif">On March 8, 2006, the Company entered into a further loan agreement with VVPH. Under the terms of the agreement, the Company borrowed &#36;200,000 for a 12 month term extendable for an additional twelve 12 month period by
mutual consent. The loan bears interest of 15% per annum to be paid in monthly installments. In March 2007, the parties entered into a modification and extension agreement to extend the maturity date of this loan to March 2008 and modify the
interest rates on these loans to 12% per annum on a going forward basis. Subsequently, the maturity date was further extended to September 30 2008.</FONT></P>
<P align="justify">
<FONT size=2 face="serif">On May 2, 2007, the Company entered into an additional loan agreement with VVPH. Under the terms of this loan agreement, the Company borrowed &#36;75,000 for a 12 month term extendable for an additional 12 month period by
mutual consent. The loan bears interest of 12% per annum which is to be paid in monthly installments. In May 2008, the maturity date was extended to September 30 2008 at the same rate of interest. </FONT></P>
<P align="justify">
<FONT size=2 face="serif">On August 15, 2007, the Company entered into an additional loan agreement with VVPH. Under the terms of this loan agreement, the Company borrowed &#36;50,000 for a 12 month term extendable for an additional 12 month period
by mutual consent. The loan bears interest of 12% per annum which is to be paid in monthly installments.</FONT></P>
<P align="justify">
<FONT size=2 face="serif">On October 23, 2007, the Company entered into an additional loan agreement with VVPH. Under the terms of this loan agreement, the Company borrowed &#36;70,000 for a 12 month term extendable for an additional 12 month period
by mutual consent. The loan bears interest of 12% per annum to be paid in monthly installments. </FONT></P>

<P align="center">
<FONT size=2 face="serif">15</FONT></P>

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<div style="border-bottom:1px solid #000000;" align="center">
<div style="margin-bottom:10px;">
<FONT size=2 face="serif">ASSURED PHARMACY, INC. AND SUBSIDIARIES <br>
FORMERLY KNOWN AS eRXSYS, Inc. <br>
</FONT><FONT size=2 face="serif">NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<br>
SEPTEMBER 30, 2008 </FONT></div></div>

<P align="justify">
<FONT size=2 face="serif">5. PAYABLES TO RELATED PARTIES AND STOCKHOLDERS (continued) </FONT></P>
<P align="justify">
<FONT size=2 face="serif">Pursuant to the terms of these agreements, VVPH has a continuing conversion right during the term to convert all or a portion of the then outstanding amount of the loan into a number of shares of the Company&#146;s common
stock determined at a conversion price equal to the rolling 7 trading day weighted average closing bid price for the Company&#146;s common stock on the OTCBB (or such other equivalent market on which the Company&#146;s common stock is quoted)
calculated as of the trading day immediately preceding the date the conversion right is exercised. The agreements provide that the conversion price shall not be less than &#36;0.40 or more than &#36;0.80. The loan agreements also grant VVPH
piggyback registration rights upon exercise of this conversion right. </FONT></P>
<P align="justify">
<FONT size=2 face="serif">As of September 30, 2008, the Company repaid &#36;230,000 on the above loans leaving an outstanding principal balance on these loans of &#36;565,000 plus accrued interest of &#36;129,590.</FONT><FONT face="serif">
</FONT></P>
<P align="justify">
<I><FONT size=2 face="serif">Brockington Securities, Inc. Loans</FONT></I></P>
<P align="justify">
<FONT size=2 face="serif">On April 19, 2007, the Company entered into a loan agreement with Brockington Securities Inc. (&#147;Brockington&#148;). Brockington is a related party because its president is also an officer and director of the Company.
Under the terms of the agreement the Company borrowed &#36;93,000 for a 12 month term extendable for an additional 12 month period by mutual consent. The loan bears interest of 12% per annum to be paid in monthly installments. This loan has been
extended to September 30, 2008 upon the same terms.</FONT></P>
<P align="justify">
<FONT size=2 face="serif">On August 1, 2007, the Company entered into an additional loan agreement with Brockington. Under the terms of this agreement the Company borrowed &#36;50,000 for a 12 month term extendable for an additional 12 month period
by mutual consent. The loan bears interest of 12% per annum to be paid in monthly installments. This loan has been extended to September 30, 2008 upon the same terms. </FONT></P>
<P align="justify">
<FONT size=2 face="serif">On November 19, 2007, the Company entered into an additional loan agreement with Brockington. Under the terms of this loan agreement, the Company borrowed &#36;100,000 for a 12 month term extendable for an additional twelve
month period by mutual consent. The loan has an interest rate of 12% per annum to be paid in monthly installments.</FONT></P>
<P align="justify">
<FONT size=2 face="serif">On April 2, 2008, the Company entered into an additional loan agreement with Brockington. Under the terms of this loan agreement, the Company borrowed &#36;30,000 for a 3 month term bearing interest of 10% per
annum.</FONT><B><FONT size=2 face="serif"> </FONT></B><FONT face="serif"> </FONT></P>
<P align="justify">
<FONT size=2 face="serif">Pursuant to the terms of the these agreements (except in the case of the April 2, 2008 agreement), Brockington has a continuing conversion right during the term to convert all or a portion of the then outstanding amount of
the loan into a number of shares of the Company&#146;s common stock determined at a conversion price equal to the rolling 7 trading day weighted average closing bid price for the Company&#146;s common stock on the OTCBB (or such other equivalent
market on which the Company&#146;s common stock is quoted) calculated as of the trading day immediately preceding the date the conversion right is exercised. The agreements provide that the conversion price shall not be less than &#36;0.40 or more
than &#36;0.80. The loan agreements (except in the case of the April 2, 2008 agreement) also grant Brockington piggyback registration rights upon exercise of this conversion right. </FONT></P>
<P align="justify">
<FONT size=2 face="serif">As of September 30, 2008, the Company repaid &#36;130,000 on the above Brockington loans leaving an outstanding principal balance of &#36;143,000 plus accrued interest of &#36;28,213. </FONT></P>
<P align="justify">
<I><FONT size=2 face="serif">Sheth Loan</FONT></I></P>
<P align="justify">
<FONT size=2 face="serif">On May 25, 2007, the Company entered into a loan agreement with Mr. Haresh C. Sheth, the Company&#146;s Chief Financial Officer and a member of its board of directors. Under the terms of this agreement, the Company borrowed
&#36;25,000 for a 12 month term extendable for an additional 12 month period by mutual consent. The loan bears interest of 12% per annum to be paid in monthly installments.</FONT></P>

<P align="center">
<FONT size=2 face="serif">16</FONT></P>

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<div style="border-bottom:1px solid #000000;" align="center">
<div style="margin-bottom:10px;">
<FONT size=2 face="serif">ASSURED PHARMACY, INC. AND SUBSIDIARIES <br>
FORMERLY KNOWN AS eRXSYS, Inc. <br>
</FONT><FONT size=2 face="serif">NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<br>
SEPTEMBER 30, 2008 </FONT></div></div>

<P align="justify">
<FONT size=2 face="serif">5. PAYABLES TO RELATED PARTIES AND STOCKHOLDERS (continued) </FONT></P>
<P align="justify">
<FONT size=2 face="serif">On August 1, 2007, the Company entered into another loan agreement with Mr. Sheth. Under the terms of this agreement, the Company borrowed &#36;25,000 for a 12 month term extendable for an additional 12 month period by
mutual consent. The loan bears interest of 12% per annum to be paid in monthly installments.</FONT></P>
<P align="justify">
<FONT size=2 face="serif">On October 23, 2007, the Company entered into another loan agreement with Mr. Sheth. Under the terms of this agreement, the Company borrowed &#36;50,000 for a 12 month term extendable for an additional 12 month period by
mutual consent. The loan bears interest of 12% per annum to be paid in monthly installments. </FONT></P>
<P align="justify">
<FONT size=2 face="serif">On November 17, 2007, the Company entered into another loan agreement with Mr. Sheth. Under the terms of this agreement, the Company borrowed &#36;100,000 for a 12 month term extendable for an additional 12 month period by
mutual consent. The loan bears interest of 12% per annum to be paid in monthly installments. </FONT></P>
<P align="justify">
<FONT size=2 face="serif">Pursuant to the terms of these agreements, Mr. Sheth has a continuing conversion right during the term to convert all or a portion of the then outstanding amount of the loan into a number of shares of the Company&#146;s
common stock determined at a conversion price equal to the rolling 7 trading day weighted average closing bid price for the Company&#146;s common stock on the OTCBB (or such other equivalent market on which the Company&#146;s common stock is quoted)
calculated as of the trading day immediately preceding the date the conversion right is exercised. The agreements provide that the conversion price shall not be less than &#36;0.40 or more than &#36;0.80. The loan agreements also grant Mr. Sheth
piggyback registration rights upon exercise of this conversion right. </FONT></P>
<P align="justify">
<FONT size=2 face="serif">As of September 30, 2008, the Company repaid the principal on all these loans and owes &#36;3,954 for accrued interest. </FONT></P>
<P align="justify">
<I><FONT size=2 face="serif">Woodfield Capital Services Inc.</FONT></I></P>
<P align="justify">
<FONT size=2 face="serif">On July 10, 2007, the Company entered into a loan agreement with Woodfield Capital Services Inc. (&#147;Woodfield&#148;). Woodfield is a related party to this transaction, as its president is an officer and director of the
Company. Under the terms of this agreement, the Company borrowed &#36;150,000 for a 12 month term at an interest rate of 12% per annum, with interest payable on a monthly basis. This loan was extended to September 30, 2008 upon the same terms.
</FONT><FONT face="serif"> </FONT><FONT size=2 face="serif">Pursuant to the terms of this agreement, Woodfield 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&#146;s common stock determined at a conversion price equal to the rolling 7 trading day weighted average closing bid price for the common stock on the OTCBB (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 agreement provides that the conversion price shall not be less than &#36;0.40 or more than &#36;0.80. The loan agreement also grants
Woodfield piggyback registration rights upon exercise of this conversion right. </FONT></P>
<P align="justify">
<FONT size=2 face="serif">As of September 30, 2008, the outstanding principal of this loan is &#36;150,000 plus accrued interest of &#36;22,085.</FONT></P>
<P align="justify">
<I><FONT size=2 face="serif">Mosaic Financial Services LLC</FONT></I></P>
<P align="justify">
<FONT size=2 face="serif">On April 29, 2008, the Company and certain of its subsidiaries, as joint and several borrowers (collectively, the &#147;Borrowers&#148;), entered into a Credit Agreement (the &#147;Credit Agreement&#148;) with Mosaic
Financial Services, LLC (&#147;Mosaic&#148;). Pursuant to the Credit Agreement, Mosaic has agreed to advance up to &#36;2,000,000 (or up to &#36;3,000,000 in certain circumstances) to the Borrowers. Amounts advanced under the Credit Agreement bear
interest at the rate of 14% per annum and are due and payable on April 30, 2009. Each of the Borrowers has granted Mosaic a security interest in substantially all of its assets (including, in the case of the Company, the shares of common stock of
each of the subsidiaries party to the Credit Agreement) as security for the repayment of the obligations of the Borrowers under the Credit Agreement. </FONT></P>

<P align="center">
<FONT size=2 face="serif">17</FONT></P>

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<P align="left" style="page-break-before:always"></P><PAGE>

<div style="border-bottom:1px solid #000000;" align="center">
<div style="margin-bottom:10px;">
<FONT size=2 face="serif">ASSURED PHARMACY, INC. AND SUBSIDIARIES <br>
FORMERLY KNOWN AS eRXSYS, Inc. <br>
</FONT><FONT size=2 face="serif">NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<br>
SEPTEMBER 30, 2008 </FONT></div></div>

