S-1: 1606 Corp Files for S-1 Registration to Resell 11.5 Million Shares of Common Stock

1606 Corp has filed an S-1 registration statement for the resale of up to 11,503,346 shares of its common stock by the selling stockholder, GHS Investments LLC.

Summary

• 1606 Corp., a Nevada corporation, has filed a Form S-1 registration statement with the SEC.
• The registration statement pertains to the resale of up to 11,503,346 shares of common stock by GHS Investments LLC, representing approximately 15% of the company's outstanding shares as of June 4, 2024.
• These shares were issued pursuant to an Equity Financing Agreement dated February 6, 2023, between 1606 Corp. and GHS Investments LLC.
• 1606 Corp. will not receive any proceeds from the resale of these shares by GHS, but will receive proceeds from the initial sale of shares to GHS under the Financing Agreement.
• The company will sell shares to GHS at 80% of the lowest traded price of its common stock during the ten consecutive trading day period preceding the date on which 1606 Corp. delivers a put notice to GHS.
• Following an up-list to the NASDAQ or an equivalent national exchange, the purchase price will be 90% of the Market Price, subject to a floor of $2.00 per share.
• GHS has committed to providing up to $20,000,000 over a 24-month period after the effectiveness of the S-1 registration statement.
• As of May 30, 2024, the last reported sale price for 1606 Corp.'s common stock was $0.033 per share.
• Gregory and Austen Lambrecht control a majority of the voting power of the company due to their ownership of Series B Preferred Stock, which has voting rights equal to 10 times the sum of the total number of common stock shares and the total number of votes of all other series of Preferred Stocks.
• The company's business plan is speculative, and there is no assurance that it will ever earn revenue or a profit.
• The company has experienced recurring losses from operations and negative cash flows from operating activities and anticipate that it will continue to incur significant operating losses in the future.

Sentiment

Score: 3

Explanation: The document presents a mixed picture. While there's potential for growth in the AI and CBD markets, the company's financial performance is weak, with recurring losses and reliance on external financing. The control structure and potential dilution are also concerning.

Positives

• GHS Investments LLC has committed to providing up to $20,000,000 over a 24-month period after the effectiveness of the S-1 registration statement, which could provide the company with needed capital.
• The company has a distribution contract with Cool Blue Distribution to sell its AI chatbot service to CBD companies.

Negatives

• The company will not receive any proceeds from the resale of shares by GHS.
• The company's business plan is speculative, and there is no assurance that it will ever earn revenue or a profit.
• The company has experienced recurring losses from operations and negative cash flows from operating activities and anticipate that it will continue to incur significant operating losses in the future.
• The company's stock is traded on the OTC Pink tier, which may result in lack of liquidity and make trading difficult or impossible.
• Gregory and Austen Lambrecht control a majority of the voting power of the company due to their ownership of Series B Preferred Stock, which may limit or eliminate minority shareholders' ability to influence corporate affairs.

Risks

• The company's business plan is speculative and subject to numerous risks and uncertainties.
• The burden of government regulation on CBD industry participants is uncertain and difficult to quantify.
• There is no assurance that the company will ever earn revenue or a profit.
• The company may not be able to protect its proprietary rights, if any, from infringement or theft by third parties.
• The company may have inadequate capital to successfully execute its business plan.
• The company may not be able to successfully compete against companies with substantially greater resources.
• The company's business is dependent upon available suppliers on its platform.
• The company has no control over the manufacturing and quality of the products it sells.
• The company faces an inherent risk of exposure to product liability claims.
• Intellectual property rights claims may adversely affect an investment in the company.
• Internet security poses a risk on business operations and management budgets.
• The company has a limited operating history and has generated minimal revenue.
• The company is reliant on management and may be adversely affected by the loss of important staff members.
• The company may need significant additional financing to further commercialize its products, and it may not be able to obtain such financing on acceptable terms or at all.
• The company's business activities will rely on newly established and/or developing laws and regulations in multiple jurisdictions.
• The company has experienced recurring losses from operations and negative cash flows from operating activities and anticipate that it will continue to incur significant operating losses in the future.
• Changes in government regulation or failure to comply with existing regulations could adversely affect the company's business, financial condition and results of operations.
• The market for the company's common stock may be subject to penny stock restrictions, which may result in lack of liquidity and make trading difficult or impossible.
• The price of the company's common stock may be volatile, and the value of the company's common stock could decline.
• The interests of shareholders may be hurt because the company can issue shares of its common stock to individuals or entities that support existing management.
• The company's management controls all corporate activities and can approve all transactions, including mergers, without the approval of other shareholders.
• The company does not expect to pay cash dividends in the foreseeable future.
• The company's offering is being conducted on a best efforts basis and does not require a minimum amount to be raised.
• Shareholders may be diluted significantly because of the issuance of convertible financial instruments through the company's efforts to obtain financing and satisfy obligations through issuance of additional shares of its common stock.
• The company's existing stockholders may experience significant dilution from the sale of its common stock pursuant to the GHS Equity Financing Agreement.
• The company may not have access to the full amount under the financing agreement.
• There could be unidentified risks involved with an investment in the company's securities.

Future Outlook

The company anticipates needing additional financing to enhance its sales and marketing team and cover operational costs. The company's ability to continue in existence is dependent on its ability to achieve profitable operations.

Industry Context

The global artificial intelligence market has seen remarkable growth, valued at $428 billion in 2022 and projected to reach $2.25 trillion by 2030. The global CBD market size was valued at $6.4 billion in 2022 and is expected to grow at a compound annual growth rate (CAGR) of 16.2% from 2023 to 2030.

Management Changes

Related Party Transactions

• During the three months ended March 31, 2024, a total of 40,000 shares of Class A preferred stock was issued to the members of the Company's Board of Directors for services provided.
• During the three months ended March 31, 2024, a total of 90 shares of Series B preferred stock was issued to the Company's Vice President, Austen Lambrecht, and to the Company's Chief Executive Officer, Greg Lambrecht.
• During the three months ended March 31, 2024 and 2023, the Company borrowed $70,000 and $2,521, respectively in a series of cash payments from the Company's CEO in exchange for the issuance of a promissory note.
• In June 2021, the Company entered into an Asset Purchase Agreement with Singlepoint to purchase certain assets in exchange for the issuance of a promissory note (the Note) for $63,456.

Stakeholder Impact

• Existing shareholders may experience dilution from the sale of common stock pursuant to the GHS Equity Financing Agreement.
• The company's management controls all corporate activities and can approve all transactions, including mergers, without the approval of other shareholders, which may not be in the best interests of other stakeholders.
• The company does not expect to pay cash dividends in the foreseeable future, which may impact shareholders seeking income.

Next Steps

• The company will deliver Puts to GHS obligating GHS to purchase the company's common stock based on the investment amount in each Put notice.
• The company will focus on signing businesses to use its chatbot with a monthly recurring licensing fee model.

Key Dates

Keywords

S-1 Registration, Common Stock, GHS Investments, Equity Financing, Resale, AI Chatbot, CBD Industry, Securities Act, OTC Markets, Dilution