SOURCE: Rx Safes, Inc.

Rx Safes, Inc.

May 24, 2016 08:30 ET

RX Safes Releases Shareholder Letter; Reviews 10Q and Introduces Funding and Uplist Plans

HENDERSON, NV--(Marketwired - May 24, 2016) - Rx Safes, Inc. (OTCQB: RXSF), a healthcare technology and medical device company that develops autonomous fingerprint security products designed to combat drug abuse and diversion, today released a shareholder letter reviewing the Company's 10Q and outlining Funding and Uplist plans.

Dear Valued Shareholders:

As you know, Rx Safes, Inc. just filed its first quarter disclosure for 2016. The Company spent the majority of the first quarter launching many new sales initiatives. These efforts resulted in us receiving an MOU for 5,000 units of the Rx DrugSAFE product from a totally new client from the home improvement industry, as well as our first order from a school district. We plan on expanding our presence in both of these new markets throughout the rest of the year. In addition, we spent the first 4 months of 2016 interviewing and negotiating with several investment banking firms to assist the company going forward with properly structured financings, as well as our goal of up-listing to a national exchange. Thanks to efforts of our public relations firm, The Ruth Group, the company was invited to present at several investor events, as well as participate in many one on one meetings with potential future financial partners. We used these meetings and events to fine tune our messaging to the investment community while continuously speaking with investment bankers with a goal to identify the right investment partner who could assist us in meeting our previously stated and disclosed objectives and goals. As is disclosed in the subsequent events in the Company's 10Q, we have finally selected and contracted with an investment banker that recognizes our value proposition, has a proven track record of funding multi-tiered financing plans, and who shares the company's vision for expansion and uplisting. 

I would like to help our shareholders understand the significance of the three-tiered approach our banker is implementing and how it will be instrumental to the success of our company. As has been disclosed, the Company has been funded to date with convertible debt. We have been able to manage this debt effectively and have mitigated the potential negative impacts this debt can cause through leak out agreements, as well as by retiring a number of seasoned notes independently. I have stated numerous times in public filings and other disclosures that it was my intention to eventually retire all variable convertible debt in one shot, provided that the company had sufficient operating funds in place to allow it to raise appropriate long-term funds. The initial agreement with our banker addresses this debt with up to $1,000,000 in short-term non-dilutable/non-toxic bridge money that will be used to pay off all of the variable convertible debt and provide several months of working capital until we are able to complete the next step of our plan. Step 2 of our strategy involves recapitalizing and restructuring Rx Safes through the acquisition of one or more revenue generating, positive EBITDA companies that compliment, expand or improve our product offerings, whether they serve other healthcare markets, provide expanded IP protection, or add valuable experienced management to our team. Over the past 4 months, we have targeted and have been in discussions with several companies, all of which could provide significant, measurable and accretive value in the areas of IP, products, distribution, revenues, cash flow and personnel. Our banker recognizes the value of this approach and, as such, has provided us with a facility of up to $15,000,000 acquisition capital to allow the Company to meet its goal to realize accelerated growth through acquisition. With this facility now in place, the Company now has the ability to move discussions forward more aggressively with our acquisition targets and we hope to conclude these transactions by the end of the Q3 2016.

Finally, the Company will need to raise significant capital post acquisition to support the needs of an expanded entity as well as market the company to a much larger audience, and in accord with our previous disclosures, we believe the best way to do that is in connection with an up-listing to a national exchange. While we had started negotiating funding based on needs of the existing business operations and felt $10M would be sufficient, with input from our bankers and financial advisors, the new expanded company would need significantly more than $10M. Consequently, we have signed an agreement with our new banker for up to $40,000,000 through an underwritten Confidentially Marketed Public Offering (CMPO) with a simultaneous up-listing to NASDAQ.

Accordingly, once all of the debt is retired and the acquisitions are closed, we will establish a new pro-forma enterprise value upon which the pricing of the CMPO will be based to commence the larger raise and an up-list to NASDAQ. This has been the plan since we announced the restructuring of the company last year, and we haven't changed direction. The Company will continue to keep its shareholders updated as each phase is successfully completed.

Rx Safes' Q1 report reflects a Company that has successfully commenced activities to meet its sales objectives. The CVS pilot was launched in January 2016, and we continue to work with CVS to expand that pilot program now to providing our Rx DrugSAFE product directly to CVS customers at the store level. While we cannot yet project a date for in store sales, we expect the expansion of this program to occur in the third quarter, 2016. As previously referenced, the Company received an order from Home Builders Consultants, Inc., a nationally recognized supplier of building technology and products to the home and commercial construction markets, which will result in $495,000 of revenue over a 2-year period with first deliveries commencing September, 2016. In addition, we recently received an order for of our newly designed Rx DrugSAFE Pro safes from a Kansas Public School District. The safes will be used by school nurses to lock up student medications including controlled substances in their schools. We will deliver these units before the new school year in August. Through this newly established relationship, we have also been invited to exhibit at an upcoming Kansas School Nurses Conference in July, which is well attended by nurses from schools across that state. This event will allow us to secure orders for our newly developed products from many additional school districts across Kansas. We are also planning to expand the introduction of these new professional safe products into other school districts across the country. 

We recently successfully launched our National DoctorDIRECT Program at the American College of Physicians Conference two weeks ago in Washington D.C., where we received commitments from over 200 physicians wanting to sign up for the program. The DoctorDIRECT Program allows physicians who write prescriptions for pain, anti-depressant or stimulant medications to provide ordering information to their patients for the Rx DrugSAFE at the time of prescribing. The patients can then acquire an Rx DrugSAFE at special discounted rates. Through this program, the physicians can also participate in a revenue share or choose to pass the value of the revenue share to their patients for an additional discount. This program is Sunshine Act exempt. The company is in the process of sending out program information to each doctor that registered in order to get these safes into the hands of their patients as soon as possible.

Convertible debt is still being managed responsibly until we close our interim funding. We have already retired several convertible debt instruments on our own, preventing their conversions into the public market. While our banker begins our funding plans, the Company will continue to responsibly retire and manage our convertible debt obligations. The Company has required that new and existing note holders be bound to strict-leak out agreements. The Company has set up leak-out compliance procedures allowing the Company and its attorneys the ability to monitor daily how and when any new convertible debt stock is introduced into the market. The Company believes that these programs of checks and balances will continue to foster an orderly market for our shareholders while slowly adding converted needed additional shares to the public float. At the same time we will continue to retire debt from our books. Please understand that with our small float and limited trading volume, this will be a slow process until we close funding and that the most important part of this debt retirement program is being responsible.

The 10Q indicates that in early 2016, the Company hired seasoned professionals in the areas of marketing, sales and strategic growth planning. This human capital expense was necessary to develop and kick off sales and marketing programs for 2016-2017. In most instances, salaries to these executives are accruing and will be paid once the Company has adequate financial resources to do so. In addition, we have secured a new CFO who joined Rx Safes officially on May 23, 2016. It was critical to hire a seasoned financial professional at this time as we begin the implementation of our multi-tiered funding plan with our banker. The CFO will play a key role in working with our investment banking firm to gather, analyze and present all of the necessary due diligence materials and structure the enterprise based pro-forma to support our current and future financing goals.

The Company and its new management team are as committed as ever to create a sustainable business with consistently increasing shareholder value. We expect to realize rapid growth as we move through the stages of our funding and acquisition plans and will continue to keep our shareholders well informed on our progress and challenges in all areas of the Company's business throughout the year.

On behalf of the Company and its Board of Directors, we truly appreciate your continued support and patience while we embark on the next phase of the Company's growth. We hope that the Company's positive outlook is also recognized by its shareholders, and I am totally committed to making this company a success in every sense of the word.

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