Budding news for Red Oak Mining Corp. (CVE:ROC.H), which announced today that it has signed a letter of agreement with CB Holding Group Corp (CBH).
CBH is a Nevada corporation that will focus on the design, formulation, infusion through proprietary process and sale of vaporizer pens in California. CBH will operate through a wholly-owned California subsidiary and a wholly-owned Nevada subsidiary.
Red Oak and CBH plan to enter into a definitive share exchange agreement where all outstanding shares of CBH will be exchanged for securities of Red Oak, constituting a reverse takeover by CBH and a change of business of the corporation from mining to the production and sale of vaporizers for cannabis and CBD.
The company said when the transaction is completed, it plans to change its name and to delist from the TSX Venture Exchange and list on the Canadian Securities Exchange.
Red Oak expects to issue to the shareholders of CBH a total of approximately 67,334,902 common shares in exchange for 100% of the outstanding shares of CBH.
Red Oak announced a "part and parcel" private placement, which will consist of issuing up to 1,000,000 Red Oak units at a price of $.30 per unit for gross proceeds of up to C$300,000.
The company said each unit will comprise one common share of the corporation and one full common share purchase warrant, which will entitle the holder to acquire one additional common share at an exercise price of C$0.50 for a period of three years. Securities issued will be subject to a four-month and one day statutory hold period.
The firm said it plans to use the proceeds from the placement to fund the transaction and for general working capital.
CBH is a special purpose vehicle formed on June 29, 2018. CBH's business in California was operated by affiliate Caesarbrutus California, LLC with an exclusive distribution agreement to sell vaporizer pens in California from Goodness 4 Life.
Goodness 4 Life and Caesarbrutus have cancelled its agreement and as of July 1, 2018, it has been replaced with an identical exclusive distribution agreement between Goodness 4 Life and CBH's California subsidiary, which has agreed to pay a 2% royalty on net profits to Goodness 4 Life.
Goodness 4 Life is the holder of all city and state licenses required in California for an entity to distribute and sell vaporizer pens infused with cannabis extracts. CBH will fulfill the orders and Goodness 4 Life will pick up the pens from a licensed laboratory for delivery directly to the buyers.
CBH will then carry on the business formerly being carried on by the Caesarbrutus through CBH's California Subsidiary.
Private placement plans
CBH said it plans to complete a private placement for maximum gross proceeds of up to C$3,250,000. This will include secured notes with an annual interest rate of 15% (paid quarterly) and a minimum 60% warrant coverage exercisable into shares of CBH.
Red Oak proposes to repay the notes and all warrants issued in connection with the CBH placement, which will be exchanged for warrants of Red Oak at an exercise price of between C$0.35 and $0.40 for a minimum period of three years.
Red Oak said it plans to repay the notes using the proceeds from a brokered private placement in the range of C$10,000,000 to $15,000,000.