<P align="justify">
<FONT size=2 face="serif">5. PAYABLES TO RELATED PARTIES AND STOCKHOLDERS (continued) </FONT></P>
<P align="justify">
<FONT size=2 face="serif">Mosaic is an affiliate of Mosaic Capital Advisors, LLC (&#147;Mosaic Capital Advisors&#148;) and the Mosaic Private Equity family of funds. The Managing Partner of Mosaic Capital Advisors and the Mosaic Private Equity
family of funds is also a director of the Company. </FONT></P>
<P align="justify">
<FONT size=2 face="serif">As of September 30, 2008, the outstanding principal under the Credit Agreement is &#36;650,000 plus accrued interest of &#36;37,917.</FONT></P>
<P align="justify">
<I><FONT size=2 face="serif">Weil Consulting</FONT></I></P>
<P align="justify">
<FONT size=2 face="serif">On August 14, 2007, the Company entered into a loan agreement with Weil Consulting (&#147;Weil&#148;), a beneficial owner of more than 5% of the Company&#146;s outstanding common stock. Under the terms of this agreement,
the Company received a 3 month loan of &#36;100,000 at an interest rate of 18% per annum, with interest payable on a monthly basis. The Company extended the loan to June 30, 2008 at an interest rate of 9% per annum, after adding accrued interest in
the amount of &#36;4,500 to the loan amount. The loan was subsequently extended to September 30, 2008 upon the same terms.</FONT></P>
<P align="justify">
<FONT size=2 face="serif">As of September 30, 2008, the outstanding principal was &#36;104,500 plus accrued interest of &#36;8,300. </FONT></P>
<P align="justify">
<I><FONT size=2 face="serif">Pinewood Trading Fund LP</FONT></I></P>
<P align="justify">
<FONT size=2 face="serif">On May 27, 2008, the Company entered into a loan agreement with Pinewood Trading Fund LP (&#147;Pinewood&#148;), a stockholder of the Company. Under the terms of this agreement, the Company received a 3 month loan of
&#36;500,000 at an interest rate of 13% per annum, with interest payable monthly. </FONT></P>
<P align="justify">
<FONT size=2 face="serif">As of September 30, 2008, the outstanding principal was &#36;500,000 plus accrued interest of &#36;22,750. </FONT></P>
<P align="justify">
<FONT size=2 face="serif">To the extent that any of the above loan agreements provide that the interest is payable monthly, management has secured the agreement of the lenders that interest payments are to accrue and shall be payable together with
principal.</FONT></P>
<P align="justify">
<FONT size=2 face="serif">Further, as of September 30, 2008, loans in the principal
amount of &#36;1,262,500 were
past due. The Company  plans on entering into negotiations with the lenders to
seek the extension of the term of these loans. Given the Company&#146;s
current capital needs, there can be no assurance that the Company will be successful
in extending the term of these loans or that it will be on acceptable terms.
Any failure to extend the term of the loans or otherwise obtain an agreement
with the lenders on acceptable terms could have a material adverse effect on
the Company&#8217;s business, financial condition or results of operations.</FONT></P>
<P align="justify">
<FONT size=2 face="serif">6. COMMON STOCK</FONT></P>
<P align="justify">
<FONT size=2 face="serif">During the three months ended June 30, 2008, the Company issued 500,000 shares of its common stock, valued at &#36;97,500 (calculated based upon average closing price for the Company&#146;s common stock on
the OTCBB for the five consecutive trading days preceding the issuance date) to Weil, a related party, in exchange for services rendered. </FONT><FONT color="#00ff00" face="serif"> </FONT><FONT size=2 face="serif">During the three
months ended June 30, 2008, the Company converted debentures in the principal amount of &#36;10,000 into 142,857 shares of its common stock and granted warrants to purchase 71,428 shares of its common stock, exercisable at &#36;0.60 per share until
May 30, 2009, and granted warrants to purchase 71,428 shares of its common stock, exercisable at &#36;0.80 per share until May 30, 2010 .</FONT><FONT color="#00ff00" face="serif"> </FONT></P>
<P align="justify">
<FONT size=2 face="serif">During three months ended June 30, 2008, the Company issued 1,100,171 shares of its common stock in lieu of accrued interest of &#36;217,798, to holders of convertible debentures which includes 786,227
shares to related parties. </FONT><FONT color="#00ff00" face="serif"> </FONT></P>
<P align="justify">
<FONT size=2 face="serif">During the three months ended September 30, 2008, the Company issued 600,000 shares of its common stock, valued at &#36;24,000 (calculated based upon average closing price for the Company&#146;s common stock
on the OTCBB for the five consecutive trading days preceding the issuance date) to two directors for services rendered by them in the year 2007 and for the year ending December 31 2008.</FONT></P>

<P align="center">
<FONT size=2 face="serif">18</FONT></P>

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<div style="border-bottom:1px solid #000000;" align="center">
<div style="margin-bottom:10px;">
<FONT size=2 face="serif">ASSURED PHARMACY, INC. AND SUBSIDIARIES <br>
FORMERLY KNOWN AS eRXSYS, Inc. <br>
</FONT><FONT size=2 face="serif">NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<br>
SEPTEMBER 30, 2008 </FONT></div></div>

<P align="justify">
<FONT size=2 face="serif">7. UNSECURED CONVERTIBLE DEBENTURE NOTES</FONT></P>
<P align="justify">
<FONT size=2 face="serif">As of September 30, 2008, unsecured convertible debenture notes in the aggregate principal amount of &#36;6,255,900 are outstanding of which debentures in the aggregate principal amount of &#36;4,570,900 are held by related
parties. Interest on the outstanding debentures amounted to &#36;578,171and &#36;349,898 for the nine months ended September 30, 2008 and 2007, respectively.</FONT></P>
<P align="justify">
<FONT size=2 face="serif">Other than as discussed below, the unsecured convertible debentures bear interest at the rate of 18% per annum. Interest is payable in the shares of common stock of the Company except in the case of unsecured convertible
debentures in the principal amount of &#36;3,920,900 held by the Mosaic Private Equity family of funds, a related party, where the interest is payable in cash. The number of shares to be issued in payment of the interest is to be calculated based
upon the average closing price for the Company&#146;s common stock on the OTCBB for the five consecutive trading days preceding the issuance date. At September 30, 2008, the Company is obligated to issue 1,431,648 shares of common stock as payment
of interest on the debentures issued.</FONT></P>
<P align="justify">
<FONT size=2 face="serif">In general, the debenture holders have the right to convert their debentures into fully paid non-assessable shares of common stock at the contracted rate and for every two shares converted receive one warrant to purchase
one (1) share of common stock at an exercise price of &#36;0.60 exercisable for two (2) years after the conversion date and one warrant to purchase one (1) share of common stock at an exercise price of &#36;0.80 exercisable for three (3) years after
the conversion date.</FONT></P>
<P align="justify">
<FONT size=2 face="serif">During the three months ended September 30, 2008, the
Company issued unsecured convertible debentures in the aggregate principal amount
of &#36;2,037,400
to the Mosaic Private Equity family of funds. In addition, debentures in the
 principal amount of &#36;3,221,000 held by the Mosaic Private Equity family
 of funds that matured at various times during the quarter ended September 30,
 2008 were extended to October 31, 2008. </FONT><B><FONT size=2 face="serif"> </FONT></B></P>
<P align="justify">
<FONT size=2 face="serif">Other debentures in the principal amount of &#36;440,000 which matured on or around December 2007 were extended to March 31, 2009. In connection with such extension, the conversion price of the debentures was reduced to
&#36;0.07 per share and the interest rate on such debentures was reduced to 10% per annum on a going forward basis. The change in conversion price has resulted in a beneficial conversion of &#36;110,674 which has been charged to interest expense at
June 30, 2008.</FONT></P>
<P align="justify">
<FONT size=2 face="serif">On September 29, 2008, Woodfield assigned to Mr. Sheth unsecured convertible debentures in the aggregate principal amount of &#36;350,000 and on October 16, 2008, Brockington assigned to Mr. DelVecchio unsecured convertible
debentures in the aggregate principal amount of &#36;250,000.</FONT></P>
<P align="justify">
<FONT size=2 face="serif">As of September 30, 2008, unsecured convertible debentures
in the aggregate principal amount of &#36;4,765,900
were past due. Given the Company&#8217;s current capital needs, the Company plans
on entering into negotiations with the holders to seek the extension of the term
of these debentures. There can be no assurance that the Company will be successful
in extending the term of these debentures or that it will be on acceptable terms.
Any failure to extend the term of  the debentures or otherwise obtain an agreement
with the holders on acceptable terms could have an adverse effect on the Company&#8217;s
business, financial condition or results of operations.</FONT></P>

<P align="center">
<FONT size=2 face="serif">19</FONT></P>

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<P align="left" style="page-break-before:always"></P><PAGE>

<div style="border-bottom:1px solid #000000;" align="center">
<div style="margin-bottom:10px;">
<FONT size=2 face="serif">ASSURED PHARMACY, INC. AND SUBSIDIARIES <br>
FORMERLY KNOWN AS eRXSYS, Inc. <br>
</FONT><FONT size=2 face="serif">NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<br>
SEPTEMBER 30, 2008 </FONT></div></div>

<P align="justify">
<FONT size=2 face="serif">8. COMMITMENTS AND CONTINGENCIES</FONT></P>
<P align="justify">
<I><FONT size=2 face="serif">Operating Leases</FONT></I></P>
<P align="justify">
<FONT size=2 face="serif">The Company occupies buildings and retail space under operating lease agreements expiring on various dates through January 2012 with monthly payments ranging from approximately &#36;1,400 to &#36;2,800. </FONT></P>
<P align="justify">
<FONT size=2 face="serif">Certain leases include future rental escalations and renewal options. </FONT></P>
<P align="justify">
<FONT size=2 face="serif">As of September 30, 2008, future minimum payments under operating leases approximated the following: </FONT></P>

<TABLE width="30%" border=0 align="center" cellpadding=0 cellspacing=0>
<TR>
     <TD width="49%"></TD>
     <TD width="25%"></TD>
     <TD></TD>
</TR>
<TR valign="bottom">
<TD width="49%" align=left nowrap>
<FONT size=2 face="serif">For the year ending</FONT></TD>
<TD width="25%" align=left nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
<TD width="49%" align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">December 31,</FONT></TD>
<TD width="25%" align=left nowrap>&nbsp;</TD>
<TD align=left nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#EAF9E8">
<TD width="49%" align=left nowrap>
<FONT size=2 face="serif">2008</FONT></TD>
<TD width="25%" align=right nowrap>&nbsp;</TD>
<TD align=right nowrap>
<FONT size=2 face="serif">&#36;205,347</FONT></TD>
</TR>
<TR valign="bottom">
<TD width="49%" align=left nowrap>
<FONT size=2 face="serif">2009</FONT></TD>
<TD width="25%" align=right nowrap>&nbsp;</TD>
<TD align=right nowrap>
<FONT size=2 face="serif">159,954</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#EAF9E8">
<TD width="49%" align=left nowrap>
<FONT size=2 face="serif">2010</FONT></TD>
<TD width="25%" align=right nowrap>&nbsp;</TD>
<TD align=right nowrap>
<FONT size=2 face="serif">100,752</FONT></TD>
</TR>
<TR valign="bottom">
<TD width="49%" align=left nowrap>
<FONT size=2 face="serif">2011</FONT></TD>
<TD width="25%" align=right nowrap>&nbsp;</TD>
<TD align=right nowrap>
<FONT size=2 face="serif">61,040</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#EAF9E8">
<TD width="49%" align=left nowrap>
<FONT size=2 face="serif">2012 and thereafter</FONT></TD>
<TD width="25%" align=right nowrap>&nbsp;</TD>
<TD align=right nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">48,906</FONT></TD>
</TR>
<TR valign="bottom">
<TD width="49%" align=left nowrap>
<FONT size=2 face="serif">Total</FONT></TD>
<TD width="25%" align=right nowrap>&nbsp;</TD>
<TD align=right nowrap style="border-bottom:3px double #000000;">
<FONT size=2 face="serif">&#36;575,999</FONT></TD>
</TR>
</TABLE>
<BR>
<P align="justify">
<FONT size=2 face="serif">Total rent expense for the nine months ended September 30, 2008 and 2007 was &#36;252,697 and &#36;176,589 respectively.</FONT></P>
<P align="justify">
<FONT size=2 face="serif">9</FONT><I><FONT size=2 face="serif">. </FONT></I><FONT size=2 face="serif">LEGAL MATTERS</FONT></P>
<P align="justify">
<FONT size=2 face="serif">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 the Company&#8217;s insurance
coverage, or that it will be able to maintain such coverage at acceptable costs
and on favorable terms. </FONT></P>
<P align="justify">
<FONT size=2 face="serif">From time to time, the Company may be involved in various claims, lawsuits, dispute with third parties, actions involving allegations of discrimination or breach of contract actions incidental to the normal operations of
the business. In the opinion of management, the Company is not currently involved in any litigation which it believes could have a material adverse effect on the Company's financial position or results of operations. </FONT></P>

<P align="center">
<FONT size=2 face="serif">20</FONT></P>

<HR NOSHADE ALIGN=CENTER WIDTH="100%" SIZE=4>
<P align="left" style="page-break-before:always"></P><PAGE>

<div style="border-bottom:1px solid #000000;" align="center">
<div style="margin-bottom:10px;">
<FONT size=2 face="serif">ASSURED PHARMACY, INC. AND SUBSIDIARIES <br>
FORMERLY KNOWN AS eRXSYS, Inc. <br>
</FONT><FONT size=2 face="serif">NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<br>
SEPTEMBER 30, 2008 </FONT></div></div>

