8-K: 1606 Corp. Amends Promissory Note with Gregory Lambrecht

1606 Corp. has amended its Promissory Note with Gregory Lambrecht, extending the maturity date and modifying conversion terms, including a 50% discount to common stock bid price.

Summary

• 1606 Corp. has entered into an Addendum to its Amended and Restated Promissory Note with Gregory Lambrecht, originally dated November 8, 2021, and most recently restated on December 31, 2025.
• The outstanding principal balance of the Note as of March 31, 2026, was $2,037,184.36.
• The Addendum, dated June 9, 2026, extends the Maturity Date of the Note to December 31, 2026.
• Key conversion terms have been amended: accrued interest and principal are convertible into common stock at a 50% discount to the closing bid price on the conversion date, subject to a beneficial ownership limitation.
• The beneficial ownership limitation restricts conversion if the Holder (and affiliates) would own over 9.99% of the outstanding Common Stock, with a hard cap of 10%.
• The Holder may tack back to previous loan amounts for Rule 144 holding period purposes, if permitted by the Securities Act of 1933.
• Venu Aravamudan resigned from the Board of Directors effective immediately on July 21, 2026. The Board accepted the resignation and will not fill the vacancy at this time.

Sentiment

Score: 4

Explanation: StockSavvy.ai views this as a moderately negative development due to the significant debt and the potential for substantial dilution through the 50% discounted conversion, although the maturity extension offers some short-term flexibility.

Positives

• Maturity date of the promissory note extended to December 31, 2026, providing additional time for repayment or conversion.
• Conversion terms allow for conversion into common stock at a significant 50% discount to the closing bid price, potentially benefiting the holder.
• Rule 144 tacking provision allows the holder to potentially satisfy holding period requirements more easily, facilitating future stock sales if conversion occurs.

Negatives

• The company has a significant outstanding debt of $2,037,184.36 as of March 31, 2026, owed to Gregory Lambrecht.
• The conversion terms at a 50% discount could lead to significant dilution for existing shareholders if the stock price is low.
• The beneficial ownership limitation of 9.99% (with a 10% hard cap) indicates a concern about excessive dilution and control by a single holder.

Risks

• Potential for significant dilution of existing shareholders' equity if the Note is converted into common stock at a 50% discount.
• The company's ability to repay the principal and interest by the extended maturity date of December 31, 2026, remains a risk.
• The beneficial ownership limitation could lead to complex calculations and potential disputes regarding conversion amounts.
• Any increase in the Beneficial Ownership Limitation requires a 61-day notice period, potentially delaying strategic conversion decisions.

Future Outlook

The Note's maturity date has been extended to December 31, 2026. Conversion terms allow for conversion into common stock at a 50% discount to the closing bid price, subject to beneficial ownership limitations.

Management Comments

• The Board of Directors, by unanimous written consent, approved the Addendum to the Note.
• Venu Aravamudan's resignation was not the result of any disagreement with the Company on any matter relating to the Company's operations, policies or practices.

Industry Context

StockSavvy.ai notes that amendments to convertible notes, especially those involving significant discounts and beneficial ownership limitations, are common in early-stage or financially constrained companies seeking to manage debt obligations while potentially avoiding immediate cash outflows. This strategy can lead to significant dilution for existing shareholders.

Comparison to Industry Standards

• Companies in the technology and biotechnology sectors, particularly those in development or pre-revenue stages, often utilize convertible notes with discounts to attract capital. Discounts typically range from 10% to 30%, making the 50% discount in this filing notably aggressive.
• Beneficial ownership limitations (e.g., 9.99%) are standard practice to prevent hostile takeovers or undue influence, but the specific percentage and the 10% hard cap are company-specific parameters.
• Maturity extensions are a common negotiation point when companies face financial pressure, allowing more time to secure funding or improve operational performance.

Management Changes

Related Party Transactions

• The Addendum to the Promissory Note is between 1606 Corp. and Gregory Lambrecht, who is identified as the Borrower's former Chief Executive Officer and director.

Stakeholder Impact

• Shareholders: Potential for significant dilution of ownership percentage and earnings per share if the note is converted, especially at a 50% discount.
• Noteholder (Gregory Lambrecht): Benefits from an extended maturity date and a favorable conversion price, with the option to convert debt into equity.
• Creditors: The company's continued reliance on debt financing and potential equity dilution may impact its creditworthiness.

Next Steps

• The Holder may choose to convert the principal and interest into common stock by December 31, 2026.
• The company must manage its financial obligations and potential dilution resulting from the conversion.
• The Board will operate with two directors following Venu Aravamudan's resignation.

Key Dates

Recommendation

The filing indicates a significant debt obligation with terms that could lead to substantial dilution, but also provides a maturity extension. The company's financial health and future prospects are uncertain, warranting a hold recommendation pending further operational or financial developments.

Keywords

Promissory Note Amendment, Debt Conversion, Shareholder Dilution, Maturity Extension, Beneficial Ownership Limitation, Rule 144, Convertible Debt, Gregory Lambrecht