S-1: 1606 Corp. S-1: GHS Resale, AI Pivot, & Financial Struggles

1606 Corp. filed an S-1 registration statement for the resale of 204.7 million common shares by GHS Investments LLC, highlighting its pivot to AI chatbots amidst ongoing financial losses and a going concern warning.

Summary

• 1606 Corp. filed an S-1 registration statement for the resale of up to 204,700,902 shares of common stock by GHS Investments LLC (the Selling Stockholder).
• The company will not receive any proceeds from the resale of shares by GHS, but will receive proceeds from its initial sale of shares to GHS pursuant to an Equity Financing Agreement.
• GHS Investments LLC agreed to provide the company with up to $20,000,000 over a 24-month period, purchasing shares at 80% of the lowest traded price during a ten-day period, with a potential increase to 90% and a $2.00 floor if up-listed to NASDAQ.
• 1606 Corp. has pivoted its business from discontinued hemp/CBD product sales to developing AI chatbots for the CBD industry (chatCBDW) and public companies (IRChat).
• The company reported no revenue for the three and nine months ended September 30, 2025, compared to $7,195 in consulting revenue for the nine months ended September 30, 2024.
• Net loss for the nine months ended September 30, 2025, was $(802,966), a significant decrease from $(4,195,265) for the same period in 2024, primarily due to lower stock-based compensation.
• Cash on hand was critically low at $998 as of September 30, 2025, down from $2,078 at December 31, 2024.
• The company faces substantial doubt about its ability to continue as a going concern, requiring approximately $1,000,000 in cash for the next 12 months to sustain operations.
• An LOI to acquire a minority equity position in AI biotech company Adnexus expired, and the company has no plans to move forward with it.
• A non-binding LOI was signed in November 2025 to be acquired by Sim Agro Inc. in a reverse acquisition.
• Current CEO Austen Lambrecht and former CEO Gregory Lambrecht (father and son) control a majority of the company's voting power through their ownership of Series B Super Voting Preferred Stock.

Sentiment

Score: 2

Explanation: The company faces severe financial distress, including recurring losses, negative cash flow, and a 'going concern' warning. While it has pivoted to AI, there is no revenue from this new business, and cash reserves are critically low. Significant dilution risk for shareholders and strong management control further add to the negative sentiment.

Positives

• The company achieved a significant reduction in net loss for the nine months ended September 30, 2025, to $(802,966) from $(4,195,265) in the prior year, primarily due to lower stock-based compensation.
• Successfully pivoted to AI chatbot technology for the CBD industry (chatCBDW) and public companies (IRChat), with initial customer sign-ups for testing and implementation.
• Management believes the company is positioned to become a market leader for AI Bot technology, with future potential to expand beyond the CBD industry to sectors like solar, beauty, and auto parts.
• The global AI market is projected for remarkable growth, valued at $428 billion in 2022 and expected to reach $2.25 trillion by 2030, with a compound annual growth rate (CAGR) ranging from 33.2% to 38.1%.
• The global CBD market, a key target for the company's chatbots, is also positioned for exponential growth, with a projected CAGR of 16.2% from 2023 to 2030.
• The company boasts a team of AI experts on its board and in the communications team, with a combined 115 years of technology and tech project development experience.

Negatives

• The company has experienced recurring losses from operations and negative cash flows, leading to substantial doubt about its ability to continue as a going concern.
• No revenue was generated for the three and nine months ended September 30, 2025, indicating a lack of commercial traction for its new AI chatbot business.
• The cash balance is extremely low at $998 as of September 30, 2025, which is insufficient for ongoing operations.
• The company requires approximately $1,000,000 in cash for the next 12 months to sustain operations.
• The previous hemp/CBD product business has been discontinued, and related inventory was written off in September 2024.
• An LOI to acquire a minority equity position in Adnexus, an AI biotech company, expired, and the company has no plans to move forward.
• The company is in default on a $63,456 promissory note to Singlepoint Inc. (its spin-off parent) from June 2021, with no payments made and accrued interest of $11,900 as of September 30, 2025.
• The common stock trades on OTC Markets Group, Inc.'s OTCID tier at a very low price ($0.0008 per share on January 12, 2026), classifying it as a 'penny stock' subject to significant trading restrictions and lack of liquidity.
• Existing shareholders face significant dilution from the potential sale of up to 204,700,902 common shares by GHS Investments LLC, representing approximately 30% of current outstanding shares.
• The company's management (Austen and Gregory Lambrecht) controls a supermajority of voting power through Series B Super Voting Preferred Stock, limiting minority shareholder influence.
• The company does not expect to pay cash dividends in the foreseeable future.

Risks

• The business plan is speculative, with no assurance of revenue or profit, or that research and development activities will result in proprietary technology.
• Competitors may develop and sell superior products, or industry participants may not accept or desire the company's AI chatbot products.
• The company may not be able to protect its proprietary rights, if any, from infringement or theft by third parties.
• Government regulation may suppress or prevent marketing and sales of products, even if they can be commercialized.
• The company may have inadequate capital to successfully execute its business plan and may not be able to successfully compete against companies with substantially greater resources.
• Intellectual property rights claims by third parties could result in extremely expensive legal defense or force the company to liquidate.
• Internet security poses a risk to business operations, potentially leading to misappropriation of proprietary information, operational interruptions, and significant capital expenditure to protect against breaches.
• The company's operations could be affected by general economic conditions, influencing consumer trends and impacting sales and profitability.
• The company has a limited operating history and minimal revenue, making it subject to risks common to early-stage enterprises, including under-capitalization, cash shortages, and limitations with personnel and resources.
• The company's success is dependent upon the continued services of its senior management and key personnel, particularly CEO Austen Lambrecht, and the loss of such individuals could materially harm the business.
• Difficulty in forecasting sales due to reliance on internal market research in an early-stage industry, where a failure in demand could have a material adverse effect.
• Growth-related risks, including capacity constraints and pressure on internal systems and controls, could adversely affect the business if not managed effectively.
• The company will need significant additional financing to further commercialize its products and may not be able to obtain such financing on acceptable terms or at all, leading to potential dilution for existing stockholders.
• Global economic downturns could make raising capital more difficult, impacting the company's ability to meet future operating cost requirements.
• The company has experienced recurring losses from operations and negative cash flows and anticipates continuing to incur significant operating losses, raising substantial doubt about its ability to continue as a going concern.
• Demand for products may be adversely affected by changes in consumer preferences or any inability to innovate, market, or distribute products effectively.
• Changes in government regulation or failure to comply with existing regulations could adversely affect the business, financial condition, and results of operations.
• Litigation or legal proceedings could expose the company to significant liabilities and damage its reputation.
• A failure or interruption of the information technology infrastructure or a cybersecurity attack could adversely impact business and operations.
• Changes in accounting standards and subjective assumptions, estimates, and judgments by management related to complex accounting matters could significantly affect financial results.
• The market for the company's common stock may be subject to penny stock restrictions, resulting in lack of liquidity and making trading difficult or impossible.
• The price of the company's common stock may be volatile and decline regardless of operating performance.
• The company's management controls all corporate activities and can approve transactions, including mergers and share issuances, without the approval of other shareholders due to super-voting preferred stock.
• The board of directors has the authority to issue preferred stock with terms that may not be beneficial to common stockholders and could perpetuate their control.
• The offering is being conducted on a 'best efforts' basis and does not require a minimum amount to be raised, meaning the company may not raise enough funds to fully implement its business plan.
• The issuance of shares pursuant to the GHS Equity Financing Agreement may have a significant dilutive effect on existing shareholders, and GHS has a financial incentive to sell shares immediately, potentially causing price declines.
• The company may not have access to the full $20,000,000 under the financing agreement due to low market price and drawdown limitations.
• There could be unidentified risks involved with an investment in the company's securities.

Future Outlook

The company anticipates needing significant additional financing in the near and long term to fully execute its business plan, enhance its sales and marketing team, and cover operational costs. It expects to continue incurring significant operating losses for the foreseeable future and may not achieve profitability. The company believes its AI chatbot technology has future potential to expand beyond the CBD industry to other consumer-facing sectors like solar, beauty, and auto parts. A non-binding LOI for a reverse acquisition by Sim Agro Inc. was signed in November 2025.

Management Comments

• "We believe we are positioned to become the market leader for AI Bot technology."
• "We also see the future potential for our chatbot technology to expand beyond the CBD industry to any industry with issues with consumer questions and indecisive over product choices. This includes the solar, beauty, and auto parts industries among many others."
• "Our licensing model is designed with businesses in mind. It allows companies, particularly those in the CBD industry, to integrate our chatbots into their platforms seamlessly."

Industry Context

The company is pivoting into the rapidly growing Artificial Intelligence market, which was valued at $428 billion in 2022 and is projected to reach $2.25 trillion by 2030, with a compound annual growth rate (CAGR) ranging from 33.2% to 38.1%. Its initial focus on the CBD industry aligns with the global CBD market's expected growth at a CAGR of 16.2% from 2023 to 2030, having been valued at $6.4 billion in 2022. This strategic shift aims to capitalize on the intersection of these two high-growth sectors. However, the company's current lack of revenue in this new segment indicates it is still in the very early stages of market penetration and faces significant challenges in establishing itself within these competitive markets.

Comparison to Industry Standards

• The company's current financial performance, characterized by minimal revenue ($0 for the nine months ended September 30, 2025), recurring losses, and a critically low cash balance ($998), is significantly below industry standards for established technology or AI companies.
• The market capitalization and stock price ($0.0008 per share on January 12, 2026) on the OTCID tier are indicative of a micro-cap, highly speculative company, far from the valuations and liquidity of publicly traded AI leaders or even emerging growth companies on national exchanges.
• The company's reliance on related-party financing and discounted share sales to GHS Investments LLC is not typical for healthy, growing companies that can access traditional capital markets on favorable terms.
• The lack of separately designated audit, compensation, or nominating committees, and the absence of a formal Code of Ethics, fall short of corporate governance best practices for public companies, especially those aiming for national exchange listings, potentially raising concerns about oversight and transparency.

Management Changes

Corporate Governance

Legal Proceedings

• The company is not presently a party to any material litigation, nor is any litigation threatened against it, to the knowledge of management, which may materially affect it.

Related Party Transactions

• Promissory note to former CEO and shareholder (Gregory Lambrecht): The company borrowed $489,000 in cash payments during the nine months ended September 30, 2025, and repaid $25,000. The note, with a principal balance of $1,829,550 as of September 30, 2025, accrues interest at 10% per annum and is convertible into common stock at a 25% discount to the closing bid price.
• Asset Purchase Agreement with Singlepoint Inc.: In June 2021, the company purchased assets from Singlepoint for a $63,456 promissory note. The note bears 5% interest and is due in monthly installments of $1,902, but the company has not made any payments and is currently in default. Accrued interest totaled $11,900 at September 30, 2025.
• Issuance of Class A Preferred Stock: During the year ended December 31, 2023, 200,001 shares of Class A Preferred Stock were issued to current CEO Austen Lambrecht, and one share each to former CEO Greg Lambrecht and two other board members for services.
• Issuance of Series B Super Voting Preferred Stock: During the year ended December 31, 2024, 90 shares of Series B Preferred Stock were issued to Austen Lambrecht (30 shares) and Gregory Lambrecht (60 shares) as compensation for services.
• Gift of Series B Preferred Stock: On June 14, 2024, Gregory Lambrecht gifted 60 shares of Series B Preferred Stock to Austen Lambrecht.
• Issuance of Class A Convertible Preferred Stock to Directors: During the year ended December 31, 2024, 4,040,000 shares of Class A convertible preferred stock were issued to board members for services, valued at $2,990,000.

Stakeholder Impact

• Shareholders: Face significant dilution risk from the GHS Equity Financing Agreement and potential future capital raises. Their voting power is limited due to the super-voting preferred stock held by management. There is a high potential for loss of their entire investment due to the speculative nature of the business and the 'going concern' warning. No expectation of cash dividends in the foreseeable future.
• Employees: The company has only one full-time employee (the CEO), with additional personnel on an independent contractor basis. The company's severe financial instability and 'going concern' warning pose a significant risk to job security and future compensation for all personnel.
• Creditors: The company is in default on a promissory note to Singlepoint Inc. and has significant outstanding debt, including a large convertible promissory note to its former CEO. This raises substantial concerns about its ability to meet financial obligations and repay its debts.
• Customers: The company's ability to continue developing, supporting, and expanding its AI chatbot products may be severely impacted by its precarious financial condition and its ability to secure further financing, potentially affecting service continuity and product development.

Next Steps

• The company will, at its discretion, deliver 'Puts' to GHS obligating GHS to purchase common stock based on investment amounts.
• The company plans to contract with retailers and brands using a monthly recurring licensing fee model for its chatbots.
• Management intends to continue pursuing additional equity financing through private placements of common stock or other sources like convertible notes or debt.
• The company expects to put into place a separately designated audit committee, compensation committee, and nominating committee upon the completion of this offering.
• The company will adopt ASU 2023-09 (Income Taxes) in its fourth quarter of 2026.
• The company will adopt ASU 2024-03 (Expense Disaggregation Disclosures) for fiscal years beginning after December 15, 2026.
• A non-binding LOI was signed in November 2025 to be acquired by Sim Agro Inc. in a reverse acquisition.

Key Dates

Recommendation

The company is in a precarious financial position, evidenced by recurring losses, negative cash flows, and a 'going concern' warning. Its cash reserves are critically low ($998). While it has pivoted to AI chatbots, this new business has yet to generate meaningful revenue. The significant dilution from the GHS financing agreement, the penny stock status, and the super-voting control by management further diminish the value and influence of common shareholders. The expiration of a previous acquisition LOI and the default on a related-party note highlight operational and financial instability. The non-binding LOI for a reverse acquisition by Sim Agro Inc. introduces uncertainty but does not mitigate the immediate and severe financial risks. Investors face a high probability of losing their entire investment.

Keywords

AI Chatbots, CBD Industry, IRChat, chatCBDW, Artificial Intelligence, SEC Filing, S-1 Registration, Equity Financing, GHS Investments, Dilution, Going Concern, Preferred Stock, Super Voting Stock, OTC Markets, Penny Stock, Financial Losses, Technology, Software as a Service (SaaS), Reverse Acquisition