<P align="justify">
<FONT size=2 face="serif">10. LOSS PER COMMON SHARE</FONT></P>
<P align="justify">
<FONT size=2 face="serif">The following is a reconciliation of the numerators and denominators of the basic and diluted loss per common share computations for the three and nine months ended September 30, 2008 and 2007. </FONT></P>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
<TR>
     <TD></TD>
     <TD width="1%"></TD>
     <TD width="8%"></TD>
     <TD width="2%"></TD>
     <TD width="8%"></TD>
     <TD width="2%"></TD>
     <TD width="8%"></TD>
     <TD width="2%"></TD>
     <TD width="8%"></TD>
  </TR>
<TR valign="bottom">
<TD align=left>&nbsp;</TD>
<TD width="1%">&nbsp;</TD>
<TD colspan="3" align=center nowrap>
<FONT size=2 face="serif">Three Months Ended</FONT></TD>
<TD width="2%">&nbsp;</TD>
<TD colspan="3" align=center nowrap>
<FONT size=2 face="serif">Nine Months Ended</FONT></TD>
  </TR>
<TR valign="bottom">
<TD align=left>&nbsp;</TD>
<TD width="1%">&nbsp;</TD>
<TD colspan="3" align=center nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">September 30,</FONT></TD>
<TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
<TD colspan="3" align=center nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">September 30,</FONT></TD>
  </TR>
<TR valign="bottom">
<TD align=left>&nbsp;</TD>
<TD width="1%">&nbsp;</TD>
<TD width="8%" align=center nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">2008</FONT></TD>
<TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
<TD width="8%" align=center nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">2007</FONT></TD>
<TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
<TD width="8%" align=center nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">2008</FONT></TD>
<TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
<TD width="8%" align=center nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">2007</FONT></TD>
  </TR>
<TR valign="bottom" bgcolor="#EAF9E8">
<TD align=left>
 &nbsp;<FONT size=2 face="serif">Numerator for basic and diluted loss per common share:</FONT></TD>
<TD width="1%">&nbsp;</TD>
<TD width="8%" align=left nowrap>&nbsp;</TD>
<TD width="2%">&nbsp;</TD>
<TD width="8%" align=left nowrap>&nbsp;</TD>
<TD width="2%">&nbsp;</TD>
<TD width="8%" align=left nowrap>&nbsp;</TD>
<TD width="2%">&nbsp;</TD>
<TD width="8%" align=left nowrap>&nbsp;</TD>
  </TR>
<TR valign="bottom">
<TD align=left>
 &nbsp;<FONT size=2 face="serif">Net loss to common stockholders</FONT></TD>
<TD width="1%">&nbsp;</TD>
<TD width="8%" align=center nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">(&#36;1,504,021)</FONT></TD>
<TD width="2%">&nbsp;</TD>
<TD width="8%" align=center nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">(&#36;722,185)</FONT></TD>
<TD width="2%">&nbsp;</TD>
<TD width="8%" align=center nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">(&#36;3,405,361)</FONT></TD>
<TD width="2%">&nbsp;</TD>
<TD width="8%" align=center nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">(&#36;2,232,531)</FONT></TD>
  </TR>
<TR>
<TD>&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
  </TR>
<TR valign="bottom" bgcolor="#EAF9E8">
<TD align=left>
 &nbsp;<FONT size=2 face="serif">Denominator for basic and diluted loss per common share:</FONT></TD>
<TD width="1%">&nbsp;</TD>
<TD width="8%" align=left nowrap>&nbsp;</TD>
<TD width="2%">&nbsp;</TD>
<TD width="8%" align=left nowrap>&nbsp;</TD>
<TD width="2%">&nbsp;</TD>
<TD width="8%" align=left nowrap>&nbsp;</TD>
<TD width="2%">&nbsp;</TD>
<TD width="8%" align=left nowrap>&nbsp;</TD>
  </TR>
<TR valign="bottom">
<TD align=left>
 &nbsp;<FONT size=2 face="serif">Weighted average number of shares outstanding</FONT></TD>
<TD width="1%">&nbsp;</TD>
<TD width="8%" align=center nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">56,759,196</FONT></TD>
<TD width="2%">&nbsp;</TD>
<TD width="8%" align=center nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">54,510,539</FONT></TD>
<TD width="2%">&nbsp;</TD>
<TD width="8%" align=center nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">55,543,874</FONT></TD>
<TD width="2%">&nbsp;</TD>
<TD width="8%" align=center nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">54,541,131</FONT></TD>
  </TR>
<TR>
<TD>&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
  </TR>
<TR valign="bottom" bgcolor="#EAF9E8">
<TD align=left>
 &nbsp;<FONT size=2 face="serif">Basic and diluted loss per common share</FONT></TD>
<TD width="1%">&nbsp;</TD>
<TD width="8%" align=center nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">(&#36;0.03)</FONT></TD>
<TD width="2%">&nbsp;</TD>
<TD width="8%" align=center nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">(&#36;0.01)</FONT></TD>
<TD width="2%">&nbsp;</TD>
<TD width="8%" align=center nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">(&#36;0.06)</FONT></TD>
<TD width="2%">&nbsp;</TD>
<TD width="8%" align=center nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">(&#36;0.04)</FONT></TD>
  </TR>
</TABLE>

<P align="justify">
<FONT size=2 face="serif">11. INCOME TAXES</FONT></P>
<P align="justify">
<FONT size=2 face="serif">Due to losses incurred for the three and nine months ended September 30, 2008 there is no current provision for income taxes. </FONT></P>
<P align="justify">
<FONT size=2 face="serif">12. SUBSEQUENT EVENTS </FONT><BR>
<BR>
<U><FONT size=2 face="serif">Securities Purchase Agreement</FONT></U></P>
<P align="justify">
<FONT size=2 face="serif">On October 7, 2008, the Company entered into a Securities
Purchase Agreement (the &#147;Securities Purchase Agreement&#148;) with APHY
Holdings LLC, a Delaware limited liability company (&#147;APHY Holdings&#148;)
formed by Enhanced Equity Fund, L.P. Pursuant to the Securities Purchase Agreement,
subject to certain closing conditions, the Company agreed to issue and sell 11,235
shares of the Company&#146;s
future Series A Convertible Preferred Stock and 75,000,001 shares of the Company&#146;s
common stock, to APHY Holdings for an aggregate purchase price of &#36;12,000,000.01.
The Company intended to use the proceeds from the sale for general working capital
purposes, to pay down debt and to pay  fees related to the transaction. </FONT></P>
<P align="justify">
<FONT size=2 face="serif">Prior to closing, on November 11, 2008, the Company received notice from APHY Holdings terminating the Securities Purchase Agreement, effective immediately. Management believes that APHY Holdings terminated the Securities
Purchase Agreement because of the delays encountered in the attempts to obtain the consent of the California State Board of Pharmacy to the change in ownership which was one of the conditions to closing. </FONT></P>
<P align="justify">
<FONT size=2 face="serif">Deferred costs in the amount of &#36;330,112 relating
to the Securities Purchase Agreement have been capitalized as of September 30,
2008. These costs consist primarily of legal, accounting and consulting fees
incurred by the Company in its due diligence efforts relating to the Securities
Purchase Agreement. The deferred costs including additional costs incurred since
the end of the third quarter of 2008 for a total of approximately &#36;450,000,
will be charged to operations in the fourth quarter 2008.</FONT></P>

<P align="center">
<FONT size=2 face="serif">21</FONT></P>

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<P align="justify">
<B><FONT size=2 face="serif"><a name="item2a"></a>ITEM 2. MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL   CONDITION AND RESULTS OF OPERATIONS </FONT></B></P>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif"> The following discussion and analysis should be read in conjunction with the Consolidated Financial Statements, the related Notes to Consolidated Financial Statements and Management&#146;s Discussion and Analysis of
Financial Condition and Results of Operations included in the Company&#146;s Annual Report on Form 10-KSB for the fiscal year ended December 31, 2007 and the Unaudited Consolidated Financial Statements and related Notes to Consolidated Financial
Statements included in Item 1 of Part I of this Quarterly Report on Form 10-Q. </FONT></P>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif"> We have included in this Quarterly Report certain &#147;forward-looking statements&#148; within the meaning of the Private Securities Litigation Reform Act of 1995 concerning our business, operations and financial
condition. &#147;Forward-looking statements&#148; consist of all non-historical information, and the analysis of historical information, including the references in this Quarterly Report to future revenue growth, future expense growth, future credit
exposure, earnings before interest, taxes, depreciation and amortization, future profitability, anticipated cash resources, anticipated capital expenditures, capital requirements, and our plans for future periods.  In addition, the words
&#147;could&#148;, &#147;expects&#148;, &#147;anticipates&#148;, &#147;objective&#148;, &#147;plan&#148;, &#147;may affect&#148;, &#147;may depend&#148;, &#147;believes&#148;, &#147;estimates&#148;, &#147;projects&#148; and similar words and phrases
are also intended to identify such forward-looking statements. </FONT></P>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif"> Actual results could differ materially from those projected in our forward-looking statements due to numerous known and unknown risks and uncertainties, including, among other things, economic conditions,
legislative/regulatory changes, availability of capital, interest rates, competition, generally accepted accounting principles, the inherent uncertainty of financial estimates and projections, the uncertainties involved in certain legal proceedings,
instabilities arising from terrorist actions and responses thereto, and other considerations described as &#147;Risk Factors&#148; in other filings by us with the SEC including our Annual Report on Form 10-KSB. Such factors may also cause
substantial volatility in the market price of our common stock. All such forward-looking statements are current only as of the date on which such statements were made. We do not undertake any obligation to publicly update any forward-looking
statement to reflect events or circumstances after the date on which any such statement is made or to reflect the occurrence of unanticipated events. </FONT></P>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">As used in this Quarterly Report, the terms &#147;</FONT><I><FONT size=2 face="serif">we</FONT></I><FONT size=2 face="serif">,&#148; &#147;</FONT><I><FONT size=2 face="serif">us</FONT></I><FONT size=2 face="serif">,&#148;
&#147;</FONT><I><FONT size=2 face="serif">our</FONT></I><FONT size=2 face="serif">,&#148; and &#147;</FONT><I><FONT size=2 face="serif">Assured Pharmacy</FONT></I><FONT size=2 face="serif">&#148; mean Assured Pharmacy, Inc. and our subsidiaries
unless otherwise indicated. </FONT></P>
<P align="justify">
<B><FONT size=2 face="serif">Business Description</FONT></B></P>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">We are engaged in the
business of operating specialty pharmacies that primarily dispense highly regulated
pain medication and operate six such pharmacies. During 2006, we expanded the
reach of our business beyond pain management to service customers that require
prescriptions to treat cancer, psychiatric, and neurological conditions. Our
management attributes the recent growth in our business in part to our being
able to fill prescriptions that can accommodate a broader range of customers.</FONT></P>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Typical retail pharmacies either do not keep in inventory or maintain limited amounts of highly regulated medications. As a result, the time it takes for a traditional retail pharmacy to fill these prescriptions is
prolonged. Our specialty pharmacies maintain an inventory of highly regulated medication that is specifically tailored to the needs of our recurring customers. This practice frequently enables our pharmacies to fill customers&#146; prescriptions
from its existing inventory and decreases the wait time required to fill these prescriptions. Our focus and familiarity with dispensing highly regulated medications better positions our pharmacists to understand the needs of our customers.
</FONT></P>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">In an attempt to further expand our business and improve our marketing plans, our management decided to increase our sales force because the efforts of our sales personnel have produced the greatest success in
significantly increasing our business. Based upon the success of our sales personnel, our management has committed to staffing each pharmacy with its own sales person who will be exclusively responsible for generating sales. Our management
anticipates that this staffing model will continue to have a positive material impact on our operations. </FONT></P>

<P align="center">
<FONT size=2 face="serif">22</FONT></P>

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<P align="left" style="page-break-before:always"></P><PAGE>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">The table set forth below summarizes the number of prescriptions filled by our six operating pharmacies for the three and nine months ended September 30, 2008 and 2007. </FONT></P>
<P align="justify">&nbsp;</P>

<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
<TR>
     <TD></TD>
    <TD width="2%"></TD>
    <TD width="5%"></TD>
    <TD width="2%"></TD>
    <TD width="5%"></TD>
    <TD width="2%"></TD>
    <TD width="5%"></TD>
    <TD width="2%"></TD>
  <TD width="5%"></TD>
</TR>
<TR valign="bottom">
  <TD align=left nowrap>&nbsp;</TD>
  <TD>&nbsp;</TD>
  <TD colspan="3" align=center nowrap><FONT size=2 face="serif">For three months ended</FONT></TD>
  <TD align="center">&nbsp;</TD>
  <TD colspan="3" align=center nowrap><FONT size=2 face="serif">For nine months ended</FONT></TD>
  </TR>
<TR valign="bottom">
<TD align=left nowrap>&nbsp;</TD>
<TD width="2%">&nbsp;</TD>
<TD colspan="3" align=center nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">September 30</FONT></TD>
<TD width="2%" align="center">&nbsp;</TD>
<TD colspan="3" align=center nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">September 30</FONT></TD>
  </TR>
<TR valign="bottom">
<TD align=left nowrap>&nbsp;</TD>
<TD width="2%">&nbsp;</TD>
<TD width="5%" align=center nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">2008</FONT></TD>
<TD width="2%" align="center">&nbsp;</TD>
<TD width="5%" align=center nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">2007</FONT></TD>
<TD width="2%" align="center">&nbsp;</TD>
<TD width="5%" align=center nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">2008</FONT></TD>
<TD width="2%" align="center">&nbsp;</TD>
<TD width="5%" align=center nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">2007</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#EAF9E8">
<TD align=left nowrap bgcolor="#EAF9E8">
<FONT size=2 face="serif">Number of prescriptions</FONT></TD>
<TD width="2%">&nbsp;</TD>
<TD width="5%" align=center nowrap>
<FONT size=2 face="serif">28,566</FONT></TD>
<TD width="2%" align="center">&nbsp;</TD>
<TD width="5%" align=center nowrap>
<FONT size=2 face="serif">25,978</FONT></TD>
<TD width="2%" align="center">&nbsp;</TD>
<TD width="5%" align=center nowrap>
<FONT size=2 face="serif">82,787</FONT></TD>
<TD width="2%" align="center">&nbsp;</TD>
<TD width="5%" align=center nowrap>
<FONT size=2 face="serif">67,996</FONT></TD>
</TR>
</TABLE>

