Debenture

  • What is the place of incorporation of FUSION FINANCIAL HOLDING INC. (“Fusion Financial”)? Canada or The United State?

Fusion Financial Holding, Inc. (“FFH”) is a Canadian corporation.

 

  • When is the interest payment date?

The maturity date on the note is one year from the date of issuance of the debentures.

 

  • Can the debenture holder choose to get back cash instead of common stock upon maturity?

The Subscription Agreement states that “Interest shall be payable in cash or common shares, at the option of the Issuer.”

 

  • Can the debenture be redeemed early by the holder?

Each debenture is convertible at the option of the holder but is not redeemable until the maturity date.

 

  • Any exit plan if IPO fails? Or drag on for a long time? Fusion Financial can still redeem the debenture no matter the IPO fails or drag on upon the maturity of the debenture?

The business plan is not dependent upon going public through an IPO. We will continue to develop and execute on our plan to drive revenue and profits apart from the IPO. There is also possibility of other candidates wanting to acquire FFH before going public. Our current forecast contemplates break-even before the maturity date meaning stipulated payments on the debentures should be satisfied regardless of the IPO.

 

  • Is there the financial statement of Fusion Financial Holding Inc. available for review? (their balance sheet can demonstrate their ability to repay or redeem the debenture assuming the IPO fails)

Yes, our Chief Financial Officer has prepared a financial statement of FFH as of August 13. He also has made projections which outline cash flow and balance sheet projections based on quantified assumptions in the marketplace, and are available for your review. FFH’s capitalization is currently approx., C$670,000 of which approximately C$242,000 is liquid. Current financials and forecasts are available at your request, and will provided following your signature on our standard NDA.

 

  • What is the listing requirement in Canada Stock Exchange? Fusion Financial meet the listing requirement, in particular the profit and cashflow requirement?

The listing requirement for the Canadian Stock Exchange (CSE) does not require profit or cashflow, however, we intend to have a developed asset with business activity prior to listing. The CSE is ideal for early-stage businesses because that the listing agency requires 150 public board lot shareholders and the minimum CAD$2M. FFH is in the process of meeting those requirements.

 

  • What is the time table of the IPO of Fusion Financial?

We anticipate an IPO in the first quarter of 2019, subject to contingencies we cannot control such as licensing approvals and market conditions. This timing will be determined in consultation with our legal advisors and investment bankers.

 

Who is the investment banker, legal counsel and auditor for the IPO?

We have not identified an investment banker at this time but are considering candidates, including smaller firms like Haywood Associates in Vancouver, or larger entities such as Macquarie Capital, Canaccord Genuity, Gravitas, Chrystal Capital, Maxim Group, PI Financial and Boustead Securities.

 

Our Canadian securities legal counsel is Dunton Rainville in Montreal. Our US regulatory counsel is Pillsbury Winthrop Shaw Pittman. We are in discussions with additional firms to act on our behalf.

 

We have not selected auditors in relation to the IPO. That is under consideration.

 

  • Is the issue of Debenture governed by any regulatory body in Canada or The United State?

The debenture is governed by Canadian regulatory authorities in Montreal, Quebec.

 

  • Why not choose to list in New York Stock Exchange or NASDAQ?

In addition to the reasons stated above, the CSE offers simplified reporting requirements and lower barriers to entry. It is an alternative for micro-cap and emerging companies, especially those which are categorized as “Marijuana-Related Businesses” or MRB’s. The CSE is known as the “Green Exchange” and U.S. exchanges are less receptive to these businesses because cannabis remains listed as an illegal controlled substance at the federal level. There is no reason we cannot revisit this question again at the appropriate time.

 

Fusion Bank

  • Please elaborate more on the business model?

