UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
Mark One
☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2024
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File No. 000-53425
1606 Corp. |
(Exact name of registrant as specified in its charter) |
Nevada |
| 86-1497346 |
(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) |
2425 E. Camelback Rd Suite 150
Phoenix, AZ 85016
(Address of principal executive offices)
Phone: (602) 481-1544
(Registrant’s telephone number)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
N/A | N/A | N/A |
Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $0.0001 per share
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one)
Large accelerated filer | ☐ | Accelerated filer | ☐ |
Non-accelerated filer | ☒ | Smaller reporting company | ☒ |
Emerging growth company | ☒ |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company, as defined in Rule 12b-2 of the Exchange Act. Yes ☐ No ☒
The aggregate market value of the voting and non-voting stock held by non-affiliates of the registrant as of the last business day of the registrants most recently completed second fiscal quarter, based on the price at which the common equity was last sold on the OTC Markets on June 30, 2024 was approximately $3,279,997. For purposes of this computation only, all officers, directors and 10% or greater stockholders of the registrant are deemed to be “affiliates.”
The number of shares of the registrant’s common stock, $0.0001 par value per share, outstanding as of March 31, 2025 was 137,361,424
Forward Looking Statements
This Annual Report on Form 10-K contains forward-looking statements, within the meaning of the Securities Exchange Act of 1934 and the Securities Act of 1933 that involve risks and uncertainties. Forward-looking statements convey our current expectations or forecasts of future events. All statements contained in this Annual Report other than statements of historical fact are forward-looking statements. Forward-looking statements include statements regarding our future financial position, business strategy, budgets, projected costs, plans and objectives of management for future operations. The words “may,” “continue,” “estimate,” “intend,” “plan,” “will,” “believe,” “project,” “expect,” “seek,” “anticipate,” “should,” “could,” “would,” “potential,” or the negative of those terms and similar expressions may identify forward-looking statements, but the absence of these words does not necessarily mean that a statement is not forward-looking. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this report. All of these forward-looking statements are based on information available to us at this time, and we assume no obligation to update any of these statements. Actual results could differ from those projected in these forward-looking statements as a result of many factors, including those identified in “Business,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere. We urge you to review and consider the various disclosures made by us in this report, and those detailed from time to time in our filings with the Securities and Exchange Commission, that attempt to advise you of the risks and factors that may affect our future results. Factors that could cause actual results to differ materially include, among others, our ability to make good decisions about the deployment of capital, our substantial capital requirements and absence of liquidity, competition, our inability to obtain maximum value for our holdings, our ability to attract and retain qualified employees, our ability to execute our strategy, market valuations in sectors in which we operate, our need to manage our assets, and risks associated with our assets and their performance, including the fact that most have a limited history and a history of operating losses, face intense competition and may never be profitable, the effect of economic conditions in the business sectors in which our partner companies operate, compliance with government regulation and legal liabilities.” Many of these factors are beyond our ability to predict or control. In addition, as a result of these and other factors, our past financial performance should not be relied on as an indication of future performance. All forward-looking statements attributable to us, or to persons acting on our behalf, are expressly qualified in their entirety by this cautionary statement. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. In light of these risks and uncertainties, the forward-looking events and circumstances discussed in this report might not occur.
JOBS Act
We qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups (JOBS) Act of 2012 (the JOBS Act). As an emerging growth company, we may take advantage of certain reduced disclosure and other requirements that are otherwise applicable generally to public companies. Pursuant to these provisions:
| · | we are not required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (the Sarbanes-Oxley Act); |
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| · | we have (i) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and (ii) exemptions from the requirements of holding a non-binding advisory vote on executive compensation, including golden parachute compensation. |
We may take advantage of these provisions for up to five years or until such earlier time that we are no longer an emerging growth company.
We would cease to be an emerging growth company upon the earliest to occur of (1) the last day of the fiscal year in which we have more than $1.07 billion in annual revenue; (2) the date we qualify as a “large accelerated filer,” with at least $700 million of public float (3) the issuance, in any three-year period, by us of more than $1.0 billion in non-convertible debt securities held by non-affiliates; and (4) the last day of the fiscal year ending after the fifth anniversary of our initial public offering.
In addition, Section 107 of the JOBS Act also provides that an emerging growth company can use the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (the “Securities Act”), for complying with new or revised accounting standards. This permits an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We intend to take advantage of the exemptions discussed above. Accordingly, the information contained herein may be different than the information you receive from other public companies.
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TABLE OF CONTENTS
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PART I
Item 1. Business.
Company Overview
1606 Corp., a Nevada corporation (the “Company,” “we,” or “us”) was incorporated in Nevada in February 2021 as a spin-off from Singlepoint Inc. in April 2021. We started by offering a tobacco- and nicotine-free smoking alternative called “1606 Original Hemp.” We started to sell hemp, aroma-free cigarettes, first by reselling the star brand, and eventually our own brand called “TRUZ.” The brands expanded to include “Singlez,” an individually packeted version of the TRUZ hemp cigarettes. This business has been discontinued.
In August of 2023, we decided to use our knowledge of the cannabidiol (“CBD”) industry to move into AI chatbots specifically made for the CBD industry. We partnered with ARXT Labs to create a proprietary Chatbot using AI to answer customer questions and recommend a product based on their answers and preferences. We then signed a distribution contract with Cool Blue Distribution to sell the service to CBD companies as well as offer their CBD expertise through Cool Blue’s owner, Don Flanagan. In late 2023, we debuted our first chat bot, “chatCBDW by CBDW AI,” and began signing up customers to test and implement the bot on their CBD websites.
In April of 2024, we debuted our Chatbot for the public company vertical, “IRChat.” IRChat is a chatbot that is able to go on a public company’s website and pull-down vital information for investors and shareholders. Examples of this vital information include SEC fillings, company updates and press releases, and general information on the company from its website.
In July of 2024, CEO, Greg Lambrecht stepped down and Austen Lambrecht was appointed by the board as the new CEO.
In September of 2024, we signed an LOI to acquire a minority equity position of Adnexus, an AI biotech company that specializes in the development of pharmaceuticals. Adnexus has been recognized for its groundbreaking work in leveraging AI to drive early drug discovery and develop critical treatments for infectious diseases including HIV and SARS-COV-2. As of the date hereof, the LOI has terminated and the Company and Adnexus have not closed the transaction although discussions are ongoing.
With our corporate headquarters located in Phoenix, Arizona, our executive team experienced in CBD products, and our board’s knowledge of the technology and AI spaces, 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.
Distribution
We are focused on signing business to use our chatbot with a monthly recuring licensing fee model. Through a combination of our website, online ads, and email campaigns targeted towards CBD brands and retailers, we have cultivated considerable interest in our company and our AI chatbot technology.
We are also using independent sales organizations (“ISOs”) to sell the chatbot or include it in a package deal with their products. These ISOs include but are not limited to CBD distributors, website designers and builders, and payment processing services within and outside the CBD industry.
Our Strategy
The global artificial intelligence market has seen remarkable growth, valued at $428 billion in 2022 and projected to reach $2.25 trillion by 2030. With a compound annual growth rate (“CAGR”) ranging from 33.2% to 38.1%, AI's global impact is undeniable, with as many as 97 million individuals expected to work in the AI sector by 2025, according to fortunebusinessinsights.com.1
The global CBD market is positioned for exponential growth, and e-commerce is at the heart of this expansion. By tailoring our chat bots to serve this niche, we believe we are well-poised to capitalize on this extraordinary growth trajectory. Our chatbots will empower both our shareholders and business partners to thrive in an ever-expanding market. 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 2030.2
We plan to contract with retailers and brands using a monthly licensing model. 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. This approach not only reduces the development burden on businesses but also expedites the deployment of AI-driven solutions, enhancing customer experiences without requiring extensive resources.
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1 https://www.fortunebusinessinsights.com/industry-reports/artificial-intelligence-market-100114
2 https://capitalixe.com/blog/cbd-merchant-account-rising-above-risk/
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Products
We develop AI chatbot’s that are specifically designed to the industry and products for a retailer or brands. The bot is trained on industry specific questions and answers to give the most accurate information to customers’ inquiries in a conversational and natural style. The bot is also uploaded with the ability to recommend products by using the conversation and costumers input to drive to a tailed product recommendation. The chatbot is tailored to the CBD industry currently but can be programmed to accommodate any consumer facing industry. We have also developed a chatbot for public companies called IRChat.
Our Competitive Strengths
We believe that our competitive strengths lie in three key areas:
Deep Expertise in AI
We boast a team of AI experts on the board and in the communications team, who have a combined 115 years of technology and tech project development experience. The team we have assembled consists of experts in every field including technology development, management, marketing and communications.
Industry Focus
Our technology is adaptable to various sectors such as CBD, solar, auto parts, health and beauty, and vitamins, for example.
Strong IP Portfolio
We own the intellectual property, ensuring long-term competitiveness and protecting our innovations.
Government Regulation
Governments and other international organizations in various jurisdictions around the world (such as the legislative and regulatory institutions of the European Union) are adopting new laws, regulations and guidelines addressing data privacy and protection, including the processing (collection, storage, use, etc.) of personal information, cyber security, breach notification, risk management and reporting. These laws, regulations and guidelines may be inconsistent across jurisdictions and are subject to evolving and differing (sometimes conflicting) interpretations. In some cases, different sets of data privacy laws and regulations, such as the European Union’s General Data Protection Directive (“GDPR”), Israeli Privacy Law and the regulations promulgated thereunder (the “Israeli Privacy Law”), local laws and regulations and certain state laws in the U.S. on privacy, data and related technologies, such as the California Consumer Privacy Act (“CCPA”), as amended by the California Privacy Rights Act ("CPRA"), also govern the processing of personal information. Additionally, new state privacy laws may also apply.
Employees
We have one full-time employee, which is our Chief Executive Officer, Austen Lambrecht. We retain the services of additional personnel on an independent contractor basis. We do not have any part-time employees, but we work with several consultants.
Corporate Information
Our principal offices are located at 2425 E. Camelback Rd., Suite 150, Phoenix, AZ, 85016. Our main telephone number is (602) 481-1544. Our website address is www.cbdw.ai. We have not incorporated by reference into this report the information that can be accessed through our website and you should not consider it to be part of this report.
Item 1A. Risk Factors.
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and, as such, are not required to provide the information under this Item.
Item1B. Unresolved Staff Comments.
The Company is neither an accelerated filer nor a large accelerated filer, as defined in Rule 12b-2 of the Exchange Act (§240.12b-2 of this chapter), nor is it a well-known seasoned issuer as defined in Rule 405 of the Securities Act (§230.405 of this chapter), and as such is not required to provide the information required by this item.
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Item 1C. Cybersecurity.
For purposes of this section:
“Cybersecurity incident” means an unauthorized occurrence, or a series of related unauthorized occurrences, on or conducted through our information systems that jeopardizes the confidentiality, integrity, or availability of our information systems or any information residing therein.
“Cybersecurity threat” means any potential unauthorized occurrence on or conducted through our information systems that may result in adverse effects on the confidentiality, integrity, or availability of our information systems or any information residing therein.
“Information systems” means electronic information resources, owned or used by us, including physical or virtual infrastructure controlled by such information resources, or components thereof, organized for the collection, processing, maintenance, use, sharing, dissemination, or disposition of our information to maintain or support our operations.
Risk Management and Strategy
We monitor our websites and online accounts frequently to manage risks associated with cyber-security risks. Our website is monitored by a third party to check if the website or email server is secure. Our webmaster informs us of any issues that may arise in the cyber sector. We are prepared to inform all parties necessary if any breach of cyber-security were to happen. We have never had this problem and so we have never had to inform consultants, auditors, or other third parties.
We have never had a breach of cyber-security at any point in our past. The risk to us of cybersecurity threats is in data storage of customer questions and emails. A breach of customers data could negatively materially affect our public trust and could result in loss of customers and revenue.
Governance
Our board of directors has no specific processes for monitoring cybersecurity within the Company. There is no subcommittee specifically for monitoring cybersecurity in the Company.
Our management monitors our websites and online accounts frequently to manage risks associated with cyber-security risks. Our management has more than 20 years of experience working in the technology industry, which enables it to identify cybersecurity risks associated with the Company. Our management communicates with our board on matters of cybersecurity but, has not had to inform them of any breaches thus far.
