1606 Corp 10-K for FY2023
1606 Corp. (CBDW)
About this 10-K
1606 Corp filed this 10-K on April 17, 2024, covering the fiscal year ended December 31, 2023 (FY2023).
Headline figures
Fiscal year ended December 31, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $1603
- down 88.5% from $13.94K a year earlier
- Net loss
- $1.58M
- compared with a net loss of $540.04K a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM
Mark One
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File No.
(Exact name of registrant as specified in its charter) |
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(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) |
(Address of principal executive offices)
Phone: (
(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 ☐
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 ☐
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.
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).
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 | ☐ |
☒ | 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, 2023 was approximately $
The number of shares of the registrant’s common stock, $0.0001 par value per share, outstanding as of April 15, 2024, was
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.
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.
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 costumers’ 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.
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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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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 two full-time employees, which includes our Chief Executive Officer, Gregory Lambrecht, and our Vice President, 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.
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.
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“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 |
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First Quarter |
| $ | 0.230 |
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| $ | 0.023 |
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2023 |
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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 April 15, 2024 was approximately 65,356,177. 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 56,322,598 shares of our Class A Convertible Preferred Stock outstanding, which were held by eight record holders. Lastly, there were 90 shares of our Class B Super Voting Preferred Stock outstanding, which were held by two record holders.
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
During the year ended December 31, 2023, we sold an aggregate of 6,518,950 shares of Common Stock to Don Flanagan, Prasad Boddu, Brent Duskin, Sergio Alcala, Kevin Phillips, Derek McCarthy as payment for various services provided.
During the year ended December 31, 2023, we sold an aggregate of 13,810,125 shares of Common Stock upon conversion of 552,405 shares of Class A Preferred Stock owned by Will Ralston, Greg Lambrecht, Asia Lambrecht, and Heather McCulley.
We also sold an aggregate of 825,000 shares of Common Stock at $0.50 per share for a total purchase price of $412,500 to Srinivas Chitturi (Santander), Mangala Gowri Gulapalya Matam, Sreekanth Annalamuni, Sreekanth Myneni, Shiva Ram Prasad Pusala, Vamsi Krishna Singudasu, Vishnu Sandeep Yadavalli, Prashant Dandemraju, Raghu N. Sanivarapu, Ratnadeep Chadalawada, Chameekar R Katukuri, Karthik Kotha Laxmi Bajjara, and Kanakadurga Guntuboyina
Class A Preferred Stock
During the year ended December 31, 2023, a total of 200,001 shares of Class A Preferred Stock were issued to our Vice President, Austen Lambrecht, the son of Greg Lambrecht, our 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.
Convertible Promissory Notes
During the year ended December 31, 2023, we entered into a series of convertible promissory note agreements in the aggregate principal amount of $204,488. The notes have a 1-year term, bear interest of 8-9%, and have a conversion price equal to 65% of the lowest trading price for the common stock during the ten-day period prior to the conversion date.
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.
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Item 6. [Reserved]
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion should be read in conjunction with our audited financial statements and the related notes that appear elsewhere in this Annual Report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include but are not limited to those discussed below and elsewhere in this Annual Report. Our audited financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.
Plan of Operation
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. Nevertheless, the financial statements may not include all the actual expenses that would have been incurred had the Company operated as a standalone company during the period prior to the spin-off. Actual costs that would have been incurred if the Company had operated as a standalone company would depend on multiple factors, including organizational structure and strategic decisions made in various areas.
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 retailors 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, the Company has cultivated considerable interest in 1606 and our AI Chatbot technology.
The company is 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.
Results from Operations – For the year ended December 31, 2023, as compared to December 31, 2022.
Net Revenue. For the year ended December 31, 2023 and 2022, we generated revenues of $1,603 and $13,944, respectively. The decrease in revenues was due primarily to the decrease in sales of hemp cigarettes.
Cost of Goods Sold. For the year ended December 31, 2023 and 2022, cost of revenue was $995 and $12,762, respectively.
Gross Profit. As a result of the foregoing, we had a gross profit of $608 for the year ended December 31, 2023, compared with a gross profit of $1,182 for the year ended December 31, 2022.
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Operating Expenses. For the year ended December 31, 2023 and 2022, total operating expenses were $1,774,100 and $541,219, respectively. The increase was primarily due to write-off of investments, higher legal and professional expenses related to regulatory filings and listing of our common stock, higher advertising and marketing spend associated with efforts to expand distribution of our product offerings and higher salaries and wages.
Net Loss. For the year ended December 31, 2023 and 2022, net loss was $1,580,733 and $540,037, respectively. The increase in net loss was primarily due to higher operating expenses as discussed above.
Liquidity and Capital Resources
As of December 31, 2023, the Company has yet to achieve profitable operations, and while the Company hopes to achieve profitable operations in the future, if not it 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 the Company’s ability to continue as a going concern. The Company’s principal sources of liquidity have been cash provided by operating activities, as well as its ability to raise capital. The Company’s operating results for future periods are subject to numerous uncertainties and it is uncertain if the Company 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, the Company may not be able to achieve profitability. The Company’s ability to continue in existence is dependent on the Company’s 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). The Company plans to pay off current liabilities through sales and increasing revenue through sales of Company services and or products, or through financing activities as mentioned above, although there is no guarantee that the Company will ultimately do so.
Operating Activities
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.
Net cash used in operating activities was $610,151 for the year ended December 31, 2022, primarily as a result of our net loss of $540,037, which was increased by net changes in operating assets and liabilities of $70,114.
Investing Activities
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 (see Note 6 of the Notes to the Financial Statements for further details). The $21,500 related to additional funds advanced to one of the target companies for which the Company now has Notes Receivable.
There was no cash used in investing activities during the year ended December 31, 2022.
Financing Activities
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, $149,480 in net proceeds from convertible notes, and $215,500 in proceeds from the note payable to our CEO.
For the year ended December 31, 2022, our financing activities provided cash of $705,673, including $543,173 resulting from additional borrowings from our CEO and $162,500 from the sale of our common stock.
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.
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Loss Contingencies
The Company is subject to various loss contingencies arising in the ordinary course of business. The Company considers the likelihood of loss or impairment of an asset or the incurrence of a liability, as well as its ability to reasonably estimate the amount of loss in determining loss contingencies. An estimated loss contingency is accrued when management concludes that it is probable that an asset has been impaired, or a liability has been incurred and the amount of the loss can be reasonably estimated. The Company regularly evaluates current information available to us to determine whether such accruals should be adjusted.
Income Taxes
The Company recognizes deferred tax assets (future tax benefits) and liabilities for the expected future tax consequences of temporary differences between the book carrying amounts and the tax basis of assets and liabilities. The deferred tax assets and liabilities represent the expected future tax return benefits or consequences of those differences, which are expected to be either deductible or taxable when the assets and liabilities are recovered or settled.