<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Total number of prescriptions filled at our pharmacies for the three and nine months ended September 30, 2008 increased to 28,566 and 82,787 respectively which is approximately a 9% and 22% increase from the 25,978 and
67,996 total prescriptions filled at all our pharmacies in the prior three and nine months ended September 30, 2007. Our management primarily credits the increases in our business to the efforts of additional sales personnel added during the
reporting period, the expanded reach of our business beyond pain management and the additional pharmacy that opened up in Las Vegas during the first quarter of 2008.</FONT></P>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">We have a monthly call program where our pharmacies contact each recurring patient directly on a monthly basis to ensure that the patient has experienced no complications with the prescribed medication and to inquire into
whether the patient needs the prescription refilled. At the time of each monthly call, our pharmacies also inquire into whether other members of the household also need a prescription refilled. Our management believes that the monthly call program
has enhanced consumer loyalty and will continue to increase the total number of prescriptions filled at our pharmacies. </FONT><B><FONT size=2 face="serif"> </FONT></B></P>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Our management also determined that we could expand our business through developing arrangements with third party health plan providers to accept traditional co-payments and fill prescriptions
for their members who rely upon overnight courier for delivery of their prescription. Our management believes that such arrangements will broaden our consumer base and enable us to access a particular niche of consumer that receives their
prescriptions exclusively via courier as opposed to patronizing traditional retail pharmacy locations.</FONT></P>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">On an ongoing basis, our management is evaluating our operations and seeking additional opportunities to expand our business. We have established a working relationship with a specialty compounding pharmacy, which enabled
our pharmacies to fill prescriptions for custom compounded drugs. Since this time, we established a relationship with another compound drug provider to increase our available inventory of compounded drugs. Pharmaceutical compounding is the
combining, mixing, or altering of ingredients to create a customized medication for an individual patient in response to a licensed physician&#146;s prescription. Physicians often prescribe compounded medications for reasons that include situations
where there is not presently a commercially available drug to treat the unique health condition of an individual patient or to combine several medications the patient is taking to increase compliance. Custom compounded drugs can offer additional
means of treating chronic pain. We anticipate that our ability to fill prescriptions for custom compounded drugs will expand our business and enable us to better service patients who require treatment for chronic pain management.</FONT></P>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">In January, 2006, we incorporated Assured Pharmacy Plus, Corp. (&#147;</FONT><I><FONT size=2 face="serif">Plus Corp</FONT></I><FONT size=2 face="serif">.&#148;) as a wholly-owned subsidiary. We entered into an arrangement
with Affiliated Healthcare Administrators (&#147;</FONT><I><FONT size=2 face="serif">AHA</FONT></I><FONT size=2 face="serif">&#148;), a third party health plan administrator, to provide prescription service to their members. Under the arrangement
with AHA, our pharmacies provide prescription service to AHA members upon receipt of a traditional co-payment. Thereafter, we process the prescription claim with AHA and receive the remaining balances due for their member&#146;s prescription
purchases. Plus Corp. processes claims relating to the prescription filled at our pharmacies for AHA members in exchange for an administration fee. Our management is contemplating expanding the operations of Plus Corp. by licensing the entity as a
pharmacy that exclusively focuses on servicing the niche of consumers that are members of third party health plan administrators and receive their prescriptions exclusively via courier.</FONT></P>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Also in January 2006, we incorporated Assured Pharmacy DME, Corp. (&#147;</FONT><I><FONT size=2 face="serif">DME</FONT></I><FONT size=2 face="serif">&#148;) as a wholly-owned subsidiary for the purpose of facilitating and
making available specialized medical equipment to our consumers. We established a relationship with a provider of specialized medical equipment to make these products available to our consumers. In July 2006, we began notifying our consumers of the
availability of these products by disseminating a notification with each prescription filled at our pharmacies. We accept and process orders for specialized medical equipment. We will not maintain any inventory of specialized medical equipment at
any of our pharmacies. All orders will be shipped directly to the consumer from a product wholesaler. </FONT></P>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Our revenue generated
from pharmaceutical compounding and from the operations of Plus Corp. and DME
for the three and nine months ended September 30, 2008 and 2007 has been relatively
insignificant to our business. To date, our management has not advanced these
opportunities because our resources are currently being devoted to growth within
our existing</FONT></P>

<P align="center">
<FONT size=2 face="serif">23</FONT></P>

<HR NOSHADE ALIGN=CENTER WIDTH="100%" SIZE=4>
<P align="left" style="page-break-before:always"></P><PAGE>

<P align="justify">
<FONT size=2 face="serif">pharmacy locations. Our management anticipates focusing more on these opportunities at such time that allocating resources to these opportunities is in our best interest.</FONT></P>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Our management has been
seeking to expand our business by establishing additional pharmacies including
a planned future opening in Oak Lomita, California. Opening new pharmacies,
however, will require additional funding from external sources and until such
time that such funding is available, it is management&#146;s present plan to
focus its resources on its six operating pharmacies.</FONT></P>
<P align="justify">
<B><FONT size=2 face="serif">Results of Consolidated Operations</FONT></B></P>
<P align="justify">
<B><FONT size=2 face="serif">Three and Nine Months Ended September 30, 2008 Compared to Three and Nine Months Ended September 30, 2007</FONT></B><FONT size=2 face="serif">  </FONT></P>
<P align="justify">
<I><FONT size=2 face="serif">Revenues</FONT></I></P>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Our total revenue reported for the three months ended September 30, 2008 was &#36;4,039,524, a 10% increase from &#36;3,676,798 for the three months ended September 30, 2007. Our total revenue
reported for the nine months ended September 30, 2008 was &#36;11,775,937, a 21% increase from &#36;9,716,372 for the nine months ended September 30, 2007.</FONT></P>
<P align="justify">
<FONT size=2 face="serif">Our revenue for the three and nine months ended September 30, 2008 and 2007 respectively, was generated almost exclusively from the sale of prescription drugs. The increase in revenues is attributable to increased sales
volume of existing stores due to hiring sales personnel to recruit more physicians, an increase in average revenue generated per prescription and the opening of the Las Vegas store. </FONT></P>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">The table set forth below shows our total reported gross revenue generated for each completed quarterly period during fiscal 2007 and 2008:</FONT></P>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
<TR>
     <TD></TD>
    <TD width="10%"></TD>
    <TD width="1%"></TD>
    <TD width="7%" align="right"></TD>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="7%" align="right"></TD>
  <TD width="2%"></TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>&nbsp;</TD>
<TD width="10%">&nbsp;</TD>
<TD width="1%" align=center nowrap>&nbsp;</TD>
<TD width="7%" align=center nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">2007</FONT></TD>
<TD width="2%">&nbsp;</TD>
<TD width="1%" align=center nowrap>&nbsp;</TD>
<TD width="7%" align=center style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">2008</FONT></TD>
    <TD width="2%" align=left nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#EAF9E8">
<TD align=left nowrap>
<FONT size=2 face="serif">Quarterly Period Ended March 31</FONT></TD>
<TD width="10%">&nbsp;</TD>
<TD width="1%" align=left nowrap>
<FONT size=2 face="serif">&#36;</FONT></TD>
<TD width="7%" align=right nowrap>
 &nbsp; &nbsp;<FONT size=2 face="serif">2,733,683</FONT></TD>
<TD width="2%">&nbsp;</TD>
<TD width="1%" align=left nowrap>
<FONT size=2 face="serif">&#36;</FONT></TD>
<TD width="7%" align=right>
 &nbsp; &nbsp;<FONT size=2 face="serif">4,162,670</FONT></TD>
    <TD width="2%" align=left nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
<FONT size=2 face="serif">Quarterly Period Ended June 30</FONT></TD>
<TD width="10%">&nbsp;</TD>
<TD width="1%" align=left nowrap>
<FONT size=2 face="serif">&#36;</FONT></TD>
<TD width="7%" align=right nowrap>
 &nbsp; &nbsp;<FONT size=2 face="serif">3,305,891</FONT></TD>
<TD width="2%">&nbsp;</TD>
<TD width="1%" align=left nowrap>
<FONT size=2 face="serif">&#36;</FONT></TD>
<TD width="7%" align=right>
 &nbsp;<FONT size=2 face="serif">3,573,793</FONT></TD>
    <TD width="2%" align=left nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#EAF9E8">
<TD align=left nowrap>
<FONT size=2 face="serif">Quarterly Period Ended September 30</FONT></TD>
<TD width="10%">&nbsp;</TD>
<TD width="1%" align=left nowrap>
<FONT size=2 face="serif">&#36;</FONT></TD>
<TD width="7%" align=right nowrap>
 &nbsp; &nbsp;<FONT size=2 face="serif">3,676,798</FONT></TD>
<TD width="2%">&nbsp;</TD>
<TD width="1%" align=left nowrap>&nbsp;</TD>
<TD width="7%" align=right>
<FONT size=2 face="serif">4,039,524</FONT></TD>
    <TD width="2%" align=left nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
<TD align=left nowrap>
<FONT size=2 face="serif">Quarterly Period Ended December 31</FONT></TD>
<TD width="10%">&nbsp;</TD>
<TD width="1%" align=left nowrap>
<FONT size=2 face="serif">&#36;</FONT></TD>
<TD width="7%" align=right nowrap>
 &nbsp; &nbsp;<FONT size=2 face="serif">4,207,115</FONT></TD>
<TD width="2%">&nbsp;</TD>
<TD width="1%" align=left nowrap>&nbsp;</TD>
<TD width="7%" align=right>
<FONT size=2 face="serif">N/A</FONT></TD>
    <TD width="2%" align=left nowrap>&nbsp;</TD>
</TR>
</TABLE>
<BR>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Management is of the
opinion that revenues in third quarter have improved since the uncertainty surrounding
our supply chain which prevailed during the second quarter has been addressed
by identifying one more wholesaler for the supply of drugs. Management anticipates
that our revenues will increase as a result of the restoration of normal supply
conditions, concentrated sales efforts by sales personnel and the establishment
of additional pharmacies in the current year. In 2008, we consolidated the operations
of two of our pharmacies and opened a new pharmacy in Las Vegas.</FONT></P>
<P align="justify">
<I><FONT size=2 face="serif">Cost of Sales</FONT></I></P>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">The total cost of sales
for the three months ended September 30, 2008 was &#36;3,472,061, a 22% increase
from &#36;2,826,026 for the three months ended September 30, 2007. For
the nine months ended September 30, 2008, the total cost of sales increased 29%
to &#36;9,448,710 from &#36;7,287,141
for the nine months ended September 30, 2007. For the three and nine months ended
September 30, 2008, the increase in the cost of sales is primarily attributable
to the increased sales in the reporting period and also due to the change in
the product mix sold resulting in a greater number of products with lower margins.</FONT></P>
<P align="justify">
<I><FONT size=2 face="serif">Gross Profit.</FONT></I></P>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Gross profit declined to &#36;567,463, or approximately 14% of sales, for the three months ended September 30, 2008, as compared to a gross profit of &#36;850,772 or
approximately 23% of sales for the three months ended September 30, 2007.</FONT></P>

<P align="center">
<FONT size=2 face="serif">24</FONT></P>

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<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Gross profit declined to &#36;2,327,227 or approximately 20% of sales, for the nine months ended September 30, 2008, as compared to gross profit of &#36;2,429,231, or approximately 25% of sales for the nine months ended September 30, 2007.</FONT></P>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">For the three and nine
months ended September 30, 2008, the decline in the dollar value of gross profit
and as a percentage of sales is primarily due to a reduction in the workmen compensation
reimbursements in California and a change in the product mix sold resulting in
a greater number of products with lower margins.</FONT></P>
<P align="justify">
<I><FONT size=2 face="serif">Operating Expenses</FONT></I></P>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Operating expenses for the three months ended September 30, 2008 was &#36;1,431,155, a 2% increase from &#36;1,405,718 for the three months ended September 30, 2007. Our operating expenses for
the three months ended September 30, 2008 consisted of salaries and related expenses of &#36;724,940, consulting and other compensation of &#36;113,234, and selling, general and administrative expenses of &#36;592,981 . Our operating expenses for
the three months ended September 30, 2007 consisted of salaries and related expenses of &#36;654,326, consulting and other compensation of &#36;224,650, and selling, general and administrative expenses of &#36;526,742.</FONT></P>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Operating expenses for the nine months ended September 30, 2008 was &#36;4,427,150 a 6% increase from &#36;4,189,750 for the nine months ended September 30, 2007. Our operating expenses for the nine months ended September
30, 2008 consisted of salaries and related expenses of &#36;2,174,446 consulting and other compensation of &#36;470,495 and selling, general and administrative expenses of &#36;1,782,209. Our operating expenses for the nine months ended September
30, 2007 consisted of salaries and related expenses of &#36;1,948,442 consulting and other compensation of &#36;672,285, and selling, general and administrative expenses of &#36;1,569,023.</FONT></P>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Salaries and related
expenses were higher in the three and nine months ended September 30, 2008 when
compared to the three and nine months ended September 30, 2007 primarily due
to the hiring of additional personnel to adequately staff our existing pharmacies
and to staff our new pharmacy at Las Vegas. The decrease in consulting and other
compensation for the three and nine months ended September 30, 2008, when compared
to the three and nine months ended September 30, 2007, was attributable a reduction
in the number of consultants retained during the reporting period. The increase
in selling, general and administrative expenses for the three months ended September
30, 2008, as compared to the same reporting period in the prior year was primarily
a result of increases in store rents and increase in legal fees. The increase
in selling, general and administrative expenses for the nine months ended September
30, 2008, as compared to the same reporting period in the prior year was primarily
a result of increases in store rents, provision for doubtful receivables and
increases in accounting  and legal fees.</FONT></P>
<P align="justify">
<I><FONT size=2 face="serif">Other Income and Expense</FONT></I></P>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">During the three months
ended September 30, 2008, we reported other expenses, consisting of interest
expense, in the amount of &#36;647,568, compared to &#36;162,607 for the
three months ended September 30, 2007.</FONT></P>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">During the nine months
ended September 30, 2008, we reported other expenses in the amount of &#36;1,311,699
compared to &#36;455,004 for the nine months ended September 30, 2007. Other
expenses reported  during the three and nine months ended September 30, 2008
and 2007 consisted primarily of interest expense which was incurred in connection
with interest on borrowings under the Credit Agreement with Mosaic and interest
on convertible debentures and loans. In addition, interest expense for the nine
months ended September 30, 2008 also included &#36;110,674 resulting from a charge
taken at June 30, 2008 for a beneficial conversion due to a change in the terms
of certain unsecured convertible debentures. (See Note 5 of the Consolidated
Financial Statements for the quarter ended September 30, 2008).</FONT></P>
<P align="justify">
<I><FONT size=2 face="serif">Net Loss</FONT></I></P>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Net loss for the three months ended September 30, 2008 was &#36;1,504,021 a 108% increase from the net loss of &#36;722,185 for the three months ended September 30, 2007. Net
loss for the nine months ended September 30, 2008 was &#36;3,405,361 a 53% increase from the net loss of &#36;2,232,531 for the nine months ended September 30, 2007. The increase in our net loss from the three and nine months ended September 30,
2008 was primarily attributable to reduced gross profit, increased operating expenses and interest expenses during the reporting periods as discussed above.</FONT></P>
<P align="center">
<FONT size=2 face="serif">25</FONT></P>