Item 2. Properties.
The Company leases approximately 100 square feet of office space at 2425 E. Camelback Road, Suite 150, Phoenix, AZ 85016, at a monthly base rent of $580. The lease is on a month-to-month basis.
Item 3. Legal Proceedings.
From time-to-time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are not presently a party to any material litigation, nor to the knowledge of management is any litigation threatened against us, which may materially affect us.
Item 4. Mine Safety Disclosures.
Not applicable.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information
Our Common Stock is currently quoted on the OTC Markets, which is sponsored by OTC Markets Group, Inc. The OTC Markets is a network of security dealers who buy and sell stock. The dealers are connected by a computer network that provides information on current “bids” and “asks,” as well as volume information. Our shares are quoted on the OTC Markets under the symbol “CBDW.” Our Common Stock began trading in January 2023.
The table below sets forth for the periods indicated the quarterly high and low bid prices as reported by OTC Markets. Limited trading volume has occurred during these periods. These quotations reflect inter-dealer prices, without retail mark-up, mark-down, or commission and may not necessarily represent actual transactions.
2024 |
| High |
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| Low |
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First Quarter |
| $ | 0.230 |
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| $ | 0.023 |
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Second Quarter |
| $ | 0.0847 |
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| $ | 0.0235 |
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Third Quarter |
| $ | 0.0779 |
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| $ | 0.0116 |
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Fourth Quarter |
| $ | 0.0299 |
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| $ | 0.0058 |
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2023 |
| High |
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| Low |
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First Quarter |
| $ | 14.00 |
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| $ | 0.0100 |
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Second Quarter |
| $ | 0.089 |
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| $ | 0.0087 |
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Third Quarter |
| $ | 0.075 |
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| $ | 0.0210 |
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Fourth Quarter |
| $ | 0.045 |
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| $ | 0.0221 |
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Our common stock is considered to be penny stock under rules promulgated by the SEC. Under these rules, broker-dealers participating in transactions in these securities must first deliver a risk disclosure document which describes risks associated with these stocks, broker-dealers’ duties, customers’ rights and remedies, market and other information, and make suitability determinations approving the customers for these stock transactions based on financial situation, investment experience and objectives. Broker-dealers must also disclose these restrictions in writing, provide monthly account statements to customers, and obtain specific written consent of each customer. With these restrictions, the likely effect of designation as a penny stock is to decrease the willingness of broker-dealers to make a market for the stock, to decrease the liquidity of the stock and increase the transaction cost of sales and purchases of these stocks compared to other securities.
Holders
The number of shareholders of record of the Company's common stock as of March 31, 2025 was approximately 475. An additional number of stockholders are beneficial holders of our Common Stock in “street name” through banks, brokers and other financial institutions that are the record holders.
In addition, there were 58,911,559 shares of our Class A Convertible Preferred Stock outstanding, which were held by 12 record holders. Lastly, there were 90 shares of our Series B Super Voting Preferred Stock outstanding, which were held by one record holder.
Dividends
We have never paid cash dividends on any of our capital stock and we currently intend to retain our future earnings, if any, to fund the development and growth of our business. We do not intend to pay cash dividends to holders of our common stock in the foreseeable future.
Recent Sales of Unregistered Securities
Common Stock
On October 8, 2024, we issued 2,003,109 shares of Common Stock to GHS Investments, LLC (“GHS”) pursuant to the Equity Financing Agreement dated February 6, 2023 (the “EFA”).
On November 15, 2024, Asia Lambrecht purchased 1,066,667 shares of Common Stock for $8,000.
On December 20, 2024, we issued 2,963,111 shares of Common Stock to GHS pursuant to the EFA.
Conversions of Class A Preferred Stock
On October 24, 2024, Greg Lambrecht was issued 8,000,000 shares of Common Stock as a result of the conversion of 320,000 shares of Class A Preferred Stock.
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Convertible Promissory Notes
On November 22, 2024, we issued a convertible promissory note to 1800 Diagonal, LLC in the principal amount of $97,200. Upon an “Event of Default,” as defined in the note, the note is convertible into Common Stock at 70% multiplied by the lowest trading price for the Common Stock during the 10 trading days prior to the Conversion Date (representing a discount rate of 30%) (subject to equitable adjustments by the borrower relating to the borrower’s securities or the securities of any subsidiary of the borrower, combinations, recapitalization, reclassifications, extraordinary distributions and similar events).
The securities above were issued in reliance upon the exemption from securities registration afforded by Section 4(a)(2) of the Securities Act and Rule 506(b) of Regulation D under the Securities Act, based in part on the representations of the investors. No commissions were paid in connection with the sales of the securities above.
Securities Authorized for Issuance Under Equity Compensation Plans
We do not currently maintain a Stock Option Plan or other Employee benefit Plan.
Item 6. [Reserved]
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our financial statements and notes thereto appearing elsewhere in this Annual Report. In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results could differ materially from those anticipated by these forward- looking statements as a result of many factors. We discuss factors that we believe could cause or contribute to these differences below and elsewhere in this Annual Report, including those set forth under “Forward- Looking Statements.”
Plan of Operation
1606 Corp., a Nevada corporation (the “Company”), was incorporated in Nevada in February 2021 and spun-off from Singlepoint Inc. in April 2021. Management believes the assumptions made to carve out the Company’s underlying standalone financial statements from the consolidated Singlepoint results prior to the April 2021 spin-off are reasonable.
In August 2023, we achieved our goal of creating a chatbot using AI technology to be placed on CBD retailers’ and brands’ websites. This chatbot is able to answer questions specifically tailored to the CBD industry and can be trained on client specific questions as well as trained to accommodate other industries. In addition to the ability to answer questions, the bot can use answers and customer feedback to recommend a product from the list uploaded by the client.
On August 17, 2023, we engaged AR XTLabs to help in development of an AI chatbot specifically designed for the CBD industry. The chatbot offers CBD and wellness merchants the ability to increase sales by providing product recommendations, track user behavior for inventory management, and ChatCBDW can also provide information on products and education around the clock. Our bot was built on Microsoft Azure by AR XTLabs, a state-of-the-art development company in the AI space. ChatCBDW is a proprietary bot fully integrated with ChatGPT, a state-of-the-art language model developed by OpenAI. This integration equips ChatCBDW with natural language processing (NLP) and machine learning capabilities, allowing lifelike conversations and intelligent product recommendations. It's designed to drive sales, educate audiences on products, and provide analytics on customer preferences and behavior, contributing to inventory management. The chat technology is enhanced through a patent possible process that tailors product recommendations to merchant specifications.
In September 2023, we partnered with Cool Blue Distribution, a leading CBD distributor, to better expand our CBD expertise and gain access hundreds of retailers and brands. The Company agreed to install the bot on Cool Blue’s website as the first beta tester of our new chatbot.
On October 31, 2023, we announced that the beta version of our ChatCBDW bot was live on our site as well as cool blue Distributions website. We are working towards getting CBD brands and retailers to sign up for the bot on a monthly basis.
We are focused on signing business to use the chatbot with a monthly recuring licensing fee model. We are using a combination of our website, online ads, and email campaigns targeted towards CBD brands and retailers, we have cultivated considerable interest in 1606 and our AI Chatbot technology.
We are also using ISO’s or independent sales organizations to sell the Chatbot or include it in a package deal with their products. These ISO’s include but are not limited to CBD Distributors, website designers and builders, and payment processing services within and outside the CBD industry.
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On April 30, 2024, we announced the completion of our second AI bot made for public companies. Chat IR is a bot made to go on public companies’ websites and answers questions about the company’s operations and disclosures.
We are focused on signing business to use the chatbot with a monthly recurring licensing fee model. We are using a combination of our website, online ads, and email campaigns targeted towards public companies, we have cultivated considerable interest in the Company and our AI Chatbot technology.
We are also using ISO’s or independent sales organizations to sell the Chatbot or include it in a package deal with their products. These ISO’s include but are not limited to IR Firms, Transfer Agents, Press Services, and Web Developers.
On September 4, 2024. we announced that we signed a nonbinding Letter of Intent (LOI) to acquire a strategic stake in Adnexus, a company at the forefront of Artificial Intelligence innovations in early drug discovery and infectious disease research.
Results from Operations – For the year ended December 31, 2024, as compared to December 31, 2023
Net Revenue. For the year ended December 31, 2024 and 2023, we generated revenues from the sale of CBD products of $7,195 and $1,603, respectively. The Company will no longer be selling CBD products.
Cost of Goods Sold. For the year ended December 31, 2024 and 2023, cost of goods sold was $7,313 and $995, respectively.
Gross Loss. As a result of the foregoing, we had a gross loss of $118 for the year ended December 31, 2024, compared with a gross profit of $608 for the year ended December 31, 2023.
Operating Expenses. For the year ended December 31, 2024 and 2023, total operating expenses were $4,138,157 and $1,620,580, respectively. The increase was primarily due to stock-based compensation of approximately $3 million during the year ended December 31, 2024; there was no such expense during the year ended December 31, 2023.
Net Loss. For the year ended December 31, 2024 and 2023, net loss was $4,514,971 and $1,580,733, respectively. The increase in net loss was primarily due to higher operating expenses as discussed above.
Liquidity and Capital Resources
As of December 31, 2024, we have yet to achieve profitable operations, and while we hope to achieve profitable operations in the future, if not, we may need to raise capital from stockholders or other sources to sustain operations and to ultimately achieve viable operations. These factors raise substantial doubt about our ability to continue as a going concern. Our principal sources of liquidity have been cash provided by operating activities, as well as our ability to raise capital. Our operating results for future periods are subject to numerous uncertainties and it is uncertain if we will be able to become profitable and continue growth for the foreseeable future. If management is not able to increase revenue and/or manage operating expenses, we may not be able to achieve profitability. Our ability to continue in existence is dependent on our ability to achieve profitable operations.
To continue operations for the next 12 months, we will have a cash need of approximately $1,000,000. Should we not be able to fulfill our cash needs through the increase of revenue, we will need to raise money through outside investors through convertible notes, debt or similar instrument(s). Our plans to pay off current liabilities through sales and increasing revenue through sales of our services and or products, or through financing activities as mentioned above, although there is no guarantee that we will ultimately do so.
Operating Activities
Net cash used in operating activities was $890,986 for the year ended December 31, 2024, primarily as a result of our net loss of $4,514,971, change in fair value of derivative liabilities of $77,228, and gain on debt extinguishment of $37,461, offset by shares issued for services provided of $3,033,400 amortization of debt discount of $360,847, and net changes in operating assets and liabilities of $250,074.
Net cash used in operating activities was $747,104 for the year ended December 31, 2023, primarily as a result of our net loss of $1,580,733 and change in fair value of derivative liabilities of $192,759, offset by shares issued for services provided of $288,546, financing costs of $200,616, $65,000 for the write-off of investments, amortization of debt discount of $119,324, and net changes in operating assets and liabilities of $352,862.
Investing Activities
There was no cash used in investing activities during the year ended December 31, 2024.
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Net cash used in investing activities during the year ended December 31, 2023, totaled $86,500. The Company made preliminary investments of $50,000 and $15,000 in two separate operating companies which were then subsequently written-off. The $21,500 in 2024 related to additional funds advanced to one of the target companies for which the Company has Notes Receivable which is has now been determined to be uncollectible.
Financing Activities
During the year ended December 31, 2024, our financing activities provided cash of $844,123, including $371,070 from the sale of our common stock, $494,500 in proceeds from convertible notes, and $415,000 in proceeds from note payable to shareholder. These inflows were offset by the repayment of $436,447 in convertible notes.
During the year ended December 31, 2023, our financing activities provided cash of $777,480, including $412,500 from the sale of our common stock, $245,000 in proceeds from convertible notes, and $215,500 in proceeds from note payable to shareholder. These inflows were offset by the repayment of $95,520 in convertible notes.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Notes to Financial Statements describes the significant accounting policies and methods used in the preparation of the Financial Statements. Estimates are used for, but not limited to, contingencies and taxes. Actual results could differ materially from those estimates. The following critical accounting policies are impacted significantly by judgments, assumptions, and estimates used in the preparation of the Financial Statements.