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.
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, Gregory 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, 2023. Based on his evaluation, Mr. Lambrecht concluded that, due to a material weakness in our internal control over financial reporting as described below, our disclosure controls and procedures were not effective as of December 31, 2023. 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.
| 11 |
| Table of Contents |
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, 2023, 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. |
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; |
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|
|
| · | 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 |
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|
| · | 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, 2023, 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.
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| 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 |
|
|
|
|
|
Gregory Lambrecht |
| 61 |
| Chief Executive Officer, Chief Financial Officer and Director |
Austen Lambrecht |
| 26 |
| Vice President of Operations and Director |
Govindan Gowrishankar |
| 58 |
| Director |
Venu Aravamudan |
| 59 |
| 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
Greg Lambrecht became the Chief Executive Officer of the Company and a member of the Board of Directors at the inception of the Company. Prior to this, Mr. Lambrecht was the founder, and served as Chief Executive Officers of Singlepoint Inc, for over ten years until 2021. Mr. Lambrecht is a visionary entrepreneur backed by a robust tenure in operations, investor relations, and corporate leadership, As the founder of a leading consumer product distribution company, Mr. Lambrecht negotiated agreements with the nation’s largest retail outlets such as 711 (Southland Corp), Albertsons, and Costco representing 25,000 retail accounts. He is a graduate of Western Washington University with a degree in Marketing and Communications.
Our Vice President
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 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.
Legal Proceedings
Besides the disclosure below, 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.
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| Table of Contents |
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, 2023 and 2022.
Name and Principal Position |
| Year |
| Salary ($) |
|
| Total ($) |
| ||
|
|
|
|
|
|
|
|
| ||
Greg Lambrecht, |
| 2023 |
|
| 250,000 | (1) |
|
| 250,000 |
|
CEO, CFO, and; Chairman |
| 2022 |
|
| - |
|
|
| - |
|
(1) | All of the salary was accrued and unpaid. |
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.
Director Compensation
During the year ended December 31, 2023, no compensation awarded to, earned by, or paid to our non-executive directors.
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.
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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.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following tables set forth, as of April 15, 2024, certain information concerning the beneficial ownership of our capital stock, including our common stock, and Class A Convertible 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.
Our calculation of the percentage of beneficial ownership prior to this offering is based on 62,486,877 shares of common stock outstanding as of April 15, 2024, we also have 56,322,598 shares of Series 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 |
| ||
Gregory Lambrecht (1) |
|
| 2,878,793 |
|
|
| 4.6 | % |
Austen Lambrecht (2) |
|
| 229,334 |
|
| * |
| |
Govindan Gowrishankar (3) |
|
| 38,001 |
|
| * |
| |
Venu Aravamudan (4) |
|
| 167,067 |
|
| * |
| |
Officers and Directors as a Group (4 individuals) |
|
| 3,313,195 |
|
|
| 5 | % |
_________
* Less than 1%
(1) | Does not include 31,092,596 shares of Class A Preferred Stock and 60 shares of Class B Preferred Stock owned by Gregory Lambrecht. |
(2) | Does not include 200,001 shares of Class A Preferred Stock and 30 shares of Class B Preferred Stock owned by Austen Lambrecht. |
(3) | Does not include 3,000,001 shares of Class A Preferred Stock owned by Govindan Gowrishankar. |
(4) | Does not include35,001 shares of Class A Preferred Stock owned by Venu Aravamudan. |
| 15 |
| Table of Contents |
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 “Item 11. Executive Compensation.” 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 |
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|
|
| · | 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, 2023 and 2022, the Company borrowed $215,500 and $540,000, respectively in a series of cash payments from the Company’s 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 March 15, 2025. The promissory note totaled $950,550 at December 31, 2023.
During the year ended December 31, 2023, a total of 200,001 shares of Class A Preferred Stock were issued to ours Vice President, Austen Lambrecht, the son of Greg Lambrecht, our 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 February 28, 2024, we entered into an Employment Agreement with Austen Lambrecht, our Vice President. 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.
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 |
| 2023 |
| 2022 |
| |
Audit Fees | $ | 53,015 |
| $ | 35,000 |
|
Audit Related Fees |
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|
|
| - |
|
Tax Fees |
|
|
|
| - |
|
All Other Fees |
|
|
|
| 21,000 |
|
Total Fees | $ | 53,015 |
| $ | 56,000 |
|
| 16 |
| Table of Contents |
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 2023 or 2022.
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 2023 or 2022.
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 2023 or 2022.
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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 |
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| ||
|
| S-1 |
| 333-258912 |
| 3.3 |
| 8/19/21 |
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| ||
|
| S-1 |
| 333-258912 |
| 3.2 |
| 8/19/21 |
|
| ||
|
| 8-K |
| 000-56467 |
| 3.1 |
| 3/4/24 |
|
| ||
| Employment Agreement between 1606 Corp. and Greg Lambrecht dated May 10, 2021 |
| S-1 | 333-258912 | 10.1 | 8/19/21 |
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| ||||
| Asset Purchase Agreement between 1606 Corp. and Singlepoint Inc. dated June 15, 2021 |
| S-1 | 333-258912 | 10.2 | 8/19/21 |
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| ||||
| 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 |
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| ||
| Stock Purchase Agreement between 1606 Corp. and Heather McCulley dated April 28, 2021 |
| S-1/A | 333-258912 |
| 10.5 |
| 11/23/21 |
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| ||
|
| 8-K | 000-56467 |
| 10.6 |
| 2/14/23 |
|
| |||
|
| 8-K | 000-56467 |
| 10.7 |
| 2/14/23 |
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| |||
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| S-1/A |
| 333-270963 |
| 10.8 |
| 7/7/23 |
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| ||
| Employment Agreement dated February 20, 2024 with Gregory Lambrecht |
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| x | |
| Employment Agreement dated February 20, 2024 with Austen Lambrecht |
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| x | |
23.1 |
| Consent of Carl P. Ranno |
| S-1/A |
| 333-270963 |
| 23.1 |
| 7/7/23 |
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| S-1/A |
| 333-270963 |
| 23.2 |
| 7/7/23 |
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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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101.SCH |
| Inline XBRL Taxonomy Extension Schema Document |
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101.CAL |
| Inline XBRL Taxonomy Extension Calculation Linkbase Document |
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101.DEF |
| Inline XBRL Taxonomy Extension Definition Linkbase Document |
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101.LAB |
| Inline XBRL Taxonomy Extension Label Linkbase Document |
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101.PRE |
| Inline XBRL Taxonomy Extension Presentation Linkbase Document |
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104 |
| Cover Page Interactive Data File (formatted in Inline XBRL, and included in exhibit 101). |
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____________
| * | Indicates management contract or compensatory plan or arrangement. |
Item 16. Form 10–K Summary
None.