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<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Our loss per common share for the three months ended September 30, 2008 was &#36;0.03, compared to a loss per common shares of &#36;0.01 for the three months ended September 30, 2007. Our loss per common
share for the nine months ended September 30, 2008 was &#36;0.06, compared to a loss per common share of &#36;0.04 for nine months ended on September 30 2007. </FONT><BR>
<BR>
<B><FONT size=2 face="serif">Liquidity and Capital Resources</FONT></B></P>
<P align="justify">
<FONT size=2 face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif"></FONT>As of September 30, 2008, we had &#36;814,213 in cash. As of September 30, 2008, we had current assets in the amount of &#36;3,684,362 and current liabilities in the amount of &#36;11,541,464 resulting in a working capital
deficit of &#36;7,857,102.</FONT></P>
<P align="justify">
<FONT size=2 face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif"></FONT>Operating
activities used &#36;2,443,298 in cash for the nine months ended September 30,
2008, as compared to &#36;1,458,257 for the same period last year. Our net loss
of &#36;3,405,361 for the nine months ended September
30, 2008 reduced by non-cash expenses of &#36;759,519 was the primary reason
for our negative operating cash flow. In addition, our inventories increased
by &#36;217,987 primarily due to the fact that our prime vendor relocated to
a new location and  in order to minimize disruption in our ability to acquire
inventory, we purchased quantities that we felt were necessary to allow us to
continue to supply our stores during this period of relocation. An increase of
accounts payable and accrued  expenses of &#36;633,000 offset the decrease in
our cash flows of operating activities. In addition, inventory was required for
our new store opening during the nine months ended September 30, 2008. Investing
activities during the nine months ended  September 30, 2008 used &#36;186,283
for the purchase of property and equipment. Net cash flows provided by financing
activities during the nine months ended September 30, 2008 was &#36;3,035,489
primarily due to the &#36;2,437,400
we received as proceeds from the issue of convertible debentures and &#36;1,154,500
from notes issued to related parties during the reporting period.</FONT></P>
<P align="justify">
<FONT size=2 face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif"></FONT>On
October 7, 2008, we entered into a Securities Purchase Agreement (the &#147;Securities
Purchase Agreement&#148;) with APHY Holdings LLC, a Delaware limited liability
company (&#147;APHY Holdings&#148;) formed by
Enhanced Equity Fund, L.P. for the purpose of this transaction, pursuant to which,
subject to the satisfaction of certain closing conditions, we agreed to issue
and sell 11,235 shares of our future Series A Convertible Preferred Stock, par
value
&#36;0.001 per share (the &#147;Series A Preferred Stock&#148;) and 75,000,001
shares of our common stock to APHY Holdings for an aggregate purchase price of &#36;12,000,000.01.
We intended to use the proceeds from the sale for general working  capital purposes,
to pay down debt and to pay fees related to the transaction. Prior to the closing
of the Securities Purchase Agreement, on November 11, 2008, we received notice
from APHY Holdings terminating the Securities Purchase Agreement,  effective
immediately.</FONT></P>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">As a result of the termination
of the Securities Purchase Agreement, we will be required to seek alternative
sources to finance our operations, service our existing debt (including the
repayment of indebtedness that is past due) and continue our growth plan. We
intend to obtain such funds 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 next twelve months. The inability
to secure sufficient funds in a timely manner would likely have a material adverse
effect on our business, prospects, financial condition, and results of operations.</FONT></P>
<P align="justify">
<B><FONT size=2 face="serif">Off Balance Sheet Arrangements</FONT></B></P>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">As of September 30, 2008, there were no off balance sheet arrangements.</FONT></P>
<P align="justify">
<B><FONT size=2 face="serif">Going Concern</FONT></B></P>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">The accompanying condensed consolidated financial statements have been prepared assuming that we 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, 2008, we had an accumulated deficit of &#36;26,413,555, recurring losses from operations and negative cash flow from operating activities
for the nine month period ended September 30, 2008 of &#36;2,443,298. We also had a negative working capital of &#36;7,857,102 as of September 30, 2008. </FONT></P>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">We intend to fund operations through increased sales and debt and/or equity financing arrangements, which may be insufficient to fund capital expenditures, working capital or other cash requirements for the year ending
December 31, 2008. We intend 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</FONT></P>

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<P align="justify">
<FONT size=2 face="serif">execute our intended business plan or generate positive operating results.</FONT></P>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">These factors, among others, raise substantial doubt about our 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 or classification of liabilities that might result
should we be unable to continue as a going concern.</FONT></P>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">In response to these
problems, management has taken or will take the following actions:</FONT></P>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr valign="top">
    <td width="3%">&nbsp;</td>
    <td width="2%">&#149;</td>
    <td><FONT size=2 face="serif">We are expanding our revenue base beyond the
        pain management sector to service customers that require</FONT> <FONT size=2 face="serif">prescriptions
    to treat cancer, psychiatric, and neurological conditions.</FONT></td>
  </tr>
  <tr valign="top">
    <td width="3%">&nbsp;</td>
    <td width="2%">&#149;</td>
    <td><FONT size=2 face="serif">We are aggressively signing up new physicians.</FONT></td>
  </tr>
  <tr valign="top">
    <td width="3%">&nbsp;</td>
    <td width="2%">&#149;</td>
    <td><FONT size=2 face="serif">We are seeking investment capital.</FONT></td>
  </tr>
  <tr valign="top">
    <td width="3%">&nbsp;</td>
    <td width="2%">&#149;</td>
    <td><FONT size=2 face="serif">We retained additional sales personnel to attract
    business.</FONT></td>
  </tr>
  <tr valign="top">
    <td width="3%">&nbsp;</td>
    <td width="2%">&#149;</td>
    <td><FONT size=2 face="serif">We consolidated our two pharmacies in Portland,
        Oregon into a single operation. This consolidation is expected
        to allow us to further leverage our existing infrastructure and is expected
    to result in a reduction of costs.</FONT></td>
  </tr>
  <tr valign="top">
    <td width="3%">&nbsp;</td>
    <td width="2%">&#149;</td>
    <td><FONT size=2 face="serif">In April 2008, we entered into a Credit Agreement
    for &#36;2,000,000, which can be extended up to &#36;3,000,000.</FONT></td>
  </tr>
  <tr valign="top">
    <td width="3%">&nbsp;</td>
    <td width="2%">&#149;</td>
    <td><FONT size=2 face="serif">In the third quarter of 2008, we raised &#36;2,037,400
    through the issuance of convertible debentures.</FONT></td>
  </tr>
  <tr valign="top">
    <td>&nbsp;</td>
    <td>&#149;</td>
    <td><FONT size=2 face="serif">The Company will seek to extend the maturity
        dates of its outstanding indebtedness that is past due.</FONT></td>
  </tr>
</table>
<P align="justify">
<B><FONT size=2 face="serif">Critical Accounting Policies</FONT></B></P>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">In December 2001, the SEC requested that all registrants list their most &#147;critical accounting polices&#148; in the Management Discussion and Analysis. The SEC indicated that a
&#147;critical accounting policy&#148; is one which is both important to the portrayal of a company&#146;s financial condition and results, and requires management&#146;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. </FONT></P>
<P align="justify">
<I><FONT size=2 face="serif">Inventories</FONT></I></P>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Inventories are stated at the lower of cost (first-in, first-out method) or estimated market, and consist primarily of pharmaceutical drugs. Market value is determined by comparison with recent
sales or net realizable value. Net realizable value is based on management&#146;s forecast for sales of its 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</FONT><I><FONT size=2 face="serif"> </FONT></I><FONT size=2 face="serif">is measured as the difference between the inventory cost and the estimated market value based on management&#146;s assumptions about market conditions and future demand
for its products. No reserves were provided at September 30, 2008. Should the demand for the 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. </FONT></P>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">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 multiple
wholesale vendors. 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. </FONT></P>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">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 in acquiring Schedule II drugs is higher than Schedule III and IV drugs.</FONT></P>
<P align="justify">
<I><FONT size=2 face="serif">Long-Lived Assets</FONT></I></P>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">We adopted Statement of Financial Accounting Standard (&#147;</FONT><I><FONT size=2 face="serif">SFAS</FONT></I><FONT size=2 face="serif">&#148;) No. 144, &#147;</FONT><I><FONT size=2 face="serif">Accounting for the Impairment or Disposal of Long-Lived Assets</FONT></I><FONT size=2 face="serif">,&#148; which 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</FONT></P>

<P align="center">
<FONT size=2 face="serif">27</FONT></P>

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<P align="justify">
<FONT size=2 face="serif">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. </FONT></P>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">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. </FONT></P>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Our long-lived assets consist of computers, software, office furniture and equipment, store fixtures and leasehold improvements on pharmacy build-outs. We assess the impairment of these
long-lived assets at least annually and make adjustment accordingly. </FONT></P>
<P align="justify">
<I><FONT size=2 face="serif">Intangible Assets</FONT></I></P>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Statement of Financial Accounting standard (&#147;</FONT><I><FONT size=2 face="serif">SFAS</FONT></I><FONT size=2 face="serif">&#148;) No. 142, &#147;</FONT><I><FONT size=2 face="serif">Goodwill and Other Intangible Assets</FONT></I><FONT size=2 face="serif">,&#148; 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.</FONT></P>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">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.
</FONT></P>
<P align="justify">
<I><FONT size=2 face="serif">Revenue Recognition</FONT></I></P>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">We recognize revenue on an accrual basis when the product is delivered to the customer. Payments are received directly from the customer at the point of sale, or the customers&#146; insurance
provider is billed. Authorization, which assures payment, is obtained from the customers&#146; insurance provider before the medication is dispensed to the customer. Authorization is obtained for the vast majority of these sales electronically and a
corresponding authorization number is issued by the customers&#146; insurance provider. </FONT></P>
<P align="justify">
<I><FONT size=2 face="serif">Recently Issued Accounting Pronouncements Not Yet Effective </FONT></I></P>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">The following are potentially relevant accounting pronouncements that have been issued but are not yet effective: </FONT></P>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I><FONT size=2 face="serif">Statements of Financial Accounting Standards (SFAS):</FONT></I></P>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr valign="top">
    <td width="3%">&nbsp;</td>
    <td width="2%">&#149;</td>
    <td><FONT size=2 face="serif">SFAS 141 (R), </FONT><I><FONT size=2 face="serif">Business
    Combinations</FONT></I></td>
  </tr>
  <tr>
    <td colspan="3">
<P align=left>
<font size="2" face="serif">&nbsp;</font></P></td>
  </tr>
  <tr valign="top">
    <td width="3%">&nbsp;</td>
    <td width="2%">&#149;</td>
    <td><FONT size=2 face="serif">SFAS 157, </FONT><I><FONT size=2 face="serif">Fair
    Value Measurements</FONT></I></td>
  </tr>
  <tr>
    <td colspan="3">
<P align=left>
<font size="2" face="serif">&nbsp;</font></P></td>
  </tr>
  <tr valign="top">
    <td width="3%">&nbsp;</td>
    <td width="2%">&#149;</td>
    <td><FONT size=2 face="serif">SFAS 159, </FONT><I><FONT size=2 face="serif">The
          Fair Value Option for Financial Assets and Financial Liabilities&#151;including
          an</FONT></I> <I><FONT size=2 face="serif">amendment of FASB Statement
    No. 115</FONT></I></td>
  </tr>
  <tr>
    <td colspan="3">
<P align=left>
<font size="2" face="serif">&nbsp;</font></P></td>
  </tr>
  <tr valign="top">
    <td width="3%">&nbsp;</td>
    <td width="2%">&#149;</td>
    <td><FONT size=2 face="serif">SFAS 160, </FONT><I><FONT size=2 face="serif">Noncontrolling
    Interests in Consolidated Financial Statements</FONT></I></td>
  </tr>
  <tr>
    <td colspan="3">
<P align=left>
<font size="2" face="serif">&nbsp;</font></P></td>
  </tr>
  <tr valign="top">
    <td width="3%">&nbsp;</td>
    <td width="2%">&#149;</td>
    <td><FONT size=2 face="serif">SFAS Statement No. 161, </FONT><I><FONT size=2 face="serif">Disclosures
          about Derivative Instruments and Hedging Activities - an</FONT></I> <I><FONT size=2 face="serif">Amendment
    of FASB Statement 133</FONT></I></td>
  </tr>
  <tr>
    <td colspan="3">
<P align=left>
<font size="2" face="serif">&nbsp;</font></P></td>
  </tr>
  <tr valign="top">
    <td width="3%">&nbsp;</td>
    <td width="2%">&#149;</td>
    <td><FONT size=2 face="serif">SFAS 163, </FONT><I><FONT size=2 face="serif">Accounting
    for Financial Guarantee Insurance Contracts</FONT></I></td>
  </tr>
</table>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I><FONT size=2 face="serif">FASB Staff Positions (FSP):</FONT></I></P>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr valign="top">
    <td width="3%">&nbsp;</td>
    <td width="2%">&#149;</td>
    <td><FONT size=2 face="serif">FSP EITF 00-19-2, </FONT><I><FONT size=2 face="serif">Accounting for Registration Payment Arrangements</FONT></I></td>
  </tr>
</table>

<P align="center">
<FONT size=2 face="serif">28</FONT></P>

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<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr valign="top">
    <td width="3%">&nbsp;</td>
    <td width="2%">&#149;</td>
    <td><FONT size=2 face="serif">FSP APB 14-1, </FONT><I><FONT size=2 face="serif">Accounting for Convertible Debt Instruments That May Be Settled in Cash upon</FONT></I> <I><FONT size=2 face="serif">Conversion (Including Partial Cash
Settlement)</FONT></I></td>
  </tr>
  <tr>
    <td colspan="3">
<P align=left>
<font size="2" face="serif">&nbsp;</font></P></td>
  </tr>
  <tr valign="top">
    <td width="3%">&nbsp;</td>
    <td width="2%">&#149;</td>
    <td><FONT size=2 face="serif">FSP FAS 117-1, </FONT><I><FONT size=2 face="serif">Endowments
          of Not-for-Profit Organizations: Net Asset Classification of Funds
          Subject</FONT></I> <I><FONT size=2 face="serif">to an Enacted Version
          of the Uniform Prudent Management of Institutional Funds Act, and Enhanced
    Disclosures for All Endowment Funds</FONT></I></td>
  </tr>
  <tr>
    <td colspan="3">
<P align=left>
<font size="2" face="serif">&nbsp;</font></P></td>
  </tr>
  <tr valign="top">
    <td width="3%">&nbsp;</td>
    <td width="2%">&#149;</td>
    <td><FONT size=2 face="serif">FSP FAS 133-1 and FIN 45-4, <I>Disclosures
          about Credit Derivatives and Certain Guarantees: An</I> FSP FAS 133-1 and <i>FIN</i> 45-4, <I>Disclosures
          about Credit Derivatives and Certain Guarantees: An</I> <I>Amendment
          of FASB Statement No. 133 and FASB Interpretation No. 45; and Clarification
          of the</I> <I>Effective Date of FASB
          Statement No. 161 </I>&#151; amends
          FASB Statement No. 133, <I>Accounting
          for</I> <I>Derivative Instruments
          and Hedging Activities</I>, to require
          disclosures by sellers of credit derivatives, including
          credit derivatives embedded in a hybrid instrument. This FSP also amends
          FASB Interpretation No. 45, <I>Guarantor&#146;s
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others</I>, to
require an additional disclosure about the current status
of the payment/performance risk of a guarantee. Further, this FSP clarifies the
Board&#146;s intent about the effective date
of FASB Statement No. 161, <I>Disclosures about
Derivative Instruments and Hedging Activities</I></FONT></td>
  </tr>
  <tr>
    <td colspan="3">
<P align=left>
<font size="2" face="serif">&nbsp;</font></P></td>
  </tr>
  <tr valign="top">
    <td width="3%">&nbsp;</td>
    <td width="2%">&#149;</td>
    <td><FONT size=2 face="serif">FSP FAS 140-3, <I>Accounting
          for Transfers of Financial Assets and Repurchase Financing</I></FONT> <I><FONT size=2 face="serif">Transactions</FONT></I><FONT size=2 face="serif">&#151; amends
    FASB Statement 140</FONT></td>
  </tr>
  <tr>
    <td colspan="3">
<P align=left>
<font size="2" face="serif">&nbsp;</font></P></td>
  </tr>
  <tr valign="top">
    <td width="3%">&nbsp;</td>
    <td width="2%">&#149;</td>
    <td><FONT size=2 face="serif">FSP FAS 142-3, <I>Determination
    of the Useful Life of Intangible Assets</I></FONT></td>
  </tr>
  <tr>
    <td colspan="3">
<P align=left>
<font size="2" face="serif">&nbsp;</font></P></td>
  </tr>
  <tr valign="top">
    <td width="3%">&nbsp;</td>
    <td width="2%">&#149;</td>
    <td><FONT size=2 face="serif">FSP FAS 157-1, <I>Application
          of FASB Statement No. 157 to FASB Statement No. 13 and Other</I></FONT> <I><FONT size=2 face="serif">Accounting
          Pronouncements That Address Fair Value Measurements for Purposes of
          Lease</FONT></I> <I><FONT size=2 face="serif">Classification or Measurement
    under Statement 13</FONT></I></td>
  </tr>
  <tr>
    <td colspan="3">
<P align=left>
<font size="2" face="serif">&nbsp;</font></P></td>
  </tr>
  <tr valign="top">
    <td width="3%">&nbsp;</td>
    <td width="2%">&#149;</td>
    <td><FONT size=2 face="serif">FSP FAS 157-2, <I>Effective
    Date of FASB Statement No. 157</I></FONT></td>
  </tr>
  <tr>
    <td colspan="3">
<P align=left>
<font size="2" face="serif">&nbsp;</font></P></td>
  </tr>
  <tr valign="top">
    <td width="3%">&nbsp;</td>
    <td width="2%">&#149;</td>
    <td><FONT size=2 face="serif">FSP FIN 46(R)-7, <I>Application
    of FASB Interpretation No. 46(R) to Investment Companies</I></FONT></td>
  </tr>
  <tr>
    <td colspan="3">
<P align=left>
<font size="2" face="serif">&nbsp;</font></P></td>
  </tr>
  <tr valign="top">
    <td width="3%">&nbsp;</td>
    <td width="2%">&#149;</td>
    <td><FONT size=2 face="serif">FSP SOP 94-3-1 and AAG HCO-1, <I>Omnibus
          Changes to Consolidation and Equity Method Guidance</I></FONT> <I><FONT size=2 face="serif">for
    Not-for-Profit Organizations</FONT></I></td>
  </tr>
  <tr>
    <td colspan="3">
<P align=left>
<font size="2" face="serif">&nbsp;</font></P></td>
  </tr>
  <tr valign="top">
    <td width="3%">&nbsp;</td>
    <td width="2%">&#149;</td>
    <td><FONT size=2 face="serif">FSP SOP 07-1-1, &#151; indefinitely delays
        the effective date of AICPA Statement of Position 07-1, <I>"Clarification
        of the Scope of the Audit and Accounting Guide Investment Companies and
        Accounting byParent Companies
    and Equity Method Investors for Investments in Investment Companies</I></FONT></td>
  </tr>
  <tr>
    <td colspan="3">
<P align=left>
<font size="2" face="serif">&nbsp;</font></P></td>
  </tr>
  <tr valign="top">
    <td width="3%">&nbsp;</td>
    <td width="2%">&#149;</td>
    <td><FONT size=2 face="serif">FSP EITF 03-6-1, &#151; <I>Determining
          Whether Instruments Granted in Share-Based Payment Transactions</I></FONT> <I><FONT size=2 face="serif">Are
    Participating Securities</FONT></I></td>
  </tr>
</table>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I><FONT size=2 face="serif">EITF Consensuses (EITF):</FONT></I></P>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr valign="top">
    <td width="3%">&nbsp;</td>
    <td width="2%">&#149;</td>
    <td><FONT size=2 face="serif">EITF Issue No. 07-1, <I>Accounting
    for Collaborative Arrangements</I></FONT></td>
  </tr>
  <tr>
    <td colspan="3">
<P align=left>
<font size="2" face="serif">&nbsp;</font></P></td>
  </tr>
  <tr valign="top">
    <td width="3%">&nbsp;</td>
    <td width="2%">&#149;</td>
    <td><FONT size=2 face="serif">EITF Issue No. 07-4, <I>Application
          of the Two-Class Method under FASB Statement No. 128, Earnings</I></FONT> <I><FONT size=2 face="serif">per
    Share, to Master Limited Partnerships</FONT></I></td>
  </tr>
  <tr>
    <td colspan="3">
<P align=left>
<font size="2" face="serif">&nbsp;</font></P></td>
  </tr>
  <tr valign="top">
    <td width="3%">&nbsp;</td>
    <td width="2%">&#149;</td>
    <td><FONT size=2 face="serif">EITF Issue No. 07-5, <I>Determining
          Whether an Instrument (or Embedded Feature) Is Indexed to an</I></FONT> <I><FONT size=2 face="serif">Entity's
    Own Stock</FONT></I></td>
  </tr>
  <tr>
    <td colspan="3">
<P align=left>
<font size="2" face="serif">&nbsp;</font></P></td>
  </tr>
  <tr valign="top">
    <td width="3%">&nbsp;</td>
    <td width="2%">&#149;</td>
    <td><FONT size=2 face="serif">EITF Issue No. 08-3, <I>Accounting
    by Lessees for Maintenance Deposits</I></FONT></td>
  </tr>
  <tr>
    <td colspan="3">
<P align=left>
<font size="2" face="serif">&nbsp;</font></P></td>
  </tr>
  <tr valign="top">
    <td width="3%">&nbsp;</td>
    <td width="2%">&#149;</td>
    <td><FONT size=2 face="serif">EITF Issue No. 08-5, <I>Issuer's
          Accounting for Liabilities Measured at Fair Value with a Third-Party</I></FONT> <I><FONT size=2 face="serif">Credit
    Enhancement</FONT></I></td>
  </tr>
</table>

<P align="center">
<FONT size=2 face="serif">29</FONT></P>

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<P align="left" style="page-break-before:always"></P><PAGE>

<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr valign="top">
    <td width="3%">&nbsp;</td>
    <td width="2%">&#149;</td>
    <td><FONT size=2 face="serif">EITF Issue No. 08-6, <I>"Equity
          Method Investment Accounting Considerations" </I>&#151; The
          purpose of this issue is to resolve
          several accounting issues that arise in applying the equity method
          of accounting. Most of these issues
          arise or become more prevalent upon the effective date of FASB Statement
          No. 141 (Revised 2007), <I>"Business
          Combinations"</I>, and (or) FASB Statement
          No. 160, <I>"Noncontrolling Interests</I> <I>in
          Consolidated Financial Statements." </I>This
          is because the literature that is being replaced or amended by Statements
          141R and 160 have been used by analogy in addressing certain aspects
          of applying the equity method of accounting,
          which raises the question as to whether these aspects of applying the
          equity method of accounting should
          change upon the effective date of Statements 141R and 160 (which for
    calendar year-end companies is January 1, 2009).</FONT></td>
  </tr>
  <tr>
    <td colspan="3">
<P align=left>
<font size="2" face="serif">&nbsp;</font></P></td>
  </tr>
  <tr valign="top">
    <td width="3%">&nbsp;</td>
    <td width="2%">&#149;</td>
    <td><FONT size=2 face="serif">EITF Issue No. 08-7, <I>Accounting
    for Defensive Intangible Assets</I></FONT></td>
  </tr>
  <tr>
    <td colspan="3">
<P align=left>
<font size="2" face="serif">&nbsp;</font></P></td>
  </tr>
  <tr valign="top">
    <td width="3%">&nbsp;</td>
    <td width="2%">&#149;</td>
    <td><FONT size=2 face="serif">EITF Issue No. 08-8, <I>Accounting
          for an Instrument (or an Embedded Feature) with a Settlement Amount</I></FONT> <I><FONT size=2 face="serif">That
    Is Based on the Stock of an Entity's Consolidated Subsidiary</FONT></I></td>
  </tr>
</table>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I><FONT size=2 face="serif">AICPA Statements of Position (SOP):</FONT></I></P>
<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr valign="top">
    <td width="3%">&nbsp;</td>
    <td width="2%">&#149;</td>
    <td><FONT size=2 face="serif">SOP 07-01, <I>Clarification of the Scope of the Audit and Accounting Guide Investment Companies and</I></FONT> <I><FONT size=2 face="serif">Accounting by Parent Companies and Equity Method
Investors for Investments in Investment</FONT></I> <I><FONT size=2 face="serif">Companies.</FONT></I></td>
  </tr>
</table>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif"> We do not believe that adoption of any of the above pronouncements that may apply will have a material impact on our financial position or results of operations. </FONT></P>
<P align="justify">
<B><FONT size=2 face="serif"><a name="item3a"></a>ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK </FONT></B></P>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif"> We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item. </FONT></P>
<P align="justify">
<B><FONT size=2 face="serif"><a name="item4ta"></a>ITEM 4. CONTROLS AND PROCEDURES </FONT></B></P>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">As of the end of the period covered by this report, based on an evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange
Act of 1934), our Chief Executive and Chief Financial Officer concluded that our disclosure controls and procedures are not effective to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed,
summarized and reported within the applicable time periods specified by the SEC&#146;s rules and forms. </FONT></P>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">There was no change in our internal controls over financial reporting that occurred during the fiscal quarter ended September 30, 2008 that materially affected or is reasonably likely to
materially affect the Company&#146;s internal controls over financial reporting. </FONT></P>

