RX Safes, Inc.

provide real-time authentication of vital signs, in addition to monitoring medication adherence and compliance. With our fully authenticated real-time remote patient monitoring system, the Company can offer various stakeholders a solution which will greatly reduce the risk of medication errors, improve remote patient care and reduce overall healthcare expenditure. The pertinent authenticated patient data will be provided in real-time to the authorized caregiver, such as a physician, the healthcare system, CRO or a provider, who can then take pro-active actions to address any risks they see, preventing adverse events from occurring and reduce the need for more costly in office care or even hospitalization ..

To address these ongoing concerns, the Company terminated its transfer agent on September 6, 2016, preventing further toxic conversions and bringing all parties to the table to discuss a satisfactory settlement which would provide the Company with a window to redeem the outstanding notes over an extended period of time and prevent any further conversions for several months. We have been actively negotiating this settlement with our existing noteholders, with a plan to convert their debt holdings into non-dilutive equity and provide a workable solution to the problem. We are hopeful that these efforts will result in a positive solution that will not only benefit the company, but should also allow the noteholders to make a return on their investments. As we are in the midst of negotiations, no firm commitments have yet been reached as of the date of preparing this document. We hope to provide further news and disclosures in the weeks ahead. We are also hopeful that these efforts will facilitate the ability the raise more traditional capital through our investment banking relationship and other capital sources that we continue to pursue. This process will take time and is not guaranteed, but we believe with hard work and the right partners, it is extremely achievable.

As previously disclosed, we have executed three comprehensive agreements with an Investment Bank which remain active and are still in effect. One of those agreements is an exclusive investment banking agreement for a 12 month period that expires in May, 2017. These agreements were signed with a view to establishing a multi-tiered financing approach and a reliable form of financing for the Company to move the business forward. To date, the investment bank has not yet performed under the agreements. One issue was the accelerated decline in our public stock price hampering efforts to raise interim capital to take out our current variable-rate convertible debt. The initial approach and strategy to retire this debt was changed in September based on our declining stock price. We intend to continue working with the investment bank, but our current stock price may be an impediment and we are taking steps to stabilize and turn it in a positive direction. In the meantime, we are concentrating our fundraising efforts at our subsidiary level which will not have a dilutive effect on our public shareholder base.

1.       We did not have written documentation of our internal control policies and procedures. Written documentation of key internal controls over financial reporting is a requirement of Section 404 of the Sarbanes-Oxley Act as of the period ending September 30, 2016. Management evaluated the impact of our failure to have written documentation of our internal controls and procedures on our assessment of our disclosure controls and procedures and has taken remedial steps to comply and reduce the control deficiency that resulted represented a material weakness.

2.       We did not have sufficient segregation of duties within accounting functions, which is a basic internal control. Due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. However, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed by separate individuals. Management evaluated the impact of our failure to have segregation of duties on our assessment of our disclosure controls and procedures and has taken steps to remediate these deficiencies by engaging a new outside accounting consultant as well as securing the full time services of our Chief Financial Officer, who was previously a part time employee.

3.       Effective controls over the control environment were not maintained. Specifically, a formally adopted written code of business conduct and ethics that governs our employees, officers, and directors was not in place. Additionally, management has not developed and effectively communicated to employees its accounting policies and procedures. The company’s Board of Directors is in the process of approving a written code of business conduct and ethics that will govern our employees and directors. Further, our Board of Directors does not currently have any independent members and no director qualifies as an audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-K. Since these entity level programs have a pervasive effect across the organization, management has determined that these circumstances constitute a material weakness. To remedy this, the company’s Board of Directors will be

adopting a Board Charter which requires the establishment of an audit committee, the mandate for which will be to eventually have all independent members and the Board is in the process of evaluating possible candidates. Meanwhile, the committee will have the ability to consult with outside independent financial experts.