| 18 |
| 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: April 17, 2024 | By: | /s/ Gregory Lambrecht | |
Gregory 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/ Gregory Lambrecht | Chief Executive Officer, Chief Financial Officer, and Chairman of the Board (Principal Executive | April 17, 2024 | ||
Gregory Lambrecht | Officer and Principal Financial Officer) | |||
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/s/ Austen Lambrecht |
| Vice President and Director |
| April 17, 2024 |
Austen Lambrecht |
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/s/ Govindan Gowrishankar |
| Director |
| April 17, 2024 |
Govindan Gowrishankar |
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/s/ Venu Aravamudan |
| Director |
| April 17, 2024 |
Venu Aravamudan |
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| 19 |
| Table of Contents |
Index to Financial Statements |
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| |
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| ||
Report of Independent Registered Public Accounting Firm (PCAOB # |
| F-2 |
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| F-3 |
| |
Statements of Operations for the Years Ended December 31, 2023 and 2022 |
| F-4 |
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| F-5 |
| |
Statements of Cash Flows for the Years Ended December 31, 2023 and 2022 |
| F-6 |
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| F-7 |
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| F-1 |
| 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 entity 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 entity’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 entity'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/
We have served as the Company's auditor since 2021.
April 16, 2024
| F-2 |
| Table of Contents |
1606 CORP.
BALANCE SHEETS
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Assets |
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Current Assets |
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Cash |
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Accounts receivable |
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Notes receivable |
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Inventory |
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Prepaids and other current assets |
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Total Current Assets |
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Total Assets |
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Liabilities and Stockholders’ Equity |
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Current Liabilities |
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Accounts payable and accrued liabilities |
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Accrued Interest |
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Note payable to related party |
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Convertible notes, net of discount |
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Derivative liability |
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Total Current Liabilities |
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Long Term Liabilities |
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Note payable to stockholder |
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Total Long Term Liabilities |
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Total Liabilities |
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Stockholders’ Equity |
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Undesignated Preferred Stock, par value $ |
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Class A Convertible Preferred Stock, par value $ |
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Common Stock, par value $ |
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Additional paid-in capital |
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Accumulated deficit |
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Total Stockholders’ Equity |
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Total Liabilities and Stockholders’ Equity |
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The accompanying notes are an integral part of these financial statements.
| F-3 |
| Table of Contents |
1606 CORP.
STATEMENTS OF OPERATIONS
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Revenue, net of discounts |
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Cost of goods sold |
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Gross profit |
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Operating Expenses |
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Selling, general and administrative |
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Write-off of investments |
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Total operating expenses |
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Operating loss |
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Other Income |
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Change in fair value of derivative liabilities |
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Total other income |
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Loss from operations before income taxes |
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Provision for income taxes |
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Net Loss |
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Net loss per share – basic and diluted |
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Weighted average common shares – basic and diluted |
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The accompanying notes are an integral part of these financial statements.
| F-4 |
| Table of Contents |
1606 CORP.
STATEMENTS OF STOCKHOLDERS’ DEFICIT
Year Ended December 31, 2022 |
| Class A Convertible |
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Balance as of December 31, 2021 |
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Net loss |
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Balance as of December 31, 2022 |
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Year Ended December 31, 2023 |
| Class A Convertible |
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Balance as of December 31, 2022 |
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Share conversions |
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Preferred stock issued for services |
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Common stock issued for cash |
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Common stock issued for services |
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Settlement of derivative liability |
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Net loss |
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Balance as of December 31, 2023 |
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The accompanying notes are an integral part of these financial statements.
| F-5 |
| Table of Contents |
1606 CORP.
STATEMENTS OF CASH FLOWS
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| December 31, |
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Cash Flows from Operating Activities |
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Net loss |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Preferred and common shares issued for services provided |
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Write-off of investments |
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Amortization of debt discount |
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Financing cost |
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Change in fair value of derivative liabilities |
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Changes in operating assets and liabilities: |
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Accounts receivable |
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Inventory |
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Prepaids and other current assets |
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Accounts payable and accrued liabilities |
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Accrued Interest |
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Net cash used in operating activities |
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Cash Flows from Investing Activities |
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Investment in operating companies |
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Investment in note receivable |
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Net cash used in investing activities |
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Cash Flows from Financing Activities |
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Proceeds from stockholder |
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Proceeds from convertible notes |
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Repayment of convertible notes |
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Proceeds from sale of common stock |
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Net cash provided by financing activities |
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Net increase (decrease) in cash |
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Cash, beginning of year |
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Cash, end of year |
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Supplemental disclosures of cash items |
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Interest paid |
| $ |
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Income tax paid |
| $ |
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Supplemental schedule of non-cash investing and financing activities |
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Discount on convertible notes payable from derivative liability |
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Settlement of derivative liability |
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The accompanying notes are an integral part of these financial statements.
| F-6 |
| Table of Contents |
1606 Corp.
Notes to the Financial Statements
For the years ended December 31, 2023 and 2022
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 Chatbot company specializing in merchandizing bot specifically built for the CBD industry.
Going Concern
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As of December 31, 2023, 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.
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.
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. Management of the Company considers all receivables collectable. Uncollectable accounts are charged to expense when the account is determined to be uncollectable. The allowance is provided based upon a review of the individual accounts outstanding, prior history of uncollectable accounts receivable and existing economic conditions. At December 31, 2023 and 2022, the allowance for doubtful accounts balance is $
| F-7 |
| Table of Contents |
Inventory
Inventories are valued at the lower of cost or net realizable value, and consist primarily of hemp products. The Company’s inventory as of December 31, 2023, and 2022 consisted 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 market. No such adjustments were deemed necessary during the periods presented.
Investments
Investments are recorded at cost and evaluated for impairment each balance sheet date. During the year ended December 31, 2023, the Company wrote-off investments of $
Revenue Recognition
The Company, which has adopted ASC 606 “Revenue from Contracts with Customers”, derives its revenues primarily from the sale of hemp products. 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. 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.
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.
Income taxes
Income taxes are accounted for using an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial statement and tax bases of assets and liabilities at the applicable tax rates. Deferred tax assets are reduced by a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates.
Tax benefits are recognized from an uncertain tax position only if it is more likely than not that the tax position will be sustained upon examination by a tax authority and based upon the technical merits of the tax position. The tax benefit recognized in the financial statements for a particular tax position is based on the largest benefit that is more likely than not to be realized upon settlement. An unrecognized tax benefit, or a portion thereof, is presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward if such settlement is required or expected in the event the uncertain tax position is disallowed.
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 2,265,400 related to the Company’s Class A 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, 2023 and 2022,
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. Selling, general and administrative costs were $
| F-8 |
| Table of Contents |
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, 2022 or 2023. The Derivative liabilities are Level 3 fair value measurements.
