1606 Corp. - 10-K

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 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.

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. This LOI has expired and the Company has no plans to move forward.

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Strategic Shift Toward Power Infrastructure and Data Center Operations

While the Company continues to maintain its AI chatbot technology, during the fourth quarter of 2025 and continuing into 2026, the Company's strategic focus shifted toward the acquisition and development of power infrastructure and energy assets to support data center and AI-related operations.

In November 2025, the Company signed a non-binding LOI with Sim Agro Inc. ("Sim Agro"), a privately held power plant operations and energy infrastructure company. As contemplated, Sim Agro would acquire a controlling interest in the Company, creating a public platform for Sim Agro's strategic expansion into power generation and data center infrastructure. Negotiations with Sim Agro remain ongoing as of the date of this report, and no definitive agreement has been executed.

On December 3, 2025, the Company received a $6 million investment commitment letter from ENMAS EPC Power Projects Limited to support the Company's strategic growth and expansion initiatives, including the potential acquisition of power generation and energy infrastructure assets.

On March 12, 2026, the Company entered into a Purchase and Sale Agreement with Jefferson Enterprise Energy, LLC to acquire approximately 132 acres of real property in Lufkin, Angelina County, Texas, including a 55-megawatt power generation facility and a 50,000-square-foot climate-controlled warehouse the Company believes is suitable for data center deployment. The total purchase price is $11,168,864, consisting of $7,000,000 in cash at closing and the assumption of a mechanic's and materialman's lien. Closing is scheduled for April 15, 2026.

The Company has also engaged Moody Capital Solutions, Inc. as its sole exclusive placement agent and financial advisor to advise on capital markets and financing matters in connection with these initiatives.

If the Company successfully completes the Texas acquisition and the Sim Agro transaction, the Company's business and operations would be fundamentally different from the AI chatbot business that generated substantially all historical activity. The Company anticipates that its future revenue, if any, would be derived primarily from power generation and data center infrastructure services rather than from chatbot licensing. There can be no assurance that either transaction will be completed, and the failure to complete one or both could have a material adverse effect on the Company's financial condition, results of operations, and future prospects.

Results from Operations – For the year ended   December 31, 2025, as compared to December 31, 2024

Net Revenue.  For the year ended December 31, 2025, we generated no revenue. For the year ended December 31, 2024, we generated revenue of $7,195 from consulting services to one potential BOT customer.

Cost of Goods Sold.  For the year ended December 31, 2025 and 2024, cost of goods sold was $0 and $7,313, respectively.

Gross Loss . As a result of the foregoing, we had a gross loss of $0 for the year ended December 31, 2025, compared with a gross loss of $118 for the year ended December 31, 2024.

Operating Expenses.   For the year ended December 31, 2025 and 2024, total operating expenses were $485,738 and $4,138,157, respectively. The decrease was primarily due to stock-based compensation of approximately $3.033 million during the year ended December 31, 2024; there was no such expense during the year ended December 31, 2025.

Net Loss . For the year ended December 31, 2025 and 2024, net loss was $1,295,041 and $4,514,971, respectively. The decrease in net loss was primarily due to lower operating expenses as discussed above.

Liquidity and Capital Resources

As of December 31, 2025, 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, exclusive of the Texas property acquisition, we estimate a cash need of approximately $1,000,000. In addition, the Company is obligated under the Purchase and Sale Agreement dated March 12, 2026, to pay $7,000,000 in cash at the closing of the Texas property acquisition, currently scheduled for April 15, 2026. The Company has not yet secured the financing necessary to fund the cash portion of the purchase price. The Company intends to fund the acquisition through a combination of capital sources, which may include proceeds under the investment commitment letter received from ENMAS EPC Power Projects Limited, proceeds from the Moody Capital placement agent engagement, and additional debt or equity financing. There can be no assurance that the Company will obtain sufficient financing to close the transaction on acceptable terms, or at all, and failure to do so would result in the forfeiture of the $250,000 nonrefundable earnest money deposit.

Following the closing of the Texas acquisition, if completed, the Company anticipates that it will require additional capital to bring the power generation facility to an operational state and to fund data center infrastructure development. The amount of such additional capital has not yet been determined. The Company's ability to fund these post-acquisition capital requirements is dependent upon its ability to raise additional debt or equity financing and, if completed, the resources available through the Sim Agro transaction.

Should we not be able to fulfill our cash needs through the foregoing sources, we will need to raise money through outside investors through convertible notes, debt, or similar instruments. There is no guarantee that we will be able to do so on acceptable terms, or at all.

Operating Activities

Net cash used in operating activities was $460,779 for the year ended December 31, 2025, primarily as a result of our net loss of $1,295,041 and change in fair value of derivative liabilities of $231,896, and gain on debt extinguishment of $55,269, offset by initial derivative expense of $142,726, amortization of debt discount of $850,785, and net changes in operating assets and liabilities of $112,916.

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 million amortization of debt discount of $360,847, and net changes in operating assets and liabilities of $250,074.

Investing Activities

There was no cash used in investing activities during the year ended December 31, 2025.

There was no cash used in investing activities during the year ended December 31, 2024.

Financing Activities

During the year ended December 31, 2025, our financing activities provided cash of $458,701, including $83,117 net proceeds from the sale of our common stock, $146,000 in proceeds from convertible notes, and $539,500 in proceeds from the note payable to our former CEO. We also repaid $309,916 of convertible notes.

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.

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Critical Accounting Policies

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 the 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.