Derivative Liabilities
The Company has certain financial instruments that are derivatives or contain embedded derivatives. The Company evaluates all its financial instruments to determine if those contracts or any potential embedded components of those contracts qualify as derivatives to be separately accounted for in accordance with ASC 810-10-05-4 and 815-40. This accounting treatment requires that the carrying amount of any derivatives be recorded at fair value at issuance and marked-to-market at each balance sheet date. In the event that the fair value is recorded as a liability, as is the case with the Company, the change in the fair value during the period is recorded as either other income or expense. Upon conversion, exercise or repayment, the respective derivative liability is marked to fair value at the conversion, repayment or exercise date and then the related fair value amount is reclassified to other income or expense as part of gain or loss on extinguishment.
When a convertible note that contains a bi-furcated derivative is converted, it is not considered to be a convertible note for accounting purposes. Therefore, the Company will recognize a gain or loss on the conversion as a debt extinguishment gain or loss based on the difference between the fair value of the shares issued and the book value of the debt converted.
Stock-Based Compensation
The Company accounts for stock-based compensation in accordance with ASC 718, “Compensation - Stock Compensation,” which requires all stock-based awards granted to employees, directors and non-employees to be measured at grant date fair value of the equity instrument issued and recognized as expense. Stock-based compensation expense is recognized on a straight-line basis over the requisite service period of the award, which is generally equivalent to the vesting period. The fair value of each stock option granted is estimated using the Black-Scholes option pricing model. The measurement date for the non-forfeitable awards to non-employees that vest immediately is the date the award is granted.
Recent Accounting Pronouncements
See Note 2 of the financial statements for discussion of Recent Accounting Pronouncements.
Off-Balance Sheet Arrangements
We are not currently a party to, or otherwise involved with, any off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Recently Adopted Accounting Standards
None.
| 10 |
| Table of Contents |
Purchase of Significant Equipment
We have not previously, nor do we intend to purchase any significant equipment during the next twelve months.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Pursuant to Item 305(e) of Regulation S-K (§ 229.305(e)), the Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined by Rule 229.10(f)(1).
Item 8. Financial Statements and Supplementary Data.
The financial statements of the Company are included beginning on page F-1 immediately following the signature page to this Annual Report.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We have established disclosure controls and procedures that are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and, as such, is accumulated and communicated to our Chief Executive Officer and Chief Financial Officer, Austen Lambrecht, who serves as our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Mr. Lambrecht evaluated the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) of the Exchange Act, as of December 31, 2024. Based on his evaluation, Mr. Lambrecht concluded that, due to material weaknesses in our internal control over financial reporting as described below, our disclosure controls and procedures were not effective as of December 31, 2024. In light of the material weakness in internal control over financial reporting, we completed substantive procedures, including validating the completeness and accuracy of the underlying data used for accounting prior to filing this Annual Report.
These additional procedures have allowed us to conclude that, notwithstanding the material weakness in our internal control over financial reporting, the financial statements included in this Annual Report fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with accounting principles generally accepted in the United States of America.
Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal controls over financial reporting for the Company. Due to limited resources, management conducted an evaluation of internal controls based on criteria established in 2013 Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). The results of this evaluation determined that our internal control over financial reporting was ineffective as of December 31, 2024, due to material weaknesses. A material weakness in internal control over financial reporting is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of our financial reporting.
Management’s assessment identified the following material weaknesses in internal control over financial reporting:
| 1. | lack of a functioning audit committee for the entire fiscal year resulting in ineffective oversight in the establishment and monitoring of required internal control and procedures; and |
|
|
|
| 2. | inadequate segregation of duties consistent with control objectives. |
| 11 |
| Table of Contents |
We will continue to follow the standards for the Public Company Accounting Oversight Board (United States) for internal control over financial reporting to include procedures that:
| · | Pertain to the maintenance of records in reasonable detail accurately that fairly reflect the transactions and dispositions of our assets; |
|
|
|
| · | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of the financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of management and the Board of Directors; and |
|
|
|
| · | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements. |
Despite the material weaknesses in financial reporting noted above, we believe that our financial statements included in this report fairly present our financial position, results of operations and cash flows as of and for the years presented in all material respects.
Changes in Internal Control over Financial Reporting
None.
Item 9B. Other Information.
During the quarter ended December 31, 2024, no director or officer adopted or terminated any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement, as each term is defined in Item 408(a) of Regulation S-K.
Item 9C. Disclosure Regarding Foreign Jurisdiction that Prevent Inspections
Not applicable.
| 12 |
| Table of Contents |
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
The following table sets forth our executive officers and directors, their ages and position(s) with the Company.
Name |
| Age |
| Position |
Austen Lambrecht |
| 27 |
| Chief Executive Officer, Chief Financial Officer and Director |
Govindan Gowrishankar |
| 59 |
| Director |
Venu Aravamudan |
| 60 |
| Director |
Directors are elected annually and hold office until the next annual meeting of the stockholders of the Company and until their successors are elected. Officers are elected annually by the Board of Directors (the “Board”) and serve at the discretion of the Board.
Our CEO and CFO
Austen Lambrecht started at Singlepoint working with the company in research and development with the solar and hemp subsidiaries in the last half of 2020. After the spinoff from Singlepoint, he worked under the CEO at 1606 Corp in business development and acquisition. Mr. Lambrecht has been the Vice President of Operations since June of 2021. His responsibilities include sales, marketing, and investor relations. Mr. Lambrecht attended the W.P. Carey School of Business at Arizona State University with a focus on Sports Business from 2016 to 2020. He is the son of our former CEO and CFO, Gregory Lambrecht.
Our Non-Executive Directors
Govindan Gowrishankar is an entrepreneur and experienced executive who has grown companies and teams. He is a strong business development professional, skilled in SAAS, Mobile Advertising, Mobile Content, Ecommerce, and Venture Capital. Mr. Gowrishankar has and does serve boards of both Public and Private companies. From 2013 to Present Gowri has been a board member of Tie Seattle.
Venu Aravamudan has in excess of 30 years of experience as a software engineering and products leader delivering leading edge offerings for enterprise customers. He was most recently SVP of engineering for Oracle's cloud platform and identity, leading a team of more than 1800 engineers from 2020-2022. Prior roles have included SVP & GM at F5 Networks where he developed the first generation of F5's cloud services offerings From 2017 to 2019, General Manager at Amazon/AWS RDS leading cloud database offerings, and similar senior roles at Limelight Networks, VMware, and Microsoft. Mr. Aravamudan has a master’s degree in applied Math from Rensselaer Polytechnic Institute (RPI) and an undergraduate in engineering from the Indian Institute of Technology (IIT).
There is no compensation at this time for Directors.
There are no agreements with respect to electing directors. None of the directors held any directorships during the past five years in any company with a class of securities registered pursuant to Section 12 of the Exchange Act or subject to the requirements of Section 15(d) of such act, or of any company registered as an investment company under the Investment Company Act of 1940.
| 13 |
| Table of Contents |
Legal Proceedings
During the past ten years there have been no events under any bankruptcy act, no criminal proceedings and no judgments, injunctions, orders or decrees material to the evaluation of the ability and integrity of any of our directors or executive officers, and none of these persons has been involved in any judicial or administrative proceedings resulting from involvement in mail or wire fraud or fraud in connection with any business entity, any judicial or administrative proceedings based on violations of federal or state securities, commodities, banking or insurance laws or regulations, or any disciplinary sanctions or orders imposed by a stock, commodities or derivatives exchange or other self-regulatory organization.
Code of Ethics
The Board has not adopted a Code of Ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions.
Committees of the Board of Directors
We have no separately designated standing audit committee, compensation committee, nominating committee, executive committee or any other committees of our Board. The functions of those committees are currently undertaken by our Board. We expect to put into place a separately designated audit committee, compensation committee and nominating committee upon the completion of this offering.
The Board does not have an express policy with regard to the consideration of any director candidates recommended by stockholders since the Board believes that it can adequately evaluate any such nominees on a case-by-case basis; however, the Board will evaluate stockholder recommended candidates under the same criteria as internally generated candidates. Although the Board does not currently have any formal minimum criteria for nominees, substantial relevant business and industry experience would generally be considered important, as would the ability to attend and prepare for board, committee and stockholder meetings. Any candidate must state in advance his or her willingness and interest in serving on the board of directors.
Item 11. Executive Compensation.
The following table shows the compensation awarded to, earned by, or paid to our named executive officers for the years ended December 31, 2024 and 2023.
Name and Principal Position |
| Year |
| Salary ($) |
|
| Stock Awards ($) |
|
| Total ($) |
| |||
Austen Lambrecht |
| 2024 |
|
| 111,414 | (2) |
|
| 1,480,000 | (3) |
|
| 1,591,414 |
|
Current Chief Executive Officer, Chief Financial Officer, and Director(1) |
| 2023 |
|
| 17,643 | (4) |
|
| 1,575,001 | (5) |
|
| 1,592,644 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Greg Lambrecht |
| 2024 |
|
| 101,648 | (7) |
|
| 15,000 | (8) |
|
| 116,648 |
|
Former Chief Executive Officer, Chief Financial Officer, and Chairman(6) |
| 2023 |
|
| 250,000 | (9) |
|
| — |
|
|
| 250,000 |
|
(1) | Effective May 28, 2024, Mr. Lambrecht was appointed as the Company’s Chief Executive Officer and Chief Financial Officer. |
(2) | $76,119 of which was accrued and unpaid as of December 31, 2024. |
(3) | During the year ended December 31, 2024, Mr. Lambrecht was awarded 2,010,000 shares of Class A Preferred. |
(4) | $2,393 of which was accrued and unpaid as of December 31, 2023. |
(5) | During the year ended December 31, 2023, Mr. Lambrecht was awarded 200,001 shares of Class A Preferred Stock. |
(6) | Effective May 28, 2024, Mr. Lambrecht resigned as the Company’s Chief Executive Officer, Chief Financial Officer, and Chairman. |
(7) | $101,648 of which was accrued and unpaid as of December 31, 2024. |
(8) | During the year ended December 31, 2024, Mr. Lambrecht was awarded 10,000 shares of Class A Preferred Stock. |
(9) | $250,000 of which was accrued and unpaid as of December 31, 2023. |
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| Table of Contents |
Current CEO/CFO Employment Agreement
On February 28, 2024, we entered into an Employment Agreement with Austen Lambrecht, our former Vice President and current CEO. The term of the agreement is three years from the effective date and will renew for six month periods automatically unless terminated by either party providing 90 days of prior written notice or for “Cause,” as defined in the agreement. Pursuant to the agreement, Mr. Lambrecht is entitled to an annual salary of $97,000. Mr. Lambrecht is also entitled to a bonus as determined by our Board of Directors, healthcare (once established by the Company), reimbursement of expenses, and 20 vacation days per year. Also, as an inducement to enter into the agreement, Mr. Lambrecht was awarded 30 shares of Series B Preferred Stock.
Former CEO/CFO Employment Agreement
On May 10, 2021, the Company entered into an employment agreement with Greg Lambrecht (Director, CEO, and CFO of the Company) to serve as Chief Operating Officer of the Company at an annual salary of $250,000. The agreement provides for a term of three years and will automatically be renewed for additional six month periods unless either party has provided written termination of the agreement at least 90 days prior to the expiration of such term. If employment is terminated as a result of death or Disability, the Company shall pay to the base salary and any accrued but unpaid bonus and expense reimbursement amounts through the date of his death or disability and a lump sum payment equal to one year of base salary (at the time his death or disability occurs) within 30 days of his death or disability. In the event the Company does not have the cash flow to pay such amount within 30 days as set forth above, the Company may make such payments over 12 equal monthly installments. If employment is terminated by the Board of Directors of the Company for Cause (as defined in the agreement), then the Company shall pay to the base salary through the date of his termination and shall have no further obligation to any other compensation or benefits. If employment is terminated by the Company (or its successor) upon the occurrence of a change of control or within six (6) months thereafter, the Company (or its successor, as applicable) shall (i) continue to pay to the base salary for a period of twelve (12) months following such termination, (ii) pay the any accrued and any earned but unpaid bonus, (iii) pay the bonus he would have earned had he remained with the Company for six (6) months from the date which such termination occurs, and (iv) pay expense reimbursement amounts through the date of termination. If employment is terminated by Mr. Lambrecht for Good Reason, or by the Company without Cause, then the Company shall (i) pay a single lump sum cash payment within five business days of such termination equal to six (6) times the then monthly base salary in effect regardless of when such termination occurs (provided, that in the event the Company does not have the cash flow to pay such amount within five business days as set forth above, the Company may make such payments over 12 equal monthly installments), and (ii) pay the bonus Mr. Lambrecht would have earned had he remained with the Company for six (6) months from the date which such termination occurs, and (iii) pay any expense reimbursement amounts owed, and payment for any unused vacation days, through the date of termination.
Effective February 28, 2024, we entered into a new Employment Agreement with Mr. Lambrecht. The term of the agreement is three years from the effective date, and will renew for six month periods automatically unless terminated by either party providing 90 days of prior written notice or for “Cause,” as defined in the agreement. Pursuant to the agreement, Mr. Lambrecht is entitled to an annual salary of $250,000. Mr. Lambrecht is also entitled to a bonus as determined by our Board of Directors, healthcare (once established by the Company), reimbursement of expenses, and 20 vacation days per year. Also, as an inducement to enter into the agreement, Mr. Lambrecht was awarded 60 shares of Series B Super Voting Preferred Stock (the “Series B Preferred Stock”) of the Company.
On May 28, 2024, Mr. Lambrecht resigned from all positions within the Company and the new Employment Agreement was terminated.
Director Compensation
The following table shows the compensation awarded to, earned by, or paid to our directors who were not named executive officers for the year ended December 31, 2024.
Name and Principal Position |
| Year |
| Stock Awards ($) |
|
| Total ($) |
| ||
Govindan Gowrishankar, Director |
| 2024 |
| $ | 747,500 | (1) |
|
| 747,500 |
|
|
|
|
|
|
|
|
|
|
|
|
Venu Aravamudan, Director |
| 2024 |
| $ | 747,500 | (2) |
| $ | 747,500 |
|
(1) | During the year ended December 31, 2024, Mr. Gowrishankar was awarded 1,010,000 shares of Class A Preferred Stock. |
(2) | During the year ended December 31, 2024, Mr. Aravamudan was awarded 1,010,000 shares of Class A Preferred Stock. |
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| Table of Contents |
Overview of Compensation Program
We currently do not maintain a Compensation Committee of the Board of Directors. Until a formal committee is established, our entire Board of Directors has responsibility for establishing, implementing, and continually monitoring adherence with the Company’s compensation philosophy. The Board of Directors ensures that the total compensation paid to the executives is fair, reasonable, and competitive.
Compensation Philosophy and Objectives
The Board believes that the most effective executive compensation program is one that is designed to reward the achievement of specific annual, long-term and strategic goals by the Company and that aligns executives’ interests with those of the stockholders by rewarding performance above established goals, with the ultimate objective of improving stockholder value. As a result of the size of the Company, the Board evaluates both performance and compensation on an informal basis. Upon hiring additional executives, the Board intends to establish a Compensation Committee to evaluate both performance and compensation to ensure that the Company maintains its ability to attract and retain superior employees in key positions and that compensation provided to key employees remains competitive.
Role of Executive Officers in Compensation Decisions
The Board of Directors makes all compensation decisions for, and approves recommendations regarding equity awards to, the executive officers and directors of the Company.
Insider Trading Policy
Due to limited resources and the small number of our management, we do not have an insider trading policy.
Policies and Practices Related to the Timing of Grants of Certain Equity Awards
It is management’s duty to approve ordinary course annual equity grants during a scheduled meeting held each year. At this meeting, management is to approve each named executive officer’s annual equity award, if any. At this time, we do not currently anticipate granting stock options to any of our named executive officers. We do not schedule our equity grants in anticipation of the release of material, non-public information, nor do we time the release of material nonpublic information based on equity grant dates.
Equity Compensation Plan Information
We have not adopted an Equity Compensation Plan.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following tables set forth, as of March 31, 2025, certain information concerning the beneficial ownership of our capital stock, including our common stock, Class A Convertible Preferred Stock, and Series B Preferred Stock, by:
| · | each stockholder known by us to own beneficially 5% or more of any class of our outstanding stock; |
| · | each director; |
| · | each named executive officer; |
| · | all our executive officers and directors as a group; and |
| · | each person, or group of affiliated persons, who is known by us to beneficially own more than 5% of any class of our outstanding stock. |
Except as indicated by the footnotes below, we believe, based on information furnished to us, that the persons and entities named in the table below have sole voting and sole investment power with respect to all shares of common stock that they beneficially owned, subject to applicable community property laws. Unless otherwise specified the address for each of the above is 2425 E Camelback Rd., Suite 150, Phoenix, AZ 85016.
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| Table of Contents |
Our calculation of the percentage of beneficial ownership prior to this offering is based on 137,361,424 shares of common stock outstanding as of March 31, 2025, we also have 58,911,559 shares of Class A Preferred Stock and 90 shares of Series B Preferred Stock outstanding. We have determined beneficial ownership in accordance with the rules of the SEC, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under Rule 13d-3 of the Exchange, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise has or shares: (i) voting power, which includes the power to vote or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person or persons, the amount of shares outstanding is deemed to include the amount of shares beneficially owned by such person or persons (and only such person or persons) by reason of these acquisition rights.
Name |
| Shares of Common Stock |
|
| Percentage of Common Stock |
|
| Shares of Class A Preferred Stock |
|
| Percentage of Class A Preferred Stock |
|
| Shares of Series B Preferred Stock |
|
| Percentage of Series B Preferred Stock |
|
| Voting Percentage |
| |||||||
Gregory Lambrecht, former CEO |
|
| 0 |
|
| - | % |
|
| 5,217,971 |
|
|
| 8.76 | % |
|
| - |
|
|
| - |
|
| * |
| ||
Austen Lambrecht, current CEO |
|
| 0 |
|
|
| - |
|
|
| 15,958,767 |
|
|
| 26.79 | % |
|
| 90 |
|
|
| 100 | % |
|
| 100 | % |
Govindan Gowrishankar, director |
|
| 1,000,000 |
|
| * |
|
|
| 3,970,001 |
|
|
| 6.66 | % |
|
| - |
|
|
| - |
|
| * |
| ||
Venu Aravamudan, director |
|
| 1,045,000 |
|
| * |
|
|
| 1,045,001 |
|
|
| 1.75 | % |
|
| - |
|
|
| - |
|
| * |
| ||
Officers and Directors as a Group (4 individuals) |
|
| 2,045,000 |
|
|
| 1.70 | % |
|
| 26,551,740 |
|
|
| 43.97 | % |
|
| 90 |
|
|
| 100 | % |
|
| 100 | % |
_________
* Less than 1%
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Transactions with Related Persons
Except as disclosed below, for transactions with our executive officers and directors, please see the disclosure under “COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS” above.
Except as set out below, since the beginning of the Company’s last fiscal year, there have been no transactions, or currently proposed transactions, in which the Company was or is to be a participant and the amount involved exceeds $120,000, and in which any of the following people had or will have a direct or indirect material interest:
| · | Any director or executive officer of the Company; |
|
|
|
| · | Any immediate family member of a director or executive officer of the Company; and |
|
|
|
| · | Any person who beneficially owns, directly or indirectly, shares carrying more than 5% of the voting rights attached to our outstanding shares of common stock. |
During the years ended December 31, 2024 and 2023, the Company borrowed $415,000 and $215,500, respectively, in a series of cash payments from the Company’s former CEO in exchange for the issuance of a promissory note. The promissory note is not secured by Company assets, does not bear interest and is due in full on December 31, 2025. The promissory note totals $1,365,550 at December 31, 2024.
During the year ended December 31, 2023, a total of 200,001 shares of Class A Preferred Stock were issued to our current CEO, Austen Lambrecht, the son of Greg Lambrecht, our former Chief Executive Officer. In addition, one share of Class A Preferred Stock was issued to Greg Lambrecht and each of the two other members of the Company’s Board of Directors for services provided.
On September 19, 2024, the Board of Directors approved the award of 2,000,000 shares of Class A Preferred Stock to Austen Lambrecht and 1,000,000 shares of Class A Preferred Stock to each of Govindan Gowrishankar and Venu Aravamudan for director services provided.
During the year ended December 31, 2024, a total of 90 shares of Series B preferred stock was issued to the Company’s Chief Executive Officer, Austen Lambrecht, and to the Company’s former Chief Executive Officer, Greg Lambrecht as Compensation for Services. On June 14, 2024, Gregory Lambrecht, gifted 60 shares of the Company’s Series B Preferred Stock to Austen Lambrecht.
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| Table of Contents |
During the year ended December 31, 2024, a total of 4,040,000 shares of Class A convertible preferred stock was issued to the members of the Company’s Board of Directors for services provided. The value of all these shares was determined to be $2,990,000 based on an assumed conversion at a 1-for-25 ratio of the Class A preferred stock for common shares and the closing market price of $0.029 of the common shares on the date of grant.
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 which is reflected as note payable to related party on the balance sheet. 1606 Corp. was originally a division of Singlepoint until April 2021, when Singlepoint spun off 1606 Corp. through a stock distribution to its shareholders. The Note bears interest at 5%, has a three-year term, and is due in monthly installments of $1,902 beginning August 1, 2021. The Company has not made any payments on the Note and is currently in default. Accrued interest on the Note totaled $9,527 and $6,346 at December 31, 2024 and December 31, 2023, respectively.
Director Independence
We are not currently subject to listing requirements of any national securities exchange or inter-dealer quotation system which has requirements that a majority of the board of directors be “independent” and, as a result, we are not at this time required to have our Board of Directors comprised of a majority of “independent directors.”
We currently have not established any committees of the Board of Directors. Our Board of Directors may designate from among its members an executive committee and one or more other committees in the future. We do not have a nominating committee or a nominating committee charter. Further, we do not have a policy with regard to the consideration of any director candidates recommended by security holders. To date, other than as described above, no security holders have made any such recommendations. The entire Board of Directors performs all functions that would otherwise be performed by committees. Given the present size of our board it is not practical for us to have committees. If we are able to grow our business and increase our operations, we intend to expand the size of our board and allocate responsibilities accordingly.
Item 14. Principal Accountant Fees and Services.
Principal Accountant Fees & Services |
| 2024 |
|
| 2023 |
| ||
Audit Fees - Turner |
| $ | 95,900 |
|
| $ | 53,015 |
|
Audit Fees – Salberg |
|
| 47,500 |
|
|
| - |
|
Audit Related Fees |
|
| - |
|
|
| - |
|
Tax Fees |
|
| - |
|
|
| - |
|
All Other Fees |
|
| - |
|
|
| - |
|
Total Fees |
| $ | 143,400 |
|
| $ | 53,015 |
|
Audit Fees
These amounts consisted of the aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of the Company’s annual financial statements and review of financial statements included in the Company’s Form 10-Q or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years.
Audit-Related Fees
These amounts consisted of the aggregate fees billed for each of the last two fiscal years for assurance and related services that are reasonably related to the performance of the audit or review of the Company’s financial statements and are not reported under “Audit Fees.” These fees were for professional services incurred in connection with accounting consultations and consultations regarding financial accounting and reporting standards.
There were no such services by our principal accountants in 2024 or 2023.
Tax Fees
These amounts consisted of the aggregate fees billed for each of the last two fiscal years for tax services including tax compliance and the preparation of tax returns and tax consultation services.
There were no such services by our principal accountant in 2024 or 2023.
All Other Fees
These amounts consisted of the aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant, other than the services reported above.
There were no such services by our principal accountant in 2024 or 2023.
| 18 |
| Table of Contents |
PART IV
Item 15. Exhibits and Financial Schedules.
Exhibits
The following exhibits are included as part of this Annual Report:
Exhibit Number |
| Exhibit Description |
| Form |
| File No. |
| Exhibit |
| Filing Date |
| Filed Herewith |
|
| S-1 |
| 333-258912 |
| 3.1 |
| 8/19/21 |
|
| ||
|
| S-1 |
| 333-258912 |
| 3.3 |
| 8/19/21 |
|
| ||
|
| S-1 |
| 333-258912 |
| 3.2 |
| 8/19/21 |
|
| ||
|
| 8-K |
| 000-56467 |
| 3.1 |
| 3/4/24 |
|
| ||
| Amended and Restated Promissory Note Issued to Gregory Lambrecht on December 31, 2024 |
| 8-K |
| 000-56467 |
| 4.1 |
| 1/20/25 |
|
| |
| Employment Agreement between 1606 Corp. and Greg Lambrecht dated May 10, 2021 |
| S-1 | 333-258912 | 10.1 | 8/19/21 |
|
| ||||
| Asset Purchase Agreement between 1606 Corp. and Singlepoint Inc. dated June 15, 2021 |
| S-1 | 333-258912 | 10.2 | 8/19/21 |
|
| ||||
| Stock Purchase Agreement between 1606 Corp. and Asia Lambrecht dated April 28, 2021 |
| S-1/A | 333-258912 | 10.3 | 11/23/21 |
| |||||
| Stock Purchase Agreement between 1606 Corp. and Austen Lambrecht dated April 28, 2021 |
| S-1/A | 333-258912 |
| 10.4 |
| 11/23/21 |
|
| ||
| Stock Purchase Agreement between 1606 Corp. and Heather McCulley dated April 28, 2021 |
| S-1/A | 333-258912 |
| 10.5 |
| 11/23/21 |
|
| ||
|
| 8-K | 000-56467 |
| 10.6 |
| 2/14/23 |
|
| |||
|
| 8-K | 000-56467 |
| 10.7 |
| 2/14/23 |
|
| |||
|
| S-1/A |
| 333-270963 |
| 10.8 |
| 7/7/23 |
|
| ||
| Employment Agreement dated February 20, 2024 with Gregory Lambrecht |
| 10-K |
| 000-56467 |
| 10.9 |
| 4/17/24 |
| ||
| Employment Agreement dated February 20, 2024 with Austen Lambrecht |
| 10-K |
| 000-56467 |
| 10.10 |
| 4/17/24 |
| ||
|
|
|
|
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|
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|
| X | ||
|
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|
| X | ||
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|
| X | ||
101.INS |
| Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) |
|
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|
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|
| X |
101.SCH |
| Inline XBRL Taxonomy Extension Schema Document |
|
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|
|
|
|
| X |
101.CAL |
| Inline XBRL Taxonomy Extension Calculation Linkbase Document |
|
|
|
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|
|
|
|
| X |
101.DEF |
| Inline XBRL Taxonomy Extension Definition Linkbase Document |
|
|
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|
|
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|
|
| X |
101.LAB |
| Inline XBRL Taxonomy Extension Label Linkbase Document |
|
|
|
|
|
|
|
|
| X |
101.PRE |
| Inline XBRL Taxonomy Extension Presentation Linkbase Document |
|
|
|
|
|
|
|
|
| X |
104 |
| Cover Page Interactive Data File (formatted in Inline XBRL and included in exhibit 101). |
|
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|
|
|
|
| X |
________________
| * | Indicates management contract or compensatory plan or arrangement. |
Item 16. Form 10–K Summary.
None.
| 19 |
| Table of Contents |
SIGNATURES
Pursuant to the requirements of Securities 13 or 15(d) of the Securities and Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
1606 Corp. | |||
| |||
Dated: March 31, 2025 | By: | /s/ Austen Lambrecht | |
Austen Lambrecht, Chief Executive Officer and Chief Financial Officer (Principal Executive Officer and Principal Financial and Accounting Officer) | |||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature | Title | Date | ||
|
|
|
|
|
/s/ Austen Lambrecht |
| Chief Executive Officer, Chief Financial Officer, and Director |
| March 31, 2025 |
Austen Lambrecht |
| (Principal Executive Officer and Principal Financial and Accounting Officer) |
|
|
|
|
|
|
|
/s/ Govindan Gowrishankar |
| Director |
| March 31, 2025 |
Govindan Gowrishankar |
|
|
|
|
|
|
|
|
|
/s/ Venu Aravamudan |
| Director |
| March 31, 2025 |
Venu Aravamudan |
|
|
|
|
| 20 |
| Table of Contents |
| F-1 |
| Table of Contents |
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of:
1606 Corp.
Opinion on the Financial Statements
We have audited the accompanying balance sheet of 1606 Corp. (the “Company”) as of December 31, 2024, and the related statements of operations, changes in stockholders’ deficit and cash flows for the year then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has yet to achieve significant profitable operations and is dependent on its ability to raise capital from stockholders or other sources to sustain operations. These matters raise substantial doubt about the Company’s ability to continue as a going concern. Management’s Plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s/ Salberg & Company, P.A.
SALBERG & COMPANY, P.A.
We have served as the Company’s auditor since 2024.
Boca Raton, Florida
March 31, 2025
2295 NW Corporate Blvd., Suite 240 • Boca Raton, FL 33431-7326
Phone: (561) 995-8270 • Toll Free: (866) CPA-8500 • Fax: (561) 995-1920
www.salbergco.com • info@salbergco.com
Member National Association of Certified Valuation Analysts • Registered with the PCAOB
Member CPAConnect with Affiliated Offices Worldwide • Member AICPA Center for Audit Quality
| F-2 |
| Table of Contents |
Report of Independent Registered Public Accounting Firm
Board of Directors and Stockholders
1606 Corp.
Opinion on the Financial Statements
We have audited the accompanying balance sheets of 1606 Corp. (the “Company”) as of December 31, 2023 and 2022, and the related statements of operations, stockholders’ deficit and parent’s net investment, and cash flows for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.
Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency that raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Turner, Stone & Company, L.L.P.
We have served as the Company's auditor from 2021 to 2024.
Dallas, Texas
April 16, 2024
| F-3 |
| Table of Contents |
1606 CORP.
BALANCE SHEETS
|
| December 31, |
|
| December 31, |
| ||
Assets |
| 2024 |
|
| 2023 |
| ||
Current Assets |
|
|
|
|
|
| ||
Cash |
| $ | 2,078 |
|
| $ | 48,941 |
|
Accounts receivable |
|
| - |
|
|
| 3,600 |
|
Notes receivable |
|
| - |
|
|
| 21,500 |
|
Inventory |
|
| - |
|
|
| 72,853 |
|
Prepaids & other current assets |
|
| 8,062 |
|
|
| 1,444 |
|
Total Current Assets |
|
| 10,140 |
|
|
| 148,338 |
|
|
|
|
|
|
|
|
|
|
Total Assets |
| $ | 10,140 |
|
| $ | 148,338 |
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Deficit |
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities |
| $ | 499,231 |
|
| $ | 295,041 |
|
Accrued interest |
|
| 48,486 |
|
|
| 10,086 |
|
Note payable to related party |
|
| 63,456 |
|
|
| 63,456 |
|
Convertible notes, net of discount |
|
| 188,306 |
|
|
| 51,086 |
|
Derivative liability |
|
| 40,603 |
|
|
| 193,026 |
|
Note payable to related party shareholder |
|
| 1,365,550 |
|
|
| 950,550 |
|
Total Current Liabilities |
|
| 2,205,632 |
|
|
| 1,563,245 |
|
Total Liabilities |
|
| 2,205,632 |
|
|
| 1,563,245 |
|
Commitments and contingencies (Note 6) |
|
|
|
|
|
|
|
|
Stockholders’ Deficit |
|
|
|
|
|
|
|
|
Undesignated Preferred Stock, par value $0.0001; 39,999,900 authorized; no shares issued and outstanding |
|
| - |
|
|
| - |
|
Class A Convertible Preferred Stock, par value $0.0001 per share, 60,000,000 shares designated; 59,560,127 and 56,282,599 shares issued and outstanding, respectively |
|
| 5,956 |
|
|
| 5,628 |
|
Series B Super Voting Preferred Stock, par value $0.0001 per share, 100 shares designated; 90 and 0 shares issued and outstanding, respectively |
|
| - |
|
|
| - |
|
Common stock, par value $0.0001 per share, 5,000,000,000 shares authorized; 112,711,945 and 58,582,469 shares issued and outstanding, respectively |
|
| 11,270 |
|
|
| 5,858 |
|
Additional Paid-in Capital |
|
| 4,724,284 |
|
|
| 995,638 |
|
Accumulated Deficit |
|
| (6,937,002 | ) |
|
| (2,422,031 | ) |
Total Stockholders’ Deficit |
|
| (2,195,492 | ) |
|
| (1,414,907 | ) |
Total Liabilities and Stockholders’ Deficit |
| $ | 10,140 |
|
| $ | 148,338 |
|
The accompanying notes are an integral part of these audited financial statements.
| F-4 |
| Table of Contents |
1606 CORP.
STATEMENTS OF OPERATIONS
|
| Year Ended |
|
| Year Ended |
| ||
|
| December 31, |
|
| December 31, |
| ||
|
| 2024 |
|
| 2023 |
| ||
Revenue, net of discounts |
| $ | 7,195 |
|
| $ | 1,603 |
|
|
|
|
|
|
|
|
|
|
Cost of goods sold |
|
| 7,313 |
|
|
| 995 |
|
|
|
|
|
|
|
|
|
|
Gross profit (loss) |
|
| (118 | ) |
|
| 608 |
|
|
|
|
|
|
|
|
|
|
Operating Expenses |
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
| 4,116,657 |
|
|
| 1,555,580 |
|
Write-off of notes receivable and investments |
|
| 21,500 |
|
|
| 65,000 |
|
Total operating expenses |
|
| 4,138,157 |
|
|
| 1,620,580 |
|
|
|
|
|
|
|
|
|
|
Operating loss |
|
| (4,138,275 | ) |
|
| (1,619,972 | ) |
|
|
|
|
|
|
|
|
|
Other Income (Expenses) |
|
|
|
|
|
|
|
|
Interest expense |
|
| (491,385 | ) |
|
| (153,520 | ) |
Gain on debt extinguishment |
|
| 37,461 |
|
|
| - |
|
Change in fair value of derivative liabilities |
|
| 77,228 |
|
|
| 192,759 |
|
Total other expenses |
|
| (376,696 | ) |
|
| 39,239 |
|
|
|
|
|
|
|
|
|
|
Loss from operations before income taxes |
|
| (4,514,971 | ) |
|
| (1,580,733 | ) |
|
|
|
|
|
|
|
|
|
Provision for income taxes |
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
Net Loss |
| $ | (4,514,971 | ) |
| $ | (1,580,733 | ) |
|
|
|
|
|
|
|
|
|
Net loss per share – basic and diluted |
| $ | (0.06 | ) |
| $ | (0.03 | ) |
|
|
|
|
|
|
|
|
|
Weighted average common shares – basic and diluted |
|
| 78,193,535 |
|
|
| 47,322,946 |
|
The accompanying notes are an integral part of these audited financial statements.