The following is a summary of activity of Level 3 liabilities for the year ended December 31, 2023:
Balance - December 31, 2022 |
| $ |
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Additions |
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Settlements |
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| ( | ) |
Change in fair value |
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Balance - December 31, 2023 |
| $ |
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Beginning on June 27, 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 subsequent to June 27, 2023, resulted in derivative liabilities.
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 $
Segment reporting
The Company operates in a single business segment. As a result, the Company’s operations are a single reportable segment, which is consistent with the Company’s internal management reporting.
Subsequent Events
The Company has evaluated all subsequent events from December 31, 2023, through the date of filing of this report. and determined that there were no events or transactions required recognition or disclosure in the accompanying financial statements. (see Note 8).
Recent Accounting Pronouncements
The Company has considered the potential impact of recent accounting pronouncements and has not identified any that are expected to have a material impact on the financial statements.
| F-9 |
| Table of Contents |
NOTE 3 – RELATED PARTY TRANSACTIONS
Related Party Transactions
During the year ended December 31, 2023, a total of
During the year ended December 31, 2023,
During the years ended December 31, 2023 and 2022, the Company borrowed $
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 $
NOTE 4 – DEBT
Promissory Notes Payable - Related Party
During the years ended December 31, 2023 and 2022, the Company borrowed $
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 $
Convertible Notes Payable
During the year ended December 31, 2023, the Company entered into a series of convertible promissory note agreements in the amount of $
During the year ended December 31, 2023, the Company amortized $
From June 27, 2023 to December 19, 2023, the Company issued three convertible notes payable which 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 $
| F-10 |
| Table of Contents |
On December 20, 2023, the Company repaid a convertible note payable prior to maturity, resulting in a settlement of derivative liabilities totaling $
Scheduled maturities of debt remaining as of December 31, 2023 for each respective fiscal year end are as follows:
2024 |
| $ |
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2025 |
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Total |
| $ |
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NOTE 5 - CAPITAL STOCK
Capital Stock
As of December 31, 2023, the Company’s authorized capital stock consists of
As of December 31, 2023, there were
Common Stock
During the year ended December 31, 2023, the Company issued
During the year ended December 31, 2023, the Company issued
During the year ended December 31, 2022, the Company sold
Preferred Stock
As of December 31, 2023, the Company had
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, 2023, a total of
During the year ended December 31, 2023,
| F-11 |
| 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 $
Voting
Conversion
Each share of our Class A preferred stock is convertible into common stock on a one-for-25 basis at the option of the holder.
NOTE 6 – 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.
The components of income tax expense for the years ended December 31, 2023 and 2022, consist of the following:
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| 2022 |
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Federal tax statutory rate |
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| % | ||
Permanent differences |
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| - | % |
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| - | % |
Valuation allowance |
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| ( | )% |
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| ( | )% |
Effective rate |
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| - | % |
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| - | % |
Significant components of the Company’s estimated deferred tax assets and liabilities as of December 31, 2023 and 2022 are as follows:
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| 2023 |
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| 2022 |
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Deferred tax assets: |
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Net operating loss carryforwards |
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Total deferred tax asset |
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Valuation allowance |
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| ( | ) |
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| ( | ) |
Net deferred tax assets |
| $ |
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| $ |
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NOTE 7 - COMMITMENTS AND CONTINGENCIES
Letter of Intent
| F-12 |
| Table of Contents |
Membership Interest Purchase Agreement
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
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 ($
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 ($
Greg Lambrecht has agreed to waive his right to payment of any amounts due but unpaid under his employment contract.
NOTE 8 – SUBSEQUENT EVENTS
None
| F-13 |
EXHIBIT 10.9
EMPLOYMENT AGREEMENT
This Agreement (this “Agreement”), dated and effective as of February 28, 2024 (the “Effective Date”), by and between 1606 Corp., a Nevada corporation with principal offices at 2425 E. Camelback Road, Suite 150, Phoenix Arizona 85016 (the “Company”), and Gregory Lambrecht residing at 6738 N Central Ave, Phoenix Arizona 85012 (the “Executive”). As of the Effective Date, this Agreement replaces and supersedes that certain Employment Agreement between the Company and the Executive effective as of May 10, 2021 (the “Prior Agreement”).
WITNESSETH:
WHEREAS, the Company desires to employ the Executive as Chief Executive Officer, of the Company, and the Executive desires to serve the Company in such capacity, upon the terms and subject to the conditions contained in this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the parties hereto hereby agree as follows:
1. Employment.
The Executive will be employed by the Company as Chief Executive Officer. The Executive will report to the Board of Directors of the Company (the “Board”) and shall perform such duties as are consistent with his position as Chief Executive Officer (as applicable, the “Services”). The Executive agrees to perform such duties faithfully, to devote all of his working time, attention and energies to the business of the Company, and while he remains employed by the Company, not to engage in any other business activity that is in conflict with his duties and obligations to the Company.
2. Term.
The Executive’s employment under this Agreement (the “Term”) shall commence as of the Effective Date and shall continue for a term of three (3) years unless sooner terminated pursuant to Section 8 of this Agreement. This Agreement shall automatically be renewed for additional six month periods (included in the definition of Term) unless either party has provided written termination of this Agreement at least ninety (90) days prior to the expiration of such Term or if terminated for Cause (as defined below) regardless of timing. Notwithstanding anything to the contrary contained herein, the provisions of this Agreement governing protection of Confidential Information shall continue in effect as specified in Section 5 hereof and survive the expiration or termination hereof.
3. Best Efforts; Place of Performance.
(a) The Executive shall devote substantially all of his business time, attention and energies to the business and affairs of the Company and shall use his best efforts to advance the best interests of the Company and shall not during the Term be actively engaged in any other business activity, whether or not such business activity is pursued for gain, profit or other pecuniary advantage, that will interfere with the performance by the Executive of his duties hereunder or the Executive’s availability to perform such duties or that will adversely affect, or negatively reflect upon, the Company.
| 1 | Page |
(b) The duties to be performed by the Executive hereunder shall be performed in any suitable location to efficiently complete the required tasks, subject to reasonable travel requirements on behalf of the Company, or such other place as the Board may reasonably designate.
4. Compensation. As full compensation for the performance by the Executive of his duties under this Agreement, the Company shall pay the Executive as follows:
(a) Base Salary. The Company shall pay Executive a salary (the “Base Salary”) equal to Two Hundred Fifty Thousand Dollars ($250,000.00) per year. Payment shall be made in accordance with the Company’s normal payroll practices.
(b) Bonus. The Executive shall be entitled to such bonus as determined by the Board of Directors. Bonus may include shares of preferred stock, common stock or cash.
(c) Withholding. The Company shall withhold all applicable federal, state and local taxes and social security and such other amounts as may be required by law from all amounts payable to the Executive under this Section 4.