The initial business plan involves the creation of a state-chartered, depository institution with access to the U.S. federal financial system. We can achieve this objective through a new state-chartered banking license, the acquisition of a small state or community bank with existing banking operations or a relationship with a Canadian-based institution to act as strategic partner and corresponding bank for processing banking wires and other transfer transactions. In all these scenarios, which will be examined in detail through legal, regulatory and operational analysis, FFH or a subsidiary of FFH, will seek access to central banking services in the United States. The Federal Reserve Board recognizes the current quandary involving the banking gap for state authorized cannabis-related businesses, and we are scheduling meetings with the Federal Reserve Board to review and arrive at the most sensible solution. What will differentiate FFH from other firms that wish to operate in this space, is the enhanced due diligence systems we are putting in place for onboarding and transaction monitoring, and leverage industry specific point of sale technology for that purpose.

 

Here is a summary of our activity within any Country, Province or State where cannabis is legal:

 

  1. We will allow private accounts to be opened in the Bank by clients located in any jurisdiction where cannabis is legal, subject to those members having completed our rigorous onboarding application and screening processes.
  2. Physical commercial branches or physical presence will be determined on a state-by-state basis as regulatory approvals vetted and secured. Some degree of regulatory supervision and prudential oversight is anticipated, for banking or fintech activities.
  3. The Bank will put in place compliance software for transaction monitoring for seed to banking compliance for all accounts, and assist as needed for document gathering and intelligence needed for general AML compliance and onboarding due diligence.
  4. For customer members to access banking services the bank will organize in-person meetings scheduled by appointment only for registered members after clearing KYC and background checks.
  5. Introduce approved customer members to third-party armored cash transport carriers from preferred vendor list. Each customer will contract directly with the cash transport carrier to pick up cash and execute a safe keeping certificate to validate deposit. Cash deposit will be taken to a Private Vault Facility in the same jurisdiction (country, province or state) where the cash is picked up.
  6. The Bank will coordinate with cash transport carrier to verify member deposit into the private vault facility (PVF). The PVF operator secures those cash deposits from members by filling out the Fusion Safe Keeping Receipt and Fusion will issue a Safe Keeping Certificate of Origin to the member. Once the SKR and Certificate of Origin are executed, Fusion then is pledged designated funds and provides a corresponding credit to the members account.
  7. Member accounts are maintained in a core banking software solution provided by a third-party banking software-as-a-service provider. Our core banking instance is hosted in the cloud on Amazon Web Services and secured by Cloudflare.
  8. We will maintain full reporting, transparency and audit readiness for any requesting government agency.

 

  • Have “Fusion Bank” already established? Or “Fusion Bank” is just a plan/project for setting up in future upon success of IPO of Fusion Financial? If it is just a plan, what is the time table for commencement of operation/business of Fusion Bank?

Fusion Banking Services Group, LLC was approved to commence operations in the Bahamas in October 2017 and is licensed under and regulated through the Friendly Societies Act in the Bahamas.

 

FFH has had conducted some marketing, prospective account holder outreach, account holder presentations, account KYC and document collection, background checks, compliance review, license review, onsite inspections, account deposits, account maintenance, daily account transactions, ongoing transaction audits, customer service and technical support. We had limited opportunity to operate with active accounts from January until May but have suspended activity pending legal and regulatory review. We are currently working with state and federal agencies to seek licensing in the US in a fully cooperative and transparent manner. In that regard, we have suspended US operations until such time as we obtain licensure and sanctioned supervision.

 

Fusion Banking Services Group LLC Notices Update

Based on certain activities in 2018, FBSG received notices from the following regulatory bodies:

  • Central Bank of Bahamas, Warning Notice (available for review)
  • Board of Governors of the Federal Reserve System (available for review)
  • State of Nevada, Department of Business and Industry Financial Institutions Division (available for review)
  • State of California, Business, Consumer Services and Housing Agency, Department of Business Oversight (available for review)

Pillsbury, Winthrop, Shaw & Pittman, representing FBSG as regulatory counsel, has responded to these notices and has met with the State of California. No action is imminent, and the regulator expressed interest in considering a full and proper application for a state-chartered license and suggested the purchase and repurposing of a small community or state bank in lieu of a new bank charter application.