| F-5 |
| Table of Contents |
1606 CORP.
STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
Year Ended December 31, 2023 |
| Class A Convertible |
|
| Series B Super Voting |
|
|
|
|
|
|
|
| Additional |
|
|
|
|
| Total |
| |||||||||||||||
|
| Preferred Stock |
|
| Preferred Stock |
|
| Common stock |
|
| Paid in |
|
| Accumulated |
|
| Stockholders' |
| ||||||||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Capital |
|
| Deficit |
|
| Deficit |
| |||||||||
Balance as of December 31, 2022 |
|
| 56,635,000 |
|
| $ | 5,663 |
|
|
| - |
|
| $ | - |
|
|
| 37,428,394 |
|
| $ | 3,742 |
|
| $ | 236,842 |
|
| $ | (841,298 | ) |
| $ | (595,051 | ) |
Share conversions |
|
| (552,405 | ) |
|
| (55 | ) |
|
| - |
|
|
| - |
|
|
| 13,810,125 |
|
|
| 1,381 |
|
|
| (1,326 | ) |
|
| - |
|
|
| - |
|
Preferred stock issued for services |
|
| 200,004 |
|
|
| 20 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 109,982 |
|
|
| - |
|
|
| 110,002 |
|
Common stock issued for cash |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 825,000 |
|
|
| 83 |
|
|
| 412,417 |
|
|
| - |
|
|
| 412,500 |
|
Common stock issued for services |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 6,518,950 |
|
|
| 652 |
|
|
| 177,892 |
|
|
| - |
|
|
| 178,544 |
|
Settlement of derivative liability |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 59,831 |
|
|
| - |
|
|
| 59,831 |
|
Net loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (1,580,733 | ) |
|
| (1,580,733 | ) |
Balance as of December 31, 2023 |
|
| 56,282,599 |
|
| $ | 5,628 |
|
|
| - |
|
| $ | - |
|
|
| 58,582,469 |
|
| $ | 5,858 |
|
| $ | 995,638 |
|
| $ | (2,422,031 | ) |
| $ | (1,414,907 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Year Ended December 31, 2024 |
| Class A Convertible |
|
| Series B Super Voting |
|
|
|
|
|
|
|
| Additional |
|
|
|
|
| Total |
| |||||||||||||||
|
| Preferred Stock |
|
| Preferred Stock |
|
| Common stock |
|
| Paid in |
|
| Accumulated |
|
| Stockholders' |
| ||||||||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Capital |
|
| Deficit |
|
| Deficit |
| |||||||||
Balance as of December 31, 2023 |
|
| 56,282,599 |
|
| $ | 5,628 |
|
|
| - |
|
| $ | - |
|
|
| 58,582,469 |
|
| $ | 5,858 |
|
| $ | 995,638 |
|
| $ | (2,422,031 | ) |
| $ | (1,414,907 | ) |
Share conversions |
|
| (762,472 | ) |
|
| (76 | ) |
|
| - |
|
|
| - |
|
|
| 19,061,800 |
|
|
| 1,906 |
|
|
| (1,830 | ) |
|
| - |
|
|
| - |
|
Preferred stock issued for services |
|
| 4,040,000 |
|
|
| 404 |
|
|
| 90 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 2,989,596 |
|
|
| - |
|
|
| 2,990,000 |
|
Common stock issued for cash, net of offering cost |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 19,462,532 |
|
|
| 1,946 |
|
|
| 369,124 |
|
|
| - |
|
|
| 371,070 |
|
Common stock issued for services |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 900,000 |
|
|
| 90 |
|
|
| 43,310 |
|
|
| - |
|
|
| 43,400 |
|
Common stock issued upon note conversions |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 14,705,144 |
|
|
| 1,470 |
|
|
| 328,446 |
|
|
| - |
|
|
| 329,916 |
|
Net loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (4,514,971 | ) |
|
| (4,514,971 | ) |
Balance as of December 31, 2024 |
|
| 59,560,127 |
|
| $ | 5,956 |
|
|
| 90 |
|
| $ | - |
|
|
| 112,711,945 |
|
| $ | 11,270 |
|
| $ | 4,724,284 |
|
| $ | (6,937,002 | ) |
| $ | (2,195,492 | ) |
The accompanying notes are an integral part of these audited financial statements.
| F-6 |
| Table of Contents |
1606 CORP.
STATEMENTS OF CASH FLOWS
|
| Year Ended |
|
| Year Ended |
| ||
|
| December 31, |
|
| December 31, |
| ||
|
| 2024 |
|
| 2023 |
| ||
Cash Flows from Operating Activities |
|
|
|
|
|
| ||
Net loss |
| $ | (4,514,971 | ) |
| $ | (1,580,733 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Shares issued for services provided |
|
| 3,033,400 |
|
|
| 288,546 |
|
Amortization of debt discount |
|
| 360,847 |
|
|
| 119,324 |
|
Change in fair value of derivative liabilities |
|
| (77,228 | ) |
|
| (192,759 | ) |
Gain on debt extinguishment |
|
| (37,461 | ) |
|
| - |
|
Financing cost |
|
| - |
|
|
| 200,616 |
|
Write-off of notes receivable and investments |
|
| 21,500 |
|
|
| 65,000 |
|
Inventory write-off |
|
| 72,853 |
|
|
| - |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
| 3,600 |
|
|
| (3,600 | ) |
Inventory |
|
| - |
|
|
| 40,321 |
|
Prepaids & other current assets |
|
| (6,618 | ) |
|
| 12,133 |
|
Accounts payable and accrued liabilities |
|
| 204,190 |
|
|
| 269,852 |
|
Accrued interest |
|
| 48,902 |
|
|
| 34,196 |
|
Net cash used in operating activities |
|
| (890,986 | ) |
|
| (747,104 | ) |
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities |
|
|
|
|
|
|
|
|
Increase in operating companies |
|
| - |
|
|
| (65,000 | ) |
Investment in note receivable |
|
| - |
|
|
| (21,500 | ) |
Net cash used in investing activities |
|
| - |
|
|
| (86,500 | ) |
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities |
|
|
|
|
|
|
|
|
Proceeds from note payable to shareholder |
|
| 415,000 |
|
|
| 215,500 |
|
Proceeds from convertible notes |
|
| 494,500 |
|
|
| 245,000 |
|
Repayment of convertible notes |
|
| (436,447 | ) |
|
| (95,520 | ) |
Proceeds from sale of common stock |
|
| 371,070 |
|
|
| 412,500 |
|
Net cash provided by financing activities |
|
| 844,123 |
|
|
| 777,480 |
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash |
|
| (46,863 | ) |
|
| (56,124 | ) |
|
|
|
|
|
|
|
|
|
Cash, beginning of year |
|
| 48,941 |
|
|
| 105,065 |
|
|
|
|
|
|
|
|
|
|
Cash, end of year |
| $ | 2,078 |
|
| $ | 48,941 |
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash items |
|
|
|
|
|
|
|
|
Interest paid |
| $ | - |
|
| $ | - |
|
Income tax paid |
| $ | - |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
Supplemental schedule of non-cash investing and financing activities |
|
|
|
|
|
|
|
|
Discount on convertible notes payable from derivative liability |
| $ | 147,805 |
|
| $ | 141,231 |
|
Settlement of derivative liability |
| $ | - |
|
| $ | 59,831 |
|
Conversion of loans and accrued interest into common stock |
| $ | 144,377 |
|
| $ | - |
|
The accompanying notes are an integral part of these audited financial statements.
| F-7 |
| Table of Contents |
1606 Corp.
Notes to Financial Statements
December 31, 2024 and 2023
NOTE 1 - DESCRIPTION OF BUSINESS
Corporate History
1606 Corp. (“1606” or the “Company”) was formed in February 2021 and was a division of Singlepoint Inc. (“Singlepoint”) until April 2021, when Singlepoint spun off 1606, whereby each holder of common stock and Class A preferred stock of Singlepoint received one share of unregistered and restricted common stock or Class A preferred stock of the Company for each such share owned of Singlepoint.
Business
The Company is an AI company specializing in building and merchandizing AI Chatbot ‘s for the CBD industry and AI Chatbots for public companies.
Going Concern
The accompanying financial statements have been prepared assuming the Company will continue as a going concern which contemplates the realization of assets and settlement of liabilities and commitments in the normal course of business. As of December 31, 2024, the Company has yet to achieve significant profitable operations and is dependent on its ability to raise capital from stockholders or other sources to sustain operations and to ultimately achieve viable operations. The financial statements do not include any adjustments that might result from the outcome of these uncertainties. These factors raise substantial doubt about the Company’s ability to continue as a going concern for the period of twelve months from the issuance date of this report.
The Company’s ability to continue in existence is dependent on its ability to develop its business and to achieve profitable operations. Since the Company does not anticipate achieving profitable operations and/or adequate cash flows in the near term, management will continue to pursue additional equity financing through private placements of the Company’s common stock.
NOTE 2 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The financial statements and related disclosures have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). These financial statements have been prepared using the accrual basis of accounting in accordance with Generally Accepted Accounting Principles of the United States (“U.S. GAAP”).
Use of Estimates
The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Accordingly, actual results may differ from those estimates. Significant estimates in the accompanying financial statements include valuation of notes receivable, valuation of inventory, valuation of derivative liabilities, valuation of stock-based costs, and valuation of deferred tax assets.
Reclassifications
The Company reclassified certain interest expenses of $153,520 from operating expenses to other expenses for the year ended December 31, 2023, to conform to the 2024 presentation. There was no net effect on the total expenses of such reclassification.
Cash
Cash consists of highly liquid investments with an original maturity of three months or less.
Accounts Receivable and Credit Policy
Trade receivables due from customers are uncollateralized customer obligations due under normal trade terms requiring payment within 30 days from the invoice date. Under the current expected credit loss method of ASC 326, estimated probable losses are charged to expense. The allowance is provided based upon a review of the individual accounts outstanding expected future write-offs, prior history of uncollectable accounts receivable and existing economic conditions. At December 31, 2024 and December 31, 2023, the allowance for doubtful accounts balance is $0.
| F-8 |
| Table of Contents |
Inventory
Inventories were valued at the lower of cost or net realizable value, and consisted primarily of finished hemp products. At each balance sheet date, the Company evaluates inventories for excess quantities, obsolescence, or shelf-life expiration. This evaluation includes analysis of historical sales levels by product, projections of future demand and the risk of technological or competitive obsolescence for products. To the extent that management determines there is excess or obsolete inventory or quantities with a shelf life that is too near its expiration for the Company to reasonably expect that it can sell those products prior to their expiration, the Company adjusts the carrying value of this inventory to the lower of cost or net realizable value. During the year ended December 31, 2024, the Company wrote off inventory in the amount of $72,853 which is included in operating expenses, since the Company will no longer be selling CBD products.
Derivative Liabilities
The Company has certain financial instruments that are derivatives or contain embedded derivatives. The Company evaluates all its financial instruments to determine if those contracts or any potential embedded components of those contracts qualify as derivatives to be separately accounted for in accordance with ASC 810-10-05-4 and 815-40. This accounting treatment requires that the carrying amount of any derivatives be recorded at fair value at issuance and marked-to-market at each balance sheet date. In the event that the fair value is recorded as a liability, as is the case with the Company, the change in the fair value during the period is recorded as either other income or expense. Upon conversion, exercise or repayment, the respective derivative liability is marked to fair value at the conversion, repayment or exercise date and then the related fair value amount is reclassified to other income or expense as part of gain or loss on extinguishment.
When a convertible note that contains a bi-furcated derivative is converted, it is not considered to be a convertible note for accounting purposes. Therefore, the Company will recognize a gain or loss on the conversion as a debt extinguishment gain or loss based on the difference between the fair value of the shares issued and the carrying value of the debt converted.
Stock-Based Compensation
The Company accounts for stock-based compensation in accordance with ASC 718, “Compensation - Stock Compensation,” which requires all stock-based awards granted to employees, directors and non-employees to be measured at grant date fair value of the equity instrument issued and recognized as expense. Stock-based compensation expense is recognized on a straight-line basis over the requisite service period of the award, which is generally equivalent to the vesting period. The fair value of each stock option granted is estimated using the Black-Scholes option pricing model. The measurement date for the non-forfeitable awards to non-employees that vest immediately is the date the award is granted.
Revenue Recognition
The Company, which has adopted ASC 606 “Revenue from Contracts with Customers”, historically derived its revenues primarily from the sale of hemp products at a point in time. Revenues are recognized when control of these products is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those products, the Company's performance obligations have been met and collection is probable. Sales and other taxes the Company collects concurrent with revenue-producing activities are excluded from revenue. Any shipping and handling fees charged to customers are reported within revenue. Incidental items that are immaterial in the context of the contract are recognized as expense. The Company does not have any significant financing components as payment is received at or shortly after the point of sale.
BOT Revenue
In addition to hemp product sales, the Company plans to generate revenue from its BOT services. BOT and related revenue is recognized over time as services are rendered to customers in accordance with the contractual terms. Revenue is measured based on the transaction price specified in the contract, net of discounts and other adjustments. The Company assesses the progress toward completion using an input or output method, as appropriate, to determine the amount of revenue recognized during the reporting period. The Company ensures that all performance obligations are met before recognizing revenue, and collection is deemed probable before recording sales.
Disaggregation of Revenue and Revenue Concentration
All revenue is derived from consulting services to one potential BOT customer. The Company ensures that all performance obligations are met before recognizing revenue, and collection is deemed probable before recording sales.
| F-9 |
| Table of Contents |
Cost of Goods Sold and Selling, General and Administrative Expenses
Costs associated with the production and procurement of product are included in cost of goods sold, including shipping and handling costs such as inbound freight costs, purchasing, and receiving costs, inspection costs and other product procurement related charges. All other expenses are included in selling, general and administrative expenses, as the predominant expenses associated therewith are general and administrative in nature.