(d) Equity Compensation. On the Effective Date, or as soon as practicable thereafter once the Certificate of Designation is filed for the Series B Super Voting Preferred Stock (the “Series B Preferred Stock”), the Company shall award the Executive sixty (60) shares of Series B Preferred Stock.
(e) Healthcare. The Executive shall have the right to participate in a healthcare plan once established by the Company.
(f) Expenses. The Company shall reimburse the Executive for all normal, usual and necessary expenses incurred by the Executive in furtherance of the business and affairs of the Company, including reasonable travel and entertainment, upon timely receipt by the Company of appropriate vouchers or other proof of the Executive’s expenditures and otherwise in accordance with any expense reimbursement policy as may from time to time be adopted by the Company.
(f) Vacation. The Executive shall, during the Term, be entitled to twenty (20) days’ vacation per annum, in addition to holidays observed by the Company. The Executive shall not be entitled to carry any vacation forward to the next year of employment and shall not receive any compensation for unused vacation days.
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5. Confidential Information and Inventions.
(a) The Executive recognizes and acknowledges that in the course of his duties he is likely to receive confidential or proprietary information owned by the Company, its affiliates or third parties with whom the Company or any such affiliates has an obligation of confidentiality. Accordingly, during and after the Term, the Executive agrees to keep confidential and not disclose or make accessible to any other person or use for any other purpose other than in connection with the fulfillment of his duties under this Agreement, any Confidential and Proprietary Information (as defined below) owned by, or received by or on behalf of, the Company or any of its affiliates. “Confidential and Proprietary Information” shall include, but shall not be limited to, confidential or proprietary scientific or technical information, data, and related concepts, business plans (both current and under development), client lists, promotion and marketing programs, trade secrets, or any other confidential or proprietary business information relating to development programs, costs, revenues, marketing, investments, sales activities, promotions, credit and financial data, manufacturing processes, financing methods, plans or the business and affairs of the Company or of any affiliate or client of the Company. The Executive expressly acknowledges the trade secret status of the Confidential and Proprietary Information and that the Confidential and Proprietary Information constitutes a protectable business interest of the Company. The Executive agrees: (i) not to use any such Confidential and Proprietary Information for himself or others; and (ii) not to take any Company material or reproductions (including but not limited to writings, correspondence, notes, drafts, records, invoices, technical and business policies, computer programs or disks) thereof from the Company’s offices at any time during his employment by the Company, except as required in the execution of the Executive’s duties to the Company. The Executive agrees to return immediately all Company material and reproductions (including but not limited, to writings, correspondence, notes, drafts, records, invoices, technical and business policies, computer programs or disks) thereof in his possession to the Company upon request and in any event immediately upon termination of employment.
(b) Except with prior written authorization by the Company, the Executive agrees not to disclose or publish any of the Confidential and Proprietary Information, or any confidential, technical or business information of any other party to whom the Company or any of its affiliates owes an obligation of confidence, at any time during or after his employment with the Company.
(c) The Executive agrees that all inventions, discoveries, improvements and patentable or copyrightable works initiated, conceived or made by him, either alone or in conjunction with others, through the use of the resources of the Company or directly related to the business of the Company (the “Inventions”) during the Term shall be the sole property of the Company to the maximum extent permitted by applicable law and, to the extent permitted by law, shall be “works made for hire” as that term is defined in the United States Copyright Act (17 U.S.C.A., Section 101). The Company shall be the sole owner of all patents, copyrights, trade secret rights, and other intellectual property or other rights in the Inventions. The Executive hereby assigns to the Company all right, title and interest he may have or acquire in all such Inventions; provided, however, that the Board of Directors of the Company may in its sole discretion agree to waive the Company’s rights pursuant to this Section 6(c). The Executive further agrees to assist the Company in every proper way (but at the Company’s expense) to obtain and from time to time enforce patents, copyrights or other rights on such Inventions in any and all countries, and to that end the Executive will execute all documents necessary (even after termination of this Agreement):
(i) to apply for, obtain and vest in the name of the Company alone (unless the Company otherwise directs) letters patents, copyrights or other analogous protection in any country throughout the world and when so obtained or vested to renew and restore the same; and
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(ii) to defend any opposition proceedings in respect of such applications and any opposition proceedings or petitions or applications for revocation of such letters patent, copyright or other analogous protection.
(d) The Executive shall cooperate in all regards with the Company, in any and all matters, including but not limited to, the execution of any and all documents pertaining to the Company (even after termination of this Agreement).
(e) The Executive acknowledges that while performing the Services under this Agreement the Executive may locate, identify and/or evaluate patented or patentable inventions or other business opportunities (the “Third Party Inventions”) having commercial potential in the fields which may be of potential interest to the Company or one of its affiliates. The Executive understands, acknowledges and agrees that all rights to, interests in or opportunities regarding, all Third-Party Inventions identified by the Company, any of its affiliates or either of the foregoing persons’ officers, directors, employees (including the Executive), agents or consultants during the Employment Term shall be and remain the sole and exclusive property of the Company or such affiliate and the Executive shall have no rights whatsoever to such Third-Party Inventions and will not pursue for himself or for others any transaction relating to the Third-Party Inventions which is not on behalf of the Company. Notwithstanding the foregoing, if the Company, having been presented with the opportunity by the Executive to pursue such Third Party Inventions chooses not to do so, then Executive may pursue such Third Party Inventions himself without accounting to the Company therefore.
(f) Executive agrees that he will promptly disclose to the Company, or any persons designated by the Company, all improvements, Inventions made or conceived or reduced to practice or learned by him, either alone or jointly with others, during the Term.
(g) The provisions of this Section 5 shall survive any termination of this Agreement.
6. Non-Competition, Non-Solicitation and Non-Disparagement.
(a) The Executive understands and recognizes that his services to the Company are special and unique and that in the course of performing such services the Executive will have access to, and knowledge of, Confidential and Proprietary Information (as defined in Section 5) and the Executive agrees that, during the Term and for a period of twelve (12) months thereafter, he shall not in any manner, directly or indirectly, on behalf of himself or any person, firm, partnership, joint venture, corporation or other business entity (“Person”), enter into or engage in any business which is engaged in any business directly competitive with the business of the Company, either as an individual for his own account, or as a partner, joint venturer, owner, executive, employee, independent contractor, principal, agent, consultant, salesperson, officer, director or shareholder of a Person in a business competitive with the Company within the geographic area of the Company’s business, which is deemed by the parties hereto to be nationwide. The Executive acknowledges that, due to the unique nature of the Company’s business, the loss of any of its clients or business flow or the improper use of its Confidential and Proprietary Information could create significant instability and cause substantial damage to the Company and its affiliates and therefore the Company has a strong legitimate business interest in protecting the continuity of its business interests and the restriction herein agreed to by the Executive narrowly and fairly serves such an important and critical business interest of the Company. For purposes of this Agreement, the Company shall be deemed to be actively engaged on the date hereof in the development and commercialization of hemp related products and in the future in any other business in which it actually devotes substantive resources to study, develop or pursue. Notwithstanding the foregoing, nothing contained in this Section 6(a) shall be deemed to prohibit the Executive from (i) acquiring or holding, solely for investment, publicly traded securities of any corporation, some or all of the activities of which are competitive with the business of the Company so long as such securities do not, in the aggregate, constitute more than four percent (4%) of any class or series of outstanding securities of such corporation. This Section 6(a) shall not be enforceable by the Company against Executive if the Executive (i) is terminated by the Company without Cause; or (ii) terminates this Agreement for Good Reason.