<P align="center">
<FONT size=2 face="serif">30</FONT></P>

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<P align="justify">
<B><FONT size=2 face="serif"><a name="part2a"></a>PART II. OTHER INFORMATION </FONT></B><BR>
<BR>
<B><FONT size=2 face="serif"><a name="item1b"></a>ITEM 1. LEGAL PROCEEDINGS </FONT></B></P>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">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.</FONT></P>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">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. </FONT></P>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">We are not a party to any pending legal proceeding. We are not aware of any pending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our voting securities are adverse to
us or have a material interest adverse to us.</FONT></P>
<P align="justify">
<B><FONT size=2 face="serif"><a name="item2b"></a>ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS </FONT></B></P>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">During the three months ended September 30, 2008, we issued unregistered securities to the persons, as described below. We believe that each transaction was exempt from the registration
requirements of the Securities Act of 1933, as amended, by virtue of Section 4(2) thereof and/or Rule 506 of Regulation D promulgated thereunder. </FONT></P>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">On August 29, 2008, our
independent directors, Richard Falcone and James Manfredonia were each issued
300,000 shares of our common stock for services rendered by them during the fiscal
year  ended December 31, 2007 and the fiscal year ending December 31, 2008. </FONT></P>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">In July, August and September
of 2008, we issued to the Mosaic Private Equity family of funds seven unsecured
convertible debentures in the aggregate principal amount of &#36;2,037,400 accruing
 interest of 18% per annum. With extensions, principal and accrued interest under
these debentures became due October 31, 2008. The debenture holders have the
right prior to payment of the debentures to convert the outstanding principal
into shares  of our common stock at a conversion price of &#36;0.40, subject
to adjustment in certain circumstances, and warrants to acquire such number of
shares of common stock equal to the number of conversion shares issued, half
of which shall be exercisable  at &#36;0.60 per share, subject to adjustment
in certain circumstances, for a one-year period and the other half of which shall
be exercisable at &#36;0.80 per share, subject to adjustment in certain circumstances,
for a two-year period. The  debenture holders are also entitled to piggyback
registration rights covering the shares issuable upon conversion of the debentures
and upon exercise of the warrants. If we conduct a certain private placement,
the outstanding principal amount of the  debenture is exchangeable for the securities
sold in such private placement at the holder&#146;s or our option. Ameet Shah,
the managing partner of the Mosaic Private Equity Family of Funds serves on our
board of directors.</FONT></P>
<P align="justify">
<B><FONT size=2 face="serif"><a name="item3b"></a>ITEM 3. DEFAULTS UPON SENIOR SECURITIES</FONT></B></P>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">At October 31, 2008,
convertible debentures and loans in the aggregate principal amount of &#36;6,248,400
were past due. Total indebtedness under such convertible debentures and loans
is 6,829,204 at October 31, 2008.</FONT></P>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">As discussed further below in Item 5, the Securities Purchase Agreement was terminated, on November 11, 2008, prior to closing. We intended to repay, convert or exchange convertible debentures and loans
that are currently outstanding from the proceeds of the transactions contemplated by the Securities Purchase Agreement. As a result of the termination of the Securities Purchase Agreement, we are in the process of exploring alternative sources to
service our existing debt. We intend to obtain such funds through increased sales and debt and/or equity financing arrangements however any failure to obtain sufficient funding is likely to have a material adverse effect on our business, financial
condition or results of operations and the market price of our common stock.</FONT></P>
<P align="justify">
<B><FONT size=2 face="serif"><a name="item4b"></a>ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS </FONT></B> </P>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">No matters have been submitted to our security holders for a vote, through the solicitation of proxies or otherwise, during the quarterly period ended September 30, 2008.
</FONT> </P>

<P align="center">
<FONT size=2 face="serif">31</FONT></P>

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<P align="justify">
<B><FONT size=2 face="serif"><a name="item5b"></a>ITEM 5. OTHER INFORMATION</FONT></B></P>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">The following disclosure would have otherwise been filed on Form 8-K under the heading &#147;Item 1.02 Termination of a Material Definitive Agreement&#148;: </FONT></P>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U><FONT size=2 face="serif">Termination of Securities Purchase Agreement</FONT></U></P>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">As previously disclosed
in the Current Report on Form 8-K filed with the Commission on October 10, 2008,
on October 7, 2008, we entered into a Securities Purchase Agreement (the
&#147;Securities Purchase Agreement&#148;) with APHY Holdings LLC, a Delaware
limited liability company (&#147;APHY Holdings&#148;)
formed by Enhanced Equity Fund, L.P. for the purpose of this transaction, pursuant
to which, subject to the satisfaction of certain closing conditions, we agreed
to issue and sell 11,235 shares of our future Series A Convertible Preferred
Stock, par value &#36;0.001 per share and 75,000,001 shares of our common stock
to APHY Holdings for an  aggregate purchase price of &#36;12,000,000.01. We intended
to use the proceeds from the sale for general working capital purposes, to pay
down debt and to pay fees related to the transaction. </FONT></P>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">Prior to closing, on November 11, 2008, we received notice from APHY Holdings terminating the Securities Purchase Agreement, effective immediately. Management believes that APHY Holdings
terminated the Securities Purchase Agreement because of the delays encountered in the attempts to obtain the consent of the California State Board of Pharmacy to the change in ownership which was one of the conditions to closing. </FONT></P>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U><FONT size=2 face="serif">Termination of Accounts Receivable Purchase Agreement</FONT></U></P>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">As previously disclosed in the Current Report on Form 8-K filed with the Commission on March 6, 2008, we entered into an Accounts Receivable Purchase Agreement (&#147;Purchase Agreement&#148;)
with Horizon International Investments LLC (&#147;Horizon&#148;) originally entered into on March 1, 2008. Under the Purchase Agreement, Horizon advanced funds to us based on our accounts receivable in exchange for the repayment of the amount
advanced and payment of certain commissions and financing fees.</FONT></P>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">On August 27, 2008, we mutually agreed to terminate the Purchase Agreement based, in addition to other considerations, on our decision to obtain financing from other sources. On the date of
termination, no outstanding balance was due on any accounts receivable purchased by Horizon under the Purchase Agreement.</FONT></P>
<p style=' margin-bottom:0pt; margin-top:0pt; text-align:justify;'><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif"></FONT>&nbsp;&nbsp;The
    following disclosure would have otherwise been filed on Form 8-K under the
    heading &#147;Item 1.01 &#150; Entry into a Material Definitive Agreement&#148;, &#147;Item
    2.03 &#150; Creation of Direct Financial Obligation&#148; and &#147;Item
    3.02 &#150; Unregistered Sales of Equity Securities.&#148;</font></p>
<p style=' margin-bottom:0pt; margin-top:0pt; text-align:justify;'><font size=2>&nbsp;</font></p>
<p style=' margin-bottom:0pt; margin-top:0pt; text-align:justify;'><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>Unsecured
      Convertible Debentures</u></font></p>
<p style=' margin-bottom:0pt; margin-top:0pt; text-align:justify;'><font size=2>&nbsp;</font></p>
<p style=' margin-bottom:0pt; margin-top:0pt; text-align:justify;'><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Reference
    is made to Part II. Item 2 of this Quarterly Report on Form 10-Q with respect
    to the description of the issuance of unsecured convertible debentures in
    the principal amount of $2,037,400, which is hereby incorporated by reference.
    The foregoing description is qualified in its entirety by the form of unsecured
convertible debenture attached as Exhibit 10.1 hereto.</font></p>
<P align="justify">
<B><FONT size=2 face="serif"><a name="item6b"></a>ITEM 6. EXHIBITS</FONT></B></P>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">The exhibits listed in the accompanying below are filed as part of this report.</FONT></P>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
<TR>
    <TD width=10%></TD>
    <TD width=2%></TD>
  <TD></TD>
</TR>
<TR valign="bottom">
<TD width="10%" align=left nowrap>
<FONT size=2 face="serif">Exhibit</FONT></TD>
<TD width="2%">&nbsp;</TD>
<TD align=left>&nbsp;</TD>
</TR>
<TR valign="bottom">
<TD width="10%" align=left nowrap style="border-bottom:1px solid #000000;">
<FONT size=2 face="serif">Number</FONT></TD>
<TD width="2%" style="border-bottom:1px solid #000000;">&nbsp;</TD>
<TD align=left style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">Description</FONT></TD>
</TR>
<TR valign="top">
  <TD align=left nowrap><FONT size=2 face="serif">10.1</FONT></TD>
  <TD>&nbsp;</TD>
  <TD align=left><FONT size=2 face="serif">Form of 18% Unsecured Convertible
      Debenture (filed as an exhibit to the Quarterly Report on Form 10-Q filed
      on August 14, 2008 with the Commission and incorporated by reference herein).</FONT></TD>
</TR>
<TR valign="top">
<TD width="10%" align=left nowrap>
<FONT size=2 face="serif">31.1</FONT></TD>
<TD width="2%">&nbsp;</TD>
<TD align=left>
<FONT size=2 face="serif">Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.</FONT></TD>
</TR>
<TR valign="top">
<TD width="10%" align=left nowrap>
<FONT size=2 face="serif">31.2</FONT></TD>
<TD width="2%">&nbsp;</TD>
<TD align=left>
<FONT size=2 face="serif">Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.</FONT></TD>
</TR>
<TR valign="top">
<TD width="10%" align=left nowrap>
<FONT size=2 face="serif">32.1</FONT></TD>
<TD width="2%">&nbsp;</TD>
<TD align=left>
<FONT size=2 face="serif">Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.</FONT></TD>
</TR>
<TR valign="top">
<TD width="10%" align=left nowrap>
<FONT size=2 face="serif">32.2</FONT></TD>
<TD width="2%">&nbsp;</TD>
<TD align=left>
<FONT size=2 face="serif">Certification by Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.</FONT></TD>
</TR>
</TABLE>
<BR>

<P align="center">
<FONT size=2 face="serif">32</FONT></P>

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<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif"><a name="sigs1"></a>Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
</FONT></P>
<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
<TR>
     <TD width=49%></TD>
    <TD width=2%></TD>
    <TD width=5%></TD>
    <TD width=44%></TD>
</TR>
<TR valign="bottom">
<TD width="49%" align=left>&nbsp;</TD>
<TD width="2%">&nbsp;</TD>
<TD width="5%" align=left nowrap>&nbsp;</TD>
<TD width="44%" align=left>
<FONT size=2 face="serif">ASSURED PHARMACY, INC.</FONT></TD>
</TR>
<TR>
<TD width="49%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="44%">&nbsp;</TD>
</TR>
<TR valign="bottom">
<TD width="49%" align=left>
<FONT size=2 face="serif">Date: November 14, 2008</FONT></TD>
<TD width="2%">&nbsp;</TD>
<TD width="5%" align=left nowrap>&nbsp;</TD>
<TD width="44%" align=left style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">/s/ Robert DelVelcchio</FONT></TD>
</TR>
<TR valign="bottom">
<TD width="49%" align=left>&nbsp;</TD>
<TD width="2%">&nbsp;</TD>
<TD width="5%" align=left nowrap>&nbsp;</TD>
<TD width="44%" align=left>
<FONT size=2 face="serif">Robert DelVelcchio</FONT></TD>
</TR>
<TR valign="bottom">
<TD width="49%" align=left>&nbsp;</TD>
<TD width="2%">&nbsp;</TD>
<TD width="5%" align=left nowrap>&nbsp;</TD>
<TD width="44%" align=left>
<FONT size=2 face="serif">Chief Executive Officer</FONT></TD>
</TR>
<TR valign="bottom">
<TD width="49%" align=left>&nbsp;</TD>
<TD width="2%">&nbsp;</TD>
<TD width="5%" align=left nowrap>&nbsp;</TD>
<TD width="44%" align=left>
<FONT size=2 face="serif">(Principal Executive Officer)</FONT></TD>
</TR>
<TR>
<TD width="49%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="44%">&nbsp;</TD>
</TR>
<TR>
<TD width="49%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="44%">&nbsp;</TD>
</TR>
<TR>
<TD width="49%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="44%">&nbsp;</TD>
</TR>
<TR valign="bottom">
<TD width="49%" align=left>
<FONT size=2 face="serif">Date: November 14, 2008</FONT></TD>
<TD width="2%">&nbsp;</TD>
<TD width="5%" align=left nowrap>&nbsp;</TD>
<TD width="44%" align=left style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">/s/ Haresh Sheth</FONT></TD>
</TR>
<TR valign="bottom">
<TD width="49%" align=left>&nbsp;</TD>
<TD width="2%">&nbsp;</TD>
<TD width="5%" align=left nowrap>&nbsp;</TD>
<TD width="44%" align=left>
<FONT size=2 face="serif">Haresh Sheth</FONT></TD>
</TR>
<TR valign="bottom">
<TD width="49%" align=left>&nbsp;</TD>
<TD width="2%">&nbsp;</TD>
<TD width="5%" align=left nowrap>&nbsp;</TD>
<TD width="44%" align=left>
<FONT size=2 face="serif">Chief Financial Officer</FONT></TD>
</TR>
<TR valign="bottom">
<TD width="49%" align=left>&nbsp;</TD>
<TD width="2%">&nbsp;</TD>
<TD width="5%" align=left nowrap>&nbsp;</TD>
<TD width="44%" align=left>
<FONT size=2 face="serif">(Principal Financial and Accounting Officer)</FONT></TD>
</TR>
</TABLE>
<BR>

<P align="center">
<FONT size=2 face="serif">33</FONT></P>

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<P align="right">
<B><FONT size=2 face="serif">Exhibit 31.1 </FONT></B></P>
<P align="center">
<B><FONT size=2 face="serif">CERTIFICATION</FONT></B></P>
<P align="justify">
<FONT size=2 face="serif">I, Robert DelVecchio, certify that:</FONT></P>
<TABLE border=0 cellspacing=0 cellpadding=0>
<TR>
	<TD nowrap valign=top>
<FONT size=2 face="serif">1.</FONT>&nbsp; &nbsp; &nbsp; 	</TD>
	<TD width=100% colspan=2>
<FONT size=2 face="serif">I have reviewed this Quarterly Report on Form 10-Q for the quarter ended September 30, 2008 of Assured Pharmacy, Inc. (the &#147;registrant&#148;);</FONT>	</TD>
</TR>
<TR><TD colspan=3>&nbsp;</TD></TR><TR>
	<TD nowrap valign=top>
<FONT size=2 face="serif">2.</FONT>&nbsp; &nbsp; &nbsp; 	</TD>
	<TD width=100% colspan=2>
<FONT size=2 face="serif">Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;</FONT>	</TD>
</TR>
<TR><TD colspan=3>&nbsp;</TD></TR><TR>
	<TD nowrap valign=top>
<FONT size=2 face="serif">3.</FONT>&nbsp; &nbsp; &nbsp; 	</TD>
	<TD width=100% colspan=2>
<FONT size=2 face="serif">Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;</FONT>	</TD>
</TR>
<TR><TD colspan=3>&nbsp;</TD></TR><TR>
	<TD nowrap valign=top>
<FONT size=2 face="serif">4.</FONT>&nbsp; &nbsp; &nbsp; 	</TD>
	<TD width=100% colspan=2>
<FONT size=2 face="serif">The registrant&#146;s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-(f)) for the registrant and have:</FONT>	</TD>
</TR>
<TR><TD colspan=3>&nbsp;</TD></TR><TR>
<TD>&nbsp;</TD>	<TD nowrap valign=top>
<FONT size=2 face="serif">(a)</FONT>&nbsp; &nbsp; &nbsp; 	</TD>
	<TD width=100%>
<FONT size=2 face="serif">Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;</FONT>	</TD>
</TR>
<TR><TD colspan=3>&nbsp;</TD></TR><TR>
<TD>&nbsp;</TD>	<TD nowrap valign=top>
<FONT size=2 face="serif">(b)</FONT>&nbsp; &nbsp; &nbsp; 	</TD>
	<TD width=100%>
<FONT size=2 face="serif">Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;</FONT>	</TD>
</TR>
<TR><TD colspan=3>&nbsp;</TD></TR><TR>
<TD>&nbsp;</TD>	<TD nowrap valign=top>
<FONT size=2 face="serif">(c)</FONT>&nbsp; &nbsp; &nbsp; 	</TD>
	<TD width=100%>
<FONT size=2 face="serif">Evaluated the effectiveness of the registrant&#146;s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and</FONT>	</TD>
</TR>
<TR><TD colspan=3>&nbsp;</TD></TR><TR>
<TD>&nbsp;</TD>	<TD nowrap valign=top>
<FONT size=2 face="serif">(d)</FONT>&nbsp; &nbsp; &nbsp; 	</TD>
	<TD width=100%>
<FONT size=2 face="serif">Disclosed in this report any change in the registrant&#146;s internal control over financial reporting that occurred during the registrant&#146;s most recent fiscal quarter that has materially affected, or is reasonably
likely to materially affect, the registrant&#146;s internal control over financial reporting.</FONT>	</TD>
</TR>
<TR><TD colspan=3>&nbsp;</TD></TR><TR>
	<TD nowrap valign=top>
<FONT size=2 face="serif">5.</FONT>&nbsp; &nbsp; &nbsp; 	</TD>
	<TD width=100% colspan=2>
<FONT size=2 face="serif">The registrant&#146;s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant&#146;s auditors and the audit committee of the
registrant&#146;s board of directors (or persons performing the equivalent functions):</FONT>	</TD>
</TR>
<TR><TD colspan=3>&nbsp;</TD></TR><TR>
<TD>&nbsp;</TD>	<TD nowrap valign=top>
<FONT size=2 face="serif">(a)</FONT>&nbsp; &nbsp; &nbsp; 	</TD>
	<TD width=100%>
<FONT size=2 face="serif">All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant&#146;s ability to record, process,
summarize and report financial information; and</FONT>	</TD>
</TR>
<TR><TD colspan=3>&nbsp;</TD></TR><TR>
<TD>&nbsp;</TD>	<TD nowrap valign=top>
<FONT size=2 face="serif">(b)</FONT>&nbsp; &nbsp; &nbsp; 	</TD>
	<TD width=100%>
<FONT size=2 face="serif">Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant&#146;s internal control over financial reporting.</FONT>	</TD>
</TR>
</TABLE>
<BR>
<TABLE width="50%" border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
	<TD align=left nowrap>
<FONT size=2 face="serif">Date: November 14, 2008</FONT></TD>
	<TD>&nbsp;</TD>
	<TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">/s/ Robert DelVecchio</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap>&nbsp;</TD>
	<TD>&nbsp;</TD>
	<TD align=left nowrap>
<FONT size=2 face="serif">Robert DelVecchio</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap>&nbsp;</TD>
	<TD>&nbsp;</TD>
	<TD align=left nowrap>
<FONT size=2 face="serif">Chief Executive Officer</FONT></TD>
</TR>
</TABLE>
<BR>
<BR>

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<DOCUMENT>
<TYPE>EX-31.2
<SEQUENCE>3
<FILENAME>c55673_ex31-2.htm
<TEXT>

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<P align="right">
<B><FONT size=2 face="serif">Exhibit 31.2 </FONT></B></P>
<P align="center">
<B><FONT size=2 face="serif">CERTIFICATION</FONT></B></P>
<P align="justify">
<FONT size=2 face="serif">I, Haresh Sheth, certify that:</FONT></P>
<TABLE border=0 cellspacing=0 cellpadding=0>
<TR>
	<TD nowrap valign=top>
<FONT size=2 face="serif">1.</FONT>&nbsp; &nbsp; &nbsp; 	</TD>
	<TD width=100% colspan=2>
<FONT size=2 face="serif">I have reviewed this Quarterly Report on Form 10-Q for the quarter ended September 30, 2008 of Assured Pharmacy, Inc. (the &#147;registrant&#148;);</FONT>	</TD>
</TR>
<TR><TD colspan=3>&nbsp;</TD></TR><TR>
	<TD nowrap valign=top>
<FONT size=2 face="serif">2.</FONT>&nbsp; &nbsp; &nbsp; 	</TD>
	<TD width=100% colspan=2>
<FONT size=2 face="serif">Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;</FONT>	</TD>
</TR>
<TR><TD colspan=3>&nbsp;</TD></TR><TR>
	<TD nowrap valign=top>
<FONT size=2 face="serif">3.</FONT>&nbsp; &nbsp; &nbsp; 	</TD>
	<TD width=100% colspan=2>
<FONT size=2 face="serif">Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;</FONT>	</TD>
</TR>
<TR><TD colspan=3>&nbsp;</TD></TR><TR>
	<TD nowrap valign=top>
<FONT size=2 face="serif">4.</FONT>&nbsp; &nbsp; &nbsp; 	</TD>
	<TD width=100% colspan=2>
<FONT size=2 face="serif">The registrant&#146;s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-(f)) for the registrant and have:</FONT>	</TD>
</TR>
<TR><TD colspan=3>&nbsp;</TD></TR><TR>
<TD>&nbsp;</TD>	<TD nowrap valign=top>
<FONT size=2 face="serif">(a)</FONT>&nbsp; &nbsp; &nbsp; 	</TD>
	<TD width=100%>
<FONT size=2 face="serif">Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;</FONT>	</TD>
</TR>
<TR><TD colspan=3>&nbsp;</TD></TR><TR>
<TD>&nbsp;</TD>	<TD nowrap valign=top>
<FONT size=2 face="serif">(b)</FONT>&nbsp; &nbsp; &nbsp; 	</TD>
	<TD width=100%>
<FONT size=2 face="serif">Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;</FONT>	</TD>
</TR>
<TR><TD colspan=3>&nbsp;</TD></TR><TR>
<TD>&nbsp;</TD>	<TD nowrap valign=top>
<FONT size=2 face="serif">(c)</FONT>&nbsp; &nbsp; &nbsp; 	</TD>
	<TD width=100%>
<FONT size=2 face="serif">Evaluated the effectiveness of the registrant&#146;s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and</FONT>	</TD>
</TR>
<TR><TD colspan=3>&nbsp;</TD></TR><TR>
<TD>&nbsp;</TD>	<TD nowrap valign=top>
<FONT size=2 face="serif">(d)</FONT>&nbsp; &nbsp; &nbsp; 	</TD>
	<TD width=100%>
<FONT size=2 face="serif">Disclosed in this report any change in the registrant&#146;s internal control over financial reporting that occurred during the registrant&#146;s most recent fiscal quarter that has materially affected, or is reasonably
likely to materially affect, the registrant&#146;s internal control over financial reporting.</FONT>	</TD>
</TR>
<TR><TD colspan=3>&nbsp;</TD></TR><TR>
	<TD nowrap valign=top>
<FONT size=2 face="serif">5.</FONT>&nbsp; &nbsp; &nbsp; 	</TD>
	<TD width=100% colspan=2>
<FONT size=2 face="serif">The registrant&#146;s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant&#146;s auditors and the audit committee of the
registrant&#146;s board of directors (or persons performing the equivalent functions):</FONT>	</TD>
</TR>
<TR><TD colspan=3>&nbsp;</TD></TR><TR>
<TD>&nbsp;</TD>	<TD nowrap valign=top>
<FONT size=2 face="serif">(a)</FONT>&nbsp; &nbsp; &nbsp; 	</TD>
	<TD width=100%>
<FONT size=2 face="serif">All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant&#146;s ability to record, process,
summarize and report financial information; and</FONT>	</TD>
</TR>
<TR><TD colspan=3>&nbsp;</TD></TR><TR>
<TD>&nbsp;</TD>	<TD nowrap valign=top>
<FONT size=2 face="serif">(b)</FONT>&nbsp; &nbsp; &nbsp; 	</TD>
	<TD width=100%>
<FONT size=2 face="serif">Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant&#146;s internal control over financial reporting.</FONT>	</TD>
</TR>
</TABLE>
<BR>
<TABLE width="50%" border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
	<TD align=left nowrap>
<FONT size=2 face="serif">Date: November 14, 2008</FONT></TD>
	<TD>&nbsp;</TD>
	<TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">/s/ Haresh Sheth</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap>&nbsp;</TD>
	<TD>&nbsp;</TD>
	<TD align=left nowrap>
<FONT size=2 face="serif">Haresh Sheth</FONT></TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap>&nbsp;</TD>
	<TD>&nbsp;</TD>
	<TD align=left nowrap>
<FONT size=2 face="serif">Chief Financial Officer</FONT></TD>
</TR>
</TABLE>
<BR>
<BR>

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<DOCUMENT>
<TYPE>EX-32.1
<SEQUENCE>4
<FILENAME>c55673_ex32-1.htm
<TEXT>

<HTML>
<HEAD>
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<P align="right">
<B><FONT size=2 face="serif">Exhibit 32.1</FONT></B></P>
<P align="center">
<B><FONT size=2 face="serif">CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO</FONT></B><BR>
<B><FONT size=2 face="serif">SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 </FONT></B></P>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">In connection with the Quarterly Report of Assured Pharmacy, Inc. (the &#147;Company&#148;) on Form 10-Q for the quarter ended September 30, 2008 filed with the Securities and Exchange Commission (the &#147;Report&#148;),
I, Robert DelVecchio, Chief Executive Officer of the Company, certify, pursuant to 18 U.S. C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: </FONT></P>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">(1) The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and </FONT></P>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">(2) The information contained in the Report fairly presents, in all material respects, the consolidated financial condition of the Company as of the
dates presented and the consolidated result of operations of the Company for the periods presented. </FONT></P>

<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
	<TD align=left nowrap>
<FONT size=2 face="serif">Date: November 14, 2008</FONT></TD>
	<TD width="4%">&nbsp;</TD>
	<TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">/s/
    Robert DelVecchio</FONT></TD>
    <TD width="30%" align=left nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap>&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD align=left nowrap><FONT size=2 face="serif">Robert DelVecchio</FONT></TD>
    <TD width="30%" align=left nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap>&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD align=left nowrap><FONT size=2 face="serif">Chief Executive Officer of<br>
	Assured Pharmacy, Inc.</FONT></TD>
    <TD width="30%" align=left nowrap>&nbsp;</TD>
</TR>
</TABLE>

<P align="justify">
<FONT size=2 face="serif">This certification has been furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.</FONT></P>
<P align="justify">
<FONT size=2 face="serif">A signed original of this written statement required by Section 906 has been provided to Assured Pharmacy, Inc. and will be retained by Assured Pharmacy, Inc. and furnished to the Securities and Exchange Commission or its
staff upon request. </FONT></P>
<BR>

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<DOCUMENT>
<TYPE>EX-32.2
<SEQUENCE>5
<FILENAME>c55673_ex32-2.htm
<TEXT>

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<P align="right">
<B><FONT size=2 face="serif">Exhibit 32.2</FONT></B></P>
<P align="center">
<B><FONT size=2 face="serif">CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO</FONT></B><BR>
<B><FONT size=2 face="serif">SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 </FONT></B></P>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif"> In connection with the Quarterly Report of Elite Pharmaceuticals, Inc. (the &#147;Company&#148;) on Form 10-Q for the quarter ended September 30, 2008 filed with the Securities and Exchange Commission (the
&#147;Report&#148;), I, Haresh Sheth, Chief Financial Officer and Treasurer of the Company, certify, pursuant to 18 U.S. C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: </FONT></P>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">(1)</FONT><FONT size=2 face="sans-serif"> </FONT><FONT size=2 face="serif">The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and </FONT></P>
<P align="justify">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size=2 face="serif">(2)</FONT><FONT size=2 face="sans-serif"> </FONT><FONT size=2 face="serif">The information contained in the Report fairly presents, in all material respects, the consolidated financial condition of the Company as of the
dates presented and the consolidated result of operations of the Company for the periods presented. </FONT></P>

<TABLE width="100%" border=0 cellpadding=0 cellspacing=0>
<TR valign="bottom">
	<TD align=left nowrap>
<FONT size=2 face="serif">Date: November 14, 2008</FONT></TD>
	<TD width="4%">&nbsp;</TD>
	<TD align=left nowrap style="border-bottom:1px solid #000000;"><FONT size=2 face="serif">/s/ Haresh Sheth</FONT></TD>
    <TD width="30%" align=left nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap>&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD align=left nowrap><FONT size=2 face="serif">Haresh Sheth</FONT></TD>
    <TD width="30%" align=left nowrap>&nbsp;</TD>
</TR>
<TR valign="bottom">
	<TD align=left nowrap>&nbsp;</TD>
	<TD width="4%">&nbsp;</TD>
	<TD align=left nowrap><FONT size=2 face="serif">Chief Financial Officer of<br>
	Assured Pharmacy, Inc.</FONT></TD>
    <TD width="30%" align=left nowrap>&nbsp;</TD>
</TR>
</TABLE>

<P align="justify">
<FONT size=2 face="serif">This certification has been furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. </FONT></P>
<P align="justify">
<FONT size=2 face="serif">A signed original of this written statement required by Section 906 has been provided to Assured Pharmacy, Inc. and will be retained by Assured Pharmacy, Inc. and furnished to the Securities and Exchange Commission or its
staff upon request. </FONT></P>

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