Net Loss Per Common Share
Basic loss per share data is computed using the weighted-average number of shares of common stock outstanding during the period. Diluted loss per share data is computed using the weighted-average number of common and dilutive common-equivalent shares outstanding during the period. Dilutive common-equivalent shares consist of shares that would be issued upon the exercise of stock options and other common stock equivalents, computed using the treasury stock method, and are excluded from the calculation of weighted average dilutive common shares, to the extent they are issued and outstanding, because their effect would be anti-dilutive. The number of potentially dilutive shares excluded from the calculation of diluted earnings per share were 1,489,003,175 related to the Company’s Class A convertible preferred stock. These shares were excluded from the diluted per share calculation because the effect of including these potential shares was antidilutive.
At December 31, 2024 and December 31, 2023, 112,711,945 and 58,582,469 shares of the Company’s common stock were outstanding, respectively. These share amounts are utilized for the calculation of basic and diluted earnings per share for years then ended.
Selling and Marketing
Selling and marketing costs are expensed as incurred and are reported under selling, general and administrative in the accompanying statements of operations.
Fair Value Measurement
ASC Topic 820, “Fair Value Measurement”, requires that certain financial instruments be recognized at their fair values at our balance sheet dates. However, other financial instruments, such as debt obligations, are not required to be recognized at their fair values, but GAAP provides an option to elect fair value accounting for these instruments. GAAP requires the disclosure of the fair values of all financial instruments, regardless of whether they are recognized at their fair values or carrying amounts in our balance sheets. For financial instruments recognized at fair value, GAAP requires the disclosure of their fair values by type of instrument, along with other information, including changes in the fair values of certain financial instruments recognized in income or other comprehensive income. For financial instruments not recognized at fair value, the disclosure of their fair values is provided below under “Financial Instruments.”
Nonfinancial assets, such as property, plant and equipment, and nonfinancial liabilities are recognized at their carrying amounts in the Company’s balance sheets. GAAP does not permit nonfinancial assets and liabilities to be remeasured at their fair values. However, GAAP requires the remeasurement of such assets and liabilities to their fair values upon the occurrence of certain events, such as the impairment of property, plant and equipment. In addition, if such an event occurs, GAAP requires the disclosure of the fair value of the asset or liability along with other information, including the gain or loss recognized in income in the period the remeasurement occurred.
Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities;
Level 2 - Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; or
Level 3 - Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).
The Company did not have any Level 1 or Level 2 assets and liabilities at December 31, 2024, or 2023. The Derivative liabilities are Level 3 fair value measurements.
The following is a summary of activity of Level 3 liabilities for the years ended December 31, 2024 and 2023:
Balance - December 31, 2022 |
| $ | - |
|
Additions |
|
| 445,616 |
|
Settlements |
|
| (59,831 | ) |
Change in fair value |
|
| (192,759 | ) |
Balance - December 31, 2023 |
| $ | 193,026 |
|
Balance - December 31, 2023 |
| $ | 193,026 |
|
Additions |
|
| 147,805 |
|
Gain on debt extinguishment |
|
| (223,000 | ) |
Change in fair value |
|
| (77,228 | ) |
Balance – December 31, 2024 |
| $ | 40,603 |
|
During 2023, the Company issued note payable agreements which contain conversion provisions meeting the definition of a derivative liability which therefore require bifurcation. Further, pursuant to the Company’s contract ordering policy, equity linked instruments subsequently issued resulted in derivative liabilities.
| F-10 |
| Table of Contents |
Settlements of derivative liabilities are the result of conversions or repayments of the underlying note payable agreements. The fair value of the bifurcated derivative related to the amounts converted or repaid are included in the (gain) loss on debt extinguishment in the accompanying condensed statement of operations.
At December 31, 2024, and for year then ended, the Company estimated the fair value of the conversion feature derivatives embedded in the notes payable and warrants based on assumptions used in the Cox-Ross-Rubinstein binomial pricing model using the following inputs: the price of the Company’s common stock ranging from $0.0084 to $0.0632; risk-free interest rates ranging from 4.20% to 5.16%; expected volatility of the Company’s common stock ranging from 110% to 183% based on the volatility of the Company and comparable publicly traded entities; and exercise prices ranging from $0.0051 to $0.0371; terms of three to twelve months; and an expected probability of occurrence of note default of 10%.
At December 31, 2023, the Company estimated the fair value of the conversion feature derivatives embedded in the notes payable and warrants based on assumptions used in the Cox-Ross-Rubinstein binomial pricing model using the following inputs: the price of the Company’s common stock of $0.0285; risk-free interest rates ranging from 4.79% to 5.03%; expected volatility of the Company’s common stock ranging from 110% to 204% based on the volatility of comparable publicly traded entities; and exercise prices of $0.0182; and terms of eight to twelve months.
Segment reporting
The Company operates as a single operating segment technology-based company that is developing a chatbot using AI technology to be placed on CBD retailers’ and brands’ websites. Per ASC 280 – “Segment Reporting”, the Company’s chief operating decision maker has been identified as the Chief Executive Officer, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. Existing guidance, which is based on a management approach to segment reporting, establishes requirements to report selected segment information quarterly and to report annually entity-wide disclosures about products and services, major customers, and the countries in which the entity holds material assets and reports revenue. All material operating units qualify for aggregation under “Segment Reporting” due to their similarities in economic characteristics such as nature of services; and procurement processes. Since the Company operates in one segment, all financial information required by “Segment Reporting” can be found in the accompanying consolidated balance sheets and statements of operations and notes to consolidated financial statements.
The table below provides information about the Company’s revenue, significant segment expenses and other segment expenses.
|
| Year ended |
|
| Year ended |
| ||
|
| December 31, |
|
| December 31, |
| ||
|
| 2024 |
|
| 2023 |
| ||
Revenue, net of discounts |
| $ | 7,195 |
|
| $ | 1,603 |
|
Cost of goods sold |
|
| 7,313 |
|
|
| 995 |
|
Gross profit (loss) |
|
| (118 | ) |
|
| 608 |
|
Less segment expenses: |
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
| 4,116,657 |
|
|
| 1,555,580 |
|
Write-off of notes receivable and investments |
|
| 21,500 |
|
|
| 65,000 |
|
Operating loss |
|
| (4,138,275 | ) |
|
| (1,619,972 | ) |
Plus: |
|
|
|
|
|
|
|
|
Interest expense |
|
| (491,385 | ) |
|
| (153,520 | ) |
Gain on debt extinguishment |
|
| 37,461 |
|
|
| - |
|
Change in fair value of derivative liabilities |
|
| 77,228 |
|
|
| 192,759 |
|
Segment Net loss |
| $ | (4,514,971 | ) |
| $ | (1,580,733 | ) |
Income Taxes
The Company accounts for income taxes in accordance with Accounting Standards Codification ("ASC") Topic 740, "Income Taxes." Under this guidance, the Company recognizes deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial statement carrying amounts and the tax bases of assets and liabilities. Deferred tax assets are evaluated for realizability and reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax assets will not be realized.
In December 2023, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”), which will require the Company to disclose specified additional information in its income tax rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. ASU 2023-09 will also require the Company to disaggregate its income taxes paid disclosure by federal, state and foreign taxes, with further disaggregation required for significant individual jurisdictions. The Company will adopt ASU 2023-09 in its fourth quarter of 2026. ASU 2023-09 allows for adoption using either a prospective or retrospective transition method.
Recent Accounting Pronouncements
In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40), which requires entities to provide more detailed disaggregation of expenses in the income statement, focusing on the nature of the expenses rather than their function. The new disclosures will require entities to separately present expenses for significant line items, including but not limited to, depreciation, amortization, and employee compensation. Entities will also be required to provide a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively, disclose the total amount of selling expenses and, in annual reporting periods, provide a definition of what constitutes selling expenses. This pronouncement is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company does not expect the adoption of this new guidance to have a material impact on the financial statements.
| F-11 |
| Table of Contents |
NOTE 3 – RELATED PARTY TRANSACTIONS
Related Party Transactions
During the year ended December 31, 2024, a total of 4,040,000 shares of Class A convertible preferred stock was issued to the members of the Company’s Board of Directors for services provided. The value of all these shares was determined to be $2,990,000 based on an assumed conversion at a 1-for-25 ratio of the Class A preferred stock for common shares and the closing market price of $0.029 of the common shares on the date of grant.
During the year ended December 31, 2024, a total of 90 shares of Series B super voting preferred stock was issued to the Company’s Chief Executive Officer, Austen Lambrecht, and to the Company’s former Chief Executive Officer, Greg Lambrecht as Compensation for Services. A nominal value was recorded for the fair value of the Series B shares issued. On June 14, 2024, Gregory Lambrecht, gifted 60 shares of the Company’s Series B Preferred Stock to Austen Lambrecht.
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 which is reflected as note payable to related party on the balance sheet. 1606 Corp. was originally a division of Singlepoint until April 2021, when Singlepoint spun off 1606 Corp. through a stock distribution to its shareholders. The Note bears interest at 5%, has a three-year term, and is due in monthly installments of $1,902 beginning August 1, 2021. The Company has not made any payments on the Note and is currently in default. Accrued interest on the Note totaled $9,527 and $6,346 at December 31, 2024 and December 31, 2023, respectively.
During the year ended December 31, 2024, the Company borrowed $415,000 in a series of cash payments from the Company’s former CEO and shareholder in exchange for the issuance of a promissory note. The promissory note is not secured by Company assets, does not bear interest and is due in full on December 31, 2025. The promissory note totals $1,365,550 at December 31, 2024.
NOTE 4 – DEBT
Promissory Notes Payable - Related Party
During the year ended December 31, 2024, the Company borrowed $415,000 in a series of cash payments from the Company’s former CEO and shareholder in exchange for the issuance of a promissory note. The promissory note is not secured by Company assets, does not bear interest and is due in full on December 31, 2025. The promissory note totals $1,365,550 at December 31, 2024.
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, which is reflected as a note payable to a related party in accompanying balance sheet. The Note bears interest at 5%, has a three-year term, and is due in monthly installments of $1,902 beginning August 1, 2021. The Company has not made any payments on the Note and is currently in default. Accrued interest on the Note totaled $9,527 and $6,346 at December 31, 2024 and December 31, 2023, respectively.
Convertible Notes Payable and Derivatives
From January 19, 2024, to November 22, 2024, the Company issued eight notes payable for the total principal of $640,750 and net proceeds of $494,500 after OID discounts of $97,750 and fees of $48,500 which, upon an event of default, contain a conversion feature meeting the definition of a derivative liability. Pursuant to the Company’s contract ordering policy, the conversion features were valued at $147,805 upon issuance and recorded as a derivative liability, resulting in additional debt discounts totaling $147,805.
The Notes have maturity dates ranging from November 30, 2024 to August 30, 2025 and carry interest rates ranging from 12% to 13%, except for one note for $60,000 which is at 8%. The notes with one of the lenders have cross default provisions only between the notes of that lender. No cross default occurred in 2024.
For one of the Notes which is convertible after 180 days from issuance or upon an event of default, the conversion rate shall be 65% of the Market Price with the Market Price being defined as the lowest trading price of the Company's common stock over the 10 preceding trading days. For seven of the Notes, which are convertible only after an Event of Default, the conversion rate shall be 70% of the market price with the market price being defined as the lowest trading price of the Company's common stock over the 10 preceding trading days.
During the year ended December 31, 2024, the Company made payments on and had conversions of convertible notes payable and a note payable, resulting in a gain on debt extinguishment from settlement of derivative liabilities totaling $223,000. Additionally, the Company issued 14,705,144 common shares for the conversion of notes payable with principal and accrued interest totaling $144,377, resulting in a loss on debt extinguishment totaling $185,539. The above $223,000 gain and $185,539 loss resulted in a net gain on extinguishment of $37,461 as reflected in the statement of operations for the year ended December 31, 2024.