| 4 | Page |
(b) During the Term and for a period of twelve (12) months thereafter, the Executive shall not, directly or indirectly, without the prior written consent of the Company:
(i) solicit or induce any employee of the Company or any of its affiliates to leave the employ of the Company or any such affiliate; or hire for any purpose any employee of the Company or any affiliate or any employee who has left the employment of the Company or any affiliate within one year of the termination of such employee’s employment with the Company or any such affiliate or at any time in violation of such employee’s non-competition agreement with the Company or any such affiliate; or
(ii) solicit or accept employment or be retained by any Person who, at any time during the term of this Agreement, was an agent, client or customer of the Company or any of its affiliates where his position will be related to the business of the Company or any such affiliate; or
(iii) solicit or accept the business of any agent, client or customer of the Company or any of its affiliates with respect to products or services which compete directly with the products or services provided or supplied by the Company or any of its affiliates, or
(iv) Notwithstanding the foregoing, Sections 6(b)(ii) and 6(b)(iii) shall not be enforceable by the Company against Executive if the Executive (i) is terminated by the Company without Cause; or (ii) terminates this Agreement for Good Reason.
(c) The Company and the Executive each agree that both during the Term and at all times thereafter, neither party shall directly or indirectly disparage, whether or not true, the name or reputation of the other party or any of its affiliates, including but not limited to, any officer, director, employee or shareholder of the Company or any of its affiliates.
| 5 | Page |
(d) In the event that the Executive breaches any provisions of Section 5 or this Section 6 or there is a threatened breach, then, in addition to any other rights which the Company may have, the Company shall be entitled, without the posting of a bond or other security, to seek injunctive relief to enforce the restrictions contained in such Sections, in addition to any other remedies at law or in equity to which the Company may be entitled.
(e) Each of the rights and remedies enumerated in Section 6(d) shall be independent of the others and shall be in addition to and not in lieu of any other rights and remedies available to the Company at law or in equity. If any of the covenants contained in this Section 6, or any part of any of them, is hereafter construed or adjudicated to be invalid or unenforceable, the same shall not affect the remainder of the covenant or covenants or rights or remedies which shall be given full effect without regard to the invalid portions. If any of the covenants contained in this Section 6 is held to be invalid or unenforceable because of the duration of such provision or the area covered thereby, the parties agree that the court making such determination shall have the power to reduce the duration and/or area of such provision and in its reduced form such provision shall then be enforceable.
(f) In the event that an actual proceeding is brought in equity to enforce the provisions of Section 5 or this Section 6, the Executive shall not use as a defense that there is an adequate remedy at law nor shall the Company be prevented from seeking any other remedies which may be available.
(g) The provisions of this Section 6 shall survive any termination of this Agreement.
7. Representations and Warranties by the Executive.
The Executive hereby represents and warrants to the Company as follows:
(i) Neither the execution or delivery of this Agreement nor the performance by the Executive of his duties and other obligations hereunder violate or will violate any statute, law, determination or award, or conflict with or constitute a default or breach of any covenant or obligation under (whether immediately, upon the giving of notice or lapse of time or both) any prior employment agreement, contract, or other instrument to which the Executive is a party or by which he is bound.
(ii) The Executive has the full right, power and legal capacity to enter and deliver this Agreement and to perform his duties and other obligations hereunder. This Agreement constitutes the legal, valid and binding obligation of the Executive enforceable against him in accordance with its terms. No approvals or consents of any persons or entities are required for the Executive to execute and deliver this Agreement or perform his duties and other obligations hereunder.
| 6 | Page |
8. Termination. The Executive’s employment hereunder shall be terminated upon the Executive’s death and may be terminated as follows:
(a) The Executive’s employment hereunder may be terminated by the Board of Directors of the Company for Cause that is not cured by the Executive within thirty (30) days after receipt of written notice by the Company to Executive of such Cause. Any of the following actions by the Executive shall constitute “Cause”:
(i) The continued willful, intentional failure, willful disregard or willful refusal by the Executive to perform his duties hereunder;
(ii) Any willful, intentional grossly negligent act by the Executive having the effect of injuring, in a material way (whether financial or otherwise and as determined in good-faith by a majority of the Board of Directors of the Company), the business or reputation of the Company or any of its affiliates, including but not limited to, any officer, director, executive or shareholder of the Company or any of its affiliates;
(iii) Willful and intentional misconduct by the Executive in respect of the duties or obligations of the Executive under this Agreement, including insubordination with respect to the lawful directions received by the Executive from the Board of Directors of the Company;
(iv) The Executive’s conviction of any felony or a misdemeanor involving moral turpitude (including entry of a nolo contendere plea);
(v) The determination by the Company, after diligent investigation by the Company following a written allegation by another employee of the Company, that the Executive engaged in harassment prohibited by law (including, without limitation, age, sex or race discrimination), unless the Executive’s actions were specifically directed in writing by the Board of Directors of the Company;
(vi) Any intentional misappropriation or intentional embezzlement of the property of the Company or its affiliates (whether or not a misdemeanor or felony); and
(vii) Breach by the Executive of any of the provisions of Sections 5, 6, or 7 of this Agreement; and
(viii) An intended and willful material breach by the Executive of any provision of this Agreement other than those contained in Sections 5, 6, or 7 which is not cured by the Executive within thirty (30) days after written notice thereof is given to the Executive by the Company.
(b) The Executive’s employment hereunder may be terminated by the Board of Directors of the Company due to the Executive’s Disability. For purposes of this Agreement, a termination for “Disability” shall occur (i) when the Board of Directors of the Company has provided a written termination notice to the Executive supported by a written statement from a reputable independent physician to the effect that the Executive shall have become so physically or mentally incapacitated as to be unable to resume, within the ensuing nine (9) months, his employment hereunder by reason of physical or mental illness or injury, or (ii) upon rendering of a written termination notice by the Board of Directors of the Company after the Executive has been unable to substantially perform his duties hereunder for ninety (90) or more consecutive days, or more than one hundred and twenty (120) days in any consecutive twelve month period, by reason of any physical or mental illness or injury. For purposes of this Section 8(b), the Executive agrees to make himself available and to cooperate in any reasonable examination by a reputable independent physician retained by the Company.
| 7 | Page |
(c) The Executive’s employment hereunder may be terminated by the Board of Directors of the Company (or its successor) upon the occurrence of a Change of Control. For purposes of this Agreement, “Change of Control” means (i) the acquisition, directly or indirectly, following the date hereof by any person (as such term is defined in Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended), in one transaction or a series of related transactions, of securities of the Company representing in excess of fifty percent (50%) or more of the combined voting power of the Company’s then outstanding securities if such person or his or its affiliate(s) do not own in excess of 50% of such voting power on the date of this Agreement, or (ii) the future disposition by the Company (whether direct or indirect, by sale of assets or stock, merger, consolidation or otherwise) of all or substantially all of its business and/or assets in one transaction or series of related transactions (other than a merger effected exclusively for the purpose of changing the domicile of the Company).
(d) The Executive’s employment hereunder may be terminated by the Executive for Good Reason. For purposes of this Agreement, “Good Reason” shall mean (i) any material breach by the Company of this Agreement that is not cured by the Company within 60 days after receipt of written notice by Executive to the Company of such material breach; or (ii) any material diminution in the duties, responsibilities, rights, or privileges, which were applicable to and enjoyed by the Executive at the commencement of the Term, without the consent of the Executive, except as a result of the termination of the Executive’s employment by the Company.
9. Compensation upon Termination.
(a) If the Executive’s employment is terminated as a result of his death or Disability, the Company shall pay to the Executive or to the Executive’s estate, as applicable, his 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 thirty (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 twelve (12) equal monthly installments.
(b) If the Executive’s employment is terminated by the Board of Directors of the Company for Cause, then the Company shall pay to the Executive his Base Salary through the date of his termination and the Executive shall have no further entitlement to any other compensation or benefits from the Company.
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(c) If the Executive’s 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 Executive his Base Salary for a period of twelve (12) months following such termination, (ii) pay the Executive any accrued and any earned but unpaid Bonus, (iv) pay the Executive 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. All Stock Options that have not vested as of the date of such termination shall be accelerated and deemed to have vested as of such termination date and shall remain exercisable for a period as outlined in the Company’s Stock Option program.
(d) If the Executive’s employment is terminated by the Executive for Good Reason, by the Company without Cause, then the Company shall (i) pay Executive 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 Executive the Bonus he would have earned had he remained with the Company for six (6) months from the date which such termination occurs, and (iii) pay Executive any expense reimbursement amounts owed, and payment for any unused vacation days, through the date of termination. All Stock Options that are scheduled to vest in the contract year of the date of such termination shall be accelerated and deemed to have vested as of the termination date. All Stock Options that have not vested (or deemed to have vested pursuant to the preceding sentence) shall be deemed expired, null and void. Any Stock Options that have vested as of the date of termination shall remain exercisable for a period as outlined in the Company’s Stock Option program.
(e) This Agreement sets forth the only obligations of the Company with respect to the termination of the Executive’s employment with the Company, and the Executive acknowledges that, upon the termination of his employment, he shall not be entitled to any payments or benefits which are not explicitly provided for herein.
(f) The provisions of this Section 9 shall survive any termination of this Agreement.
10. Miscellaneous.
(a) This Agreement shall be governed by, and construed and interpreted in accordance with, the laws of the State of Arizona, without giving effect to its principles of conflicts of laws.
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(b) Any dispute arising out of, or relating to, this Agreement or the breach thereof (other than Sections 5 or 6 hereof), or regarding the interpretation thereof, shall be finally settled by arbitration conducted in Arizona in accordance with the rules of the American Arbitration Association then in effect before a single arbitrator appointed in accordance with such rules. Judgment upon any award rendered therein may be entered and enforcement obtained thereon in any court having jurisdiction. The arbitrator shall have authority to grant any form of appropriate relief, whether legal or equitable in nature, including specific performance. For the purpose of any judicial proceeding to enforce such award or incidental to such arbitration or to compel arbitration and for purposes of Sections 5 and 6 hereof, the parties hereby submit to the non-exclusive jurisdiction of the Supreme Court of the State of Arizona, and agree that service of process in such arbitration or court proceedings shall be satisfactorily made upon it if sent by registered mail addressed to it at the address referred to in paragraph (g) below. Each party shall be responsible for its/his own attorney’s fees in such arbitration, and all of the costs and expenses incurred with respect to the arbitration proceeding (except for the filing fee, which shall be borne solely by the party commencing the arbitration) shall be divided equally between the parties. Judgment on the arbitration award may be entered by any court of competent jurisdiction.
(c) This Agreement shall be binding upon and inure to the benefit of the parties hereto, and their respective heirs, legal representatives, successors and assigns.
(d) This Agreement, and the Executive’s rights and obligations hereunder, may not be assigned by the Executive. The Company may assign its rights, together with its obligations, hereunder in connection with any sale, transfer or other disposition of all or substantially all of its business or assets or other Change of Control.
(e) This Agreement cannot be amended orally, or by any course of conduct or dealing, but only by a written agreement signed by the parties hereto.
(f) The failure of either party to insist upon the strict performance of any of the terms, conditions and provisions of this Agreement shall not be construed as a waiver or relinquishment of future compliance therewith, and such terms, conditions and provisions shall remain in full force and effect. No waiver of any term or condition of this Agreement on the part of either party shall be effective for any purpose whatsoever unless such waiver is in writing and signed by such party.
(g) All notices, requests, consents and other communications, required or permitted to be given hereunder, shall be in writing and shall be delivered personally or by an overnight courier service or sent by registered or certified mail, postage prepaid, return receipt requested, to the parties at the addresses set forth on the first page of this Agreement, and shall be deemed given when so delivered personally or by overnight courier, or, if mailed, five days after the date of deposit in the United States mails. Either party may designate another address, for receipt of notices hereunder by giving notice to the other party in accordance with this paragraph (g).
(h) This Agreement sets forth the entire agreement and understanding of the parties relating to the subject matter hereof, and supersedes all prior agreements, arrangements and understandings, written or oral, relating to the subject matter hereof which shall be deemed null and void. No representation, promise or inducement has been made by either party that is not embodied in this Agreement, and neither party shall be bound by or liable for any alleged representation, promise or inducement not so set forth.
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(i) As used in this Agreement, “affiliate” of a specified Person shall mean and include any Person controlling, controlled by or under common control with the specified Person.
(j) The section headings contained herein are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement.