Pillsbury also has prepared initial responses to the Federal Reserve Board and the State of Nevada, copies attached.

With respect to the notice from the Central Bank of Bahamas, FFH is considering the best course of action to clarify the activities of FBSG in that jurisdiction. FBSG is regulated by the Ministry of Finance and licensed under the Friendly Societies Act and has not applied for license with the Central Bank of the Bahamas. We will seek legal advice as to whether a members-only bank governed under the Friendly Societies Act requires Central Bank access in the Bahamas to transact business in the Bahamas or elsewhere.

We are confident that these matters are not going to impact the long-term planning of FFH.

Based on the interactions with and feedback from regulators from California and Nevada, we have been examining whether to pursue licensing in the State of Alaska as part of the business strategy. Alaska provides several attractive options, including comparatively low capitalization requirements ($2 million compared to as much as $40 million in other states) and is a market where even the State has expressed interest in having this banking option due to their difficulty with banking tax collection and having line of sight into business revenues. Moreover, a state-chartered bank license from Alaska, if approved, could provide a corresponding banking relationship we could lever in other jurisdictions, including California and Nevada, among others. On the downside, however, Alaska has not considered a new state-chartered banking application in many years and there is substantial work to be done to socialize the regulators to the rationale, purpose and soundness of the FFH business model.

  • Is Fusion Bank a commercial bank or investment bank? (it is said that Fusion Bank provides services to its member only and is a member only financial institution)

The proposed Fusion Bank of Alaska is a commercial bank that does not solicit personal customer accounts from the public. This model can be changed to a state-by-state approach and requires additional legal analysis to determine the most advantageous path to market.

 

  • It is confused that what is the difference between “Fusion Bank” with the traditional commercial bank? Can Fusion bank accept cash deposit or transfer from other commercial banks in US or any places in the World?

Fusion Bank, under the Sovereign Friendly Society, is authorized to open sub-associations, chapters, lodges, joint ventures, branches and any other structure so long as the members are legally operating in compliance with the laws in the jurisdiction where they operate and we obtain all proper regulatory approvals. This is a private, members-only bank, not like a traditional commercial or merchant bank.

 

 

  • Fusion Bank is subject the regulation of which government body/department/bureau in US?

We have started and will continue to engage in discussions with regulators in each jurisdiction in which we wish to operate. We will also meet or exceed the requirements set forth in the FinCEN 2014 Guidelines on handling transaction in the cannabis industry with heightened due diligence. We believe the strength of our AML regime will be a distinguishing factor that helps us with gaining regulatory approval and ultimately compete in the market place. We also have upcoming meetings with the Federal Reserve Board to review and update them on our plans, which may include application for a new or existing Fed master account to provide unfettered access to Fedline services and the US financial system.

 

  • What is Friendly Society” mentioned in the Executive Summary sheet? Is it an organization or company incorporated in Canada, US or Bahama?

In short, the SovereignFriendlySociety.com (“SFS”) is a Bahamian Friendly Society that provides Insurance, Investments, Banking, and ancillary membership services. It is a private, protected members-only association located in the Bahamas for the sole purpose of serving the MMJ community. For more information, you can visit our website at https://www.SovereignFriendlySociety.com.

 

A friendly society (sometimes called a mutual society, benevolent society, fraternal organization or ROSCA) is a mutual association for the purposes of insurance, pensions, savings or cooperative banking.  Notable examples of companies that were formed as Friendly Societies are Prudential Insurance and the American Association of Retired Persons (“AARP”). One of the most notable Friendly Societies is Lloyd’s of London.

 

Sovereign Friendly Society is a duly enrolled member association in the Bahamas as certified by the Enrolment Certificate signed by the Attorney General and Registrar as governed by the Minister of Finance.