During the year ended December 31, 2024, the Company amortized $360,847 of debt discount resulting in an unamortized debt discount of $86,608 and carrying value of $188,306 as of December 31, 2024. Accrued interest as of December 31, 2024 was $48,486.
| F-12 |
| Table of Contents |
Convertible notes value as of December 31, 2024 and December 31, 2023:
|
| December 31, 2024 |
|
| December 31, 2023 |
| ||
Convertible notes |
| $ | 274,914 |
|
| $ | 204,488 |
|
Unamortized discounts |
|
| (86,608 | ) |
|
| (153,402 | ) |
Convertible notes, net |
| $ | 188,306 |
|
| $ | 51,086 |
|
Scheduled maturities of the above related party and convertible notes debt remaining as of December 31, 2024 for each respective fiscal year end are as follows:
2024 |
| $ | 63,456 |
|
2025 |
|
| 1,640,466 |
|
Total |
| $ | 1,703,922 |
|
NOTE 5 - CAPITAL STOCK
Capital Stock
As of December 31, 2024, the Company’s authorized capital stock consists of 5,000,000,000 shares of common stock at $0.0001 par value per share and 100,000,000 shares of preferred stock at $0.0001 par value per share. The Company has designated 60,000,000 shares of preferred stock as Class A convertible preferred stock (the “Class A Preferred Stock”), and 100 shares of preferred stock as Series B super voting preferred stock (the “Series B Preferred Stock”). The remaining 39,999,900 of preferred stock remains undesignated.
Common Stock
The holders of common stock are entitled to one vote for each share held. The affirmative vote of a majority of votes cast at a meeting which commences with a lawful quorum is sufficient for approval of most matters upon which shareholders may or must vote, including the questions presented for approval or ratification at the Company’s Annual Shareholders’ Meeting. An amendment of the Company’s Articles of Incorporation, however, requires the affirmative vote of a majority of the Company’s total voting power for approval. Common shares do not carry cumulative voting rights, and holders of more than 50% of the common stock have the power to elect all directors and, as a practical matter, to control the Company. Holders of common stock are not entitled to preemptive rights, and the common stock may only be redeemed at the Company’s election.
During the year ended December 31, 2024, the Company issued 54,129,476 shares of its common stock, including:
- | 19,061,800 shares of its common stock upon conversion of 762,472 shares of Class A preferred stock; |
- | 19,462,532 shares of its common stock for a total purchase price of $371,070, net of offering costs of $14,175; |
- | 900,000 shares of its common stock for various services provided, valued at $43,400 based on the closing market price of the common shares on the grant dates; |
- | 14,705,144 shares of its common stock with a fair value of $329,916 based on the closing market price on the conversion dates upon conversion of convertible notes and accrued interest in the amount of $144,377, resulting in a loss on debt extinguishment of $185,539. |
Class A Preferred Stock
The Class A preferred stock has certain material rights and preferences (as is more fully set forth in the Certificate of Designation of the Class A Preferred Stock).
During the year ended December 31, 2024, a total of 4,040,000 shares of Class A preferred stock was issued to the members of the Company’s Board of Directors for services provided. The value of all these shares was determined to be $2,990,000 based on an assumed conversion at a 25 common shares for 1 preferred share ratio of the Class A preferred stock for common shares and the approximate $0.029 closing market price of the common shares on the date of grant.
During the year ended December 31, 2024, 762,472 shares of Class A preferred stock were converted into 19,061,800 common shares.
As of December 31, 2024, the Company had 59,560,127 shares of Class A preferred stock outstanding, of which 15,958,767 shares are held by the Company’s CEO. The former officers and directors of Singlepoint hold the remaining shares of the Class A preferred stock.
| F-13 |
| Table of Contents |
Ranking
The Class A preferred stock ranks, as to dividends and upon liquidation, senior and prior to the common stock of the Company.
Liquidation
In the event of liquidation, dissolution or winding up of the Company, the holders of the Class A preferred stock are entitled, out of the assets of the Company legally available for distribution, to receive, before any payment to the holders of shares of common stock or any other class or series of stock ranking junior, and amount per share equal to any dividends declared but unpaid thereon.
Voting
Each share of Class A preferred stock entitles the holder thereof to 50 votes on any matters requiring a shareholder vote of the Company.
Conversion
Each share of our Class A preferred stock is convertible into 25 shares of common stock at the option of the holder.
Series B Super Voting Preferred Stock
The Series B preferred stock has certain material rights and preferences (as is more fully set forth in the Certificate of Designation of the Series B Preferred Stock) and has a stated value of $0.0001 per share.
During the year ended December 31, 2024, a total of 90 shares of Class A preferred stock was issued to the two members of the Company’s Board of Directors. A nominal value was recorded for the fair value of the Series B shares issued.
As of December 31, 2024, the Company had 90 shares of Series B preferred stock outstanding.
Dividends
There will be no dividends due or payable on the Series B Preferred Stock.
Liquidation Rights
Upon the occurrence of a “Liquidation Event,” the holders of Series B Preferred Stock are entitled to receive net assets on a pro-rata basis. Each holder of Series B Preferred Stock is entitled to receive ratably any dividends declared by the Board, if any, out of funds legally available for the payment of dividends. “Liquidation Event” means (i) the liquidation, dissolution or winding-up, whether voluntary or involuntary, of the Company, (ii) the purchase or redemption by the Company of shares of any class of stock or the merger or consolidation of the Company with or into any other corporation or corporations, or (iii) the sale, license or lease of all or substantially all, or any material part of, the Company’s assets.
Conversion Rights
The shares of Series B Preferred Stock are not convertible into shares of the Company’s Common Stock.
Voting Rights
If at least one share of Series B Preferred Stock is issued and outstanding, then the total aggregate issued shares of Series B Preferred Stock at any given time, regardless of their number, shall have voting rights equal to 10 times the sum of: i) the total number of shares of Common Stock which are issued and outstanding at the time of voting, plus ii) the total number of votes of all other series of Preferred Stocks which are issued and outstanding at the time of voting.
Each individual share of Series B Preferred Stock shall have the voting rights equal to:
[ten times the sum of: {all shares of Common Stock issued and outstanding at the time of voting + the total number of votes of all other series of Preferred Stocks which are issued and outstanding at the time of voting}]
Divided by:
[the number of shares of Series B Preferred Stock issued and outstanding at the time of voting]
With respect to all matters upon which stockholders are entitled to vote or to which stockholders are entitled to give consent, the holders of the outstanding shares of Series B Preferred Stock shall vote together with the holders of Common Stock without regard to class, except as to those matters on which separate class voting is required by applicable law or the Articles of Incorporation or Bylaws.
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NOTE 6 - COMMITMENTS AND CONTINGENCIES
Legal Proceedings and Other Claims
From time to time, we are a party to claims and actions for matters arising out of our business operations. We regularly evaluate the status of the legal proceedings and other claims in which we are involved to assess whether a loss is probable or there is a reasonable possibility that a loss, or an additional loss, may have been incurred and determine if accruals are appropriate. If accruals are not appropriate, we further evaluate each legal proceeding to assess whether an estimate of possible loss or range of possible loss can be made for disclosure. Although the outcome of claims and litigation is inherently unpredictable, we believe that we have adequate provisions for any probable and estimable losses. It is possible, nevertheless, that our financial position, results of operations or liquidity could be materially and adversely affected in any particular period by the resolution of a claim or legal proceeding. Legal expenses related to defense, negotiations, settlements, rulings, and advice of outside legal counsel are expensed as incurred.
Employment Agreements
Effective February 28, 2024, the Company entered into the Employment Agreement with Gregory Lambrecht, the Company’s Chief Executive Officer (the “CEO Agreement”). The term of the CEO Agreement is three years from the effective date, and will renew for six month periods automatically unless terminated by either party providing 90 days of prior written notice or for “Cause,” as defined in the CEO Agreement. Pursuant to the CEO Agreement, Mr. Lambrecht is entitled to an annual salary of $250,000. Mr. Lambrecht is also entitled to a bonus as determined by the Company’s Board of Directors, healthcare (once established by the Company), reimbursement of expenses, and 20 vacation days per year. Also, as an inducement to enter into the CEO Agreement, Mr. Lambrecht was issued 60 shares of Series B Preferred Stock of the Company.
Effective May 28, 2024, Gregory Lambrecht resigned as the Chief Executive Officer, Chief Financial Officer, and Chairman of the Board of the Company and the Employee Agreement was terminated.
Effective February 28, 2024, the Company entered into the Employment Agreement with Austen Lambrecht, the Company’s Vice President (the “VP Agreement”). The term of the VP Agreement is three years from the effective date, and will renew for six month periods automatically unless terminated by either party providing 90 days of prior written notice or for “Cause,” as defined in the VP Agreement. Pursuant to the VP Agreement, Mr. Lambrecht is entitled to an annual salary of $97,000. Mr. Lambrecht is also entitled to a bonus as determined by the Company’s Board of Directors, healthcare (once established by the Company), reimbursement of expenses, and 20 vacation days per year. Also, as an inducement to enter into the VP Agreement, Mr. Lambrecht was issued 30 shares of Series B Preferred Stock of the Company.
Effective May 28, 2024, the Board of Directors of the Company (with Austen Lambrecht abstaining) appointed Austen Lambrecht as Chief Executive Officer (Principal Executive Officer), Chief Financial Officer (Principal Financial and Accounting Officer), and Chairman of the Board of the Company.
In February 2023, the Company entered into an employment agreement with Austen Lambrecht. The agreement provides that Austen Lambrecht would serve as Vice President for a term of three years at an annual salary of Eighty-Five Thousand Dollars ($85,000), with an incentive bonus and stock options as determined by the Board of Directors. The agreement automatically renews for additional six-month periods unless either party has provided written termination of this Agreement at least 90 days prior to the expiration of such term. The agreement also provides for compensation under certain severance and change of control circumstance of twelve months of salary and other bonus dollars that may be due.
In May 2021, the Company entered into an employment agreement with Greg Lambrecht. The agreement provides that Mr. Lambrecht would serve as Chief Executive Officer Company for a term of three years at an annual salary of Two Hundred Fifty Thousand Dollars ($250,000), and an incentive bonus as determined by the Board of Directors. The agreement automatically renews for additional six-month periods unless either party has provided written termination of this Agreement at least 90 days prior to the expiration of such term.
NOTE 7 – INCOME TAXES
The Company accounts for its income taxes in accordance with ASC 740 “Income Taxes”, which requires recognition of deferred tax assets and liabilities for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and tax credit carry forwards.
Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date. The Company has a net operating loss carryforward, however, due to the uncertainty of realization, the Company has provided a full valuation allowance for deferred tax assets resulting from this net operating loss carryforward.
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| Table of Contents |
The components of income tax expense for the years ended December 31, 2024 and 2023, consist of the following:
|
| 2024 |
|
| 2023 |
| ||
Federal tax statutory rate |
|
| 21.0 | % |
|
| 21.0 | % |
Permanent differences |
| - | % |
| - | % | ||
Valuation allowance |
|
| (21.0 | )% |
|
| (21.0 | )% |
Effective rate |
| - | % |
| - | % | ||
Significant components of the Company’s estimated deferred tax assets and liabilities as of December 31, 2024 and 2023 are as follows:
|
| 2024 |
|
| 2023 |
| ||
Deferred tax assets: |
|
|
|
|
|
| ||
Net operating loss carryforwards |
| $ | 769,031 |
|
| $ | 537,032 |
|
Total deferred tax asset |
|
| 769,031 |
|
|
| 537,032 |
|
Valuation allowance |
|
| (769,031 | ) |
|
| (537,032 | ) |
Net deferred tax assets |
| $ | - |
|
| $ | - |
|
NOTE 8 – SUBSEQUENT EVENTS
Subsequent to December 31, 2024, the Company issued an aggregate of 16,214,200 shares of its common stock upon conversion of 648,568 shares of Class A preferred stock.
Additionally, the Company issued 8,435,279 shares of its common stock for a total purchase price of $40,337.
On March 4, 2025, the Company issued a convertible note payable for the total principal of $85,050. The note has a maturity date of December 15, 2025, and carries an interest rate of 8%. The note is convertible only after 180 days and the conversion rate shall be 75% of the market price with the market price being defined as the lowest trading price of the Company's common stock over the 10 preceding trading days.
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