(k) This Agreement may be executed in any number of counterparts, each of which shall constitute an original, but all of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.
| 1606 Corp. | |||
| By: | /s/ Austen Lambrecht | ||
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| Name: | Austen Lambrecht | |
| Title: | Vice President | ||
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| By: | /s/ Gregory Lambrecht |
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| Name: | Gregory Lambrecht | ||
| 11 | Page |
EXHIBIT 10.10
EMPLOYMENT AGREEMENT
This Agreement (this “Agreement”), dated and effective as of February 28, 2024 (the “Effective Date”), by and between 1606 Corp., a Nevada corporation with principal offices at 2425 E. Camelback Road, Suite 150, Phoenix Arizona 85016 (the “Company”), and Austen Lambrecht residing at 4808 N 24th St. Unit 1207 Phoenix, Arizona 85016 (the “VP”). As of the Effective Date, this Agreement replaces and supersedes that certain Employment Agreement between the Company and the Executive effective in February 2023 (the “Prior Agreement”).
WITNESSETH:
WHEREAS, the Company desires to employ the VP as Vice President, and the VP desires to serve the Company in such capacity, upon the terms and subject to the conditions contained in this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the parties hereto hereby agree as follows:
1. Employment.
The VP will be employed by the Company as VP. The VP will report to the Chief Operating Officer of the Company (the “Board”) and shall perform such duties as are consistent with his position as VP (as applicable, the “Services”). The VP agrees to perform such duties faithfully, to devote all of his working time, attention and energies to the business of the Company, and while he remains employed by the Company, not to engage in any other business activity that is in conflict with his duties and obligations to the Company.
2. Term.
The VP’s employment under this Agreement (the “Term”) shall commence as of the Effective Date and shall continue for a term of three (3) years unless sooner terminated pursuant to Section 8 of this Agreement. This Agreement shall automatically be renewed for additional six-month periods (included in the definition of Term) unless either party has provided written termination of this Agreement at least ninety (90) days prior to the expiration of such Term, or if terminated for Cause (as defined below) regardless of timing. Notwithstanding anything to the contrary contained herein, the provisions of this Agreement governing protection of Confidential Information shall continue in effect as specified in Section 5 hereof and survive the expiration or termination hereof.
3. Best Efforts; Place of Performance.
(a) The VP shall devote substantially all of his business time, attention and energies to the business and affairs of the Company and shall use his best efforts to advance the best interests of the Company and shall not during the Term be actively engaged in any other business activity, whether or not such business activity is pursued for gain, profit or other pecuniary advantage, that will interfere with the performance by the VP of his duties hereunder or the VP’s availability to perform such duties or that will adversely affect, or negatively reflect upon, the Company.
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(b) The duties to be performed by the VP hereunder shall be performed in any suitable location to efficiently complete the required tasks, subject to reasonable travel requirements on behalf of the Company, or such other place as the Board may reasonably designate.
4. Compensation. As full compensation for the performance by the VP of his duties under this Agreement, the Company shall pay the VP as follows:
(a) Base Salary. The Company shall pay VP a salary (the “Base Salary”) equal to ninety-seven thousand dollars (97,000) per year. Payment shall be made in accordance with the Company’s normal payroll practices.
(b) Bonus. The VP shall be entitled to such bonus as determined by the Board of Directors. Bonus may include shares of preferred stock, common stock or cash.
(c) Equity Compensation. On the Effective Date, or as soon as practicable thereafter once the Certificate of Designation is filed for the Series B Super Voting Preferred Stock (the “Series B Preferred Stock”), the Company shall award the VP thirty (30) shares of Series B Preferred Stock.
(d) Healthcare. The VP shall have the right to participate in a healthcare plan once established by the Company.
(e) Expenses. The Company shall reimburse the VP for all normal, usual and necessary expenses incurred by the VP in furtherance of the business and affairs of the Company, including reasonable travel and entertainment, upon timely receipt by the Company of appropriate vouchers or other proof of the VP’s expenditures and otherwise in accordance with any expense reimbursement policy as may from time to time be adopted by the Company.
(f) Vacation. The VP shall, during the Term, be entitled to twenty (20) days’ vacation per annum, in addition to holidays observed by the Company. The VP shall not be entitled to carry any vacation forward to the next year of employment and shall not receive any compensation for unused vacation days.
5. Confidential Information and Inventions.
(a) The VP recognizes and acknowledges that in the course of his duties he is likely to receive confidential or proprietary information owned by the Company, its affiliates or third parties with whom the Company or any such affiliates has an obligation of confidentiality. Accordingly, during and after the Term, the VP agrees to keep confidential and not disclose or make accessible to any other person or use for any other purpose other than in connection with the fulfillment of his duties under this Agreement, any Confidential and Proprietary Information (as defined below) owned by, or received by or on behalf of, the Company or any of its affiliates. “Confidential and Proprietary Information” shall include, but shall not be limited to, confidential or proprietary scientific or technical information, data, and related concepts, business plans (both current and under development), client lists, promotion and marketing programs, trade secrets, or any other confidential or proprietary business information relating to development programs, costs, revenues, marketing, investments, sales activities, promotions, credit and financial data, manufacturing processes, financing methods, plans or the business and affairs of the Company or of any affiliate or client of the Company. The VP expressly acknowledges the trade secret status of the Confidential and Proprietary Information and that the Confidential and Proprietary Information constitutes a protectable business interest of the Company. The VP agrees: (i) not to use any such Confidential and Proprietary Information for himself or others; and (ii) not to take any Company material or reproductions (including but not limited to writings, correspondence, notes, drafts, records, invoices, technical and business policies, computer programs or disks) thereof from the Company’s offices at any time during his employment by the Company, except as required in the execution of the VP’s duties to the Company. The VP agrees to return immediately all Company material and reproductions (including but not limited, to writings, correspondence, notes, drafts, records, invoices, technical and business policies, computer programs or disks) thereof in his possession to the Company upon request and in any event immediately upon termination of employment.
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(b) Except with prior written authorization by the Company, the VP agrees not to disclose or publish any of the Confidential and Proprietary Information, or any confidential, technical or business information of any other party to whom the Company or any of its affiliates owes an obligation of confidence, at any time during or after his employment with the Company.
(c) The VP agrees that all inventions, discoveries, improvements and patentable or copyrightable works initiated, conceived or made by him, either alone or in conjunction with others, through the use of the resources of the Company or directly related to the business of the Company (the “Inventions”) during the Term shall be the sole property of the Company to the maximum extent permitted by applicable law and, to the extent permitted by law, shall be “works made for hire” as that term is defined in the United States Copyright Act (17 U.S.C.A., Section 101). The Company shall be the sole owner of all patents, copyrights, trade secret rights, and other intellectual property or other rights in the Inventions. The VP hereby assigns to the Company all right, title and interest he may have or acquire in all such Inventions; provided, however, that the Board of Directors of the Company may in its sole discretion agree to waive the Company’s rights pursuant to this Section 6(c). The VP further agrees