 

  • Please elaborate more on “99 Year Joint Venture Agreement with an existing Friendly Society”? Why need Joint Venture with Friendly Society?

The Sovereign Friendly Society is a membership association, much like a cooperative, mutual association or credit union, where no stock ownership is available. In order to fund the operations of any one of the assets (insurance, bank or investment license), it was determined that the best way to accomplish that was through putting the rights of the license into a stock entity which could then sell shares to raise equity. The rights to the bank license of the Society are transferred to Fusion Banking Services Group, LLC, a limited liability corporation, under the terms and conditions of a Joint Venture Agreement.

 

  • Any similar bank or financial institution already exist in the Market?

While there is no dedicated bank or financial institution like we are envisioning, we have compiled a list of existing banks and credit unions in various states which are conducting cannabis banking. Please see the attached document titled, “Fusion Financial Position Statement on Cash Management for Legal Cannabis – 2018” wherein the competitor organizations are identified.

 

The unique part about FFH is that there is no other national or international concerns that offers the complete portfolio of services necessary for a compliant solution. Currently, as published in the most recent FinCEN Marijuana Banking Update there are over 400 existing banks with cannabis accounts (some unknowingly). The compliance required by these institutions is far from thorough; these banks have not adopted the necessary procedures to be compliant. For cannabis banks to operate, they need to perform activities well beyond traditional banking. To date, we have not seen a bank that is offering cannabis accounts and engaging in full, required compliance. When cannabis is decriminalized at the US Federal level, we will be in an extraordinary position to be bought out by a larger bank providing exceptional investment return potential. 

 

  • It is forecasted that there will be US$44million revenue and US$17 million profit for the year in the first of operation. What is the basis of this forecast?

Our CFO can provide the detailed assumptions and market data on which these forecasts are based.

 

  • Any statistic or research report about the size of the Medical Marijuana community (MMJ) available?

Yes, there are multiple sources of market research on the size of the MMJ community.

 

Market Research companies provided data and analysis on the cannabis industry include:

  • Arcview Market Research – The #1 cited market research for the cannabis industry. https://arcviewgroup.com/research/
  • BDS Analytics – BDS Analytics provides businesses with actionable cannabis market intelligence and consumer research and analysis. https://bdsanalytics.com/
  • Brightfield Group – Brightfield Group offers actionable data and analysis for investors and entrepreneurs in the marijuana industry. https://www.brightfieldgroup.com/
  • New Frontier Data – New Frontier Data is an independent, technology-driven analytics company specializing in the cannabis industry. For more information about New Frontier Data please visit: newfrontierdata.com.
  • Headset – Headset provides business Intelligence solutions for cannabis dispensaries, retailers, product manufacturers and growers. https://www.headset.io/
  • Green Market Report – The Green Market Report focuses on the financial news of the rapidly growing cannabis industry. https://www.greenmarketreport.com/

 

However, even this list of maturing market research entities does not reflect that data is sporadic and inconsistent because of the state-by-state nature of the licensing and publishing of data. This is such a new and rapidly evolving industry that even states do not have comprehensive reporting on which industry analysts can produce effective reports. With that said, the available reports are validated as correct, but we believe they are underreporting the actual market numbers. Although we believe the published statistics are low, we are basing our projections on available market data in combination with our own data collected from licensed operators.

 

Perhaps the definitive industry report is published by the Arcview Group. We have purchased the report, which is only accessible online and digitally through our subscription. We will be happy to arrange for a viewing of this report. We also attach other market reports which have also been reviewed and evaluated in our market assessments.

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We’d like to invite you to become part of the initial shareholders before we take the company public. There’s no catch here: here at Fusion Financial, we’re totally passionate about financial solutions for the cannabis industry, so we like to do what we can to help cannabis operators take the risk out of dealing in cash. Learn more about how you can participate as an equity shareholder:

If you would like to speak with a representative of the company, please submit your contact information below and a telephone call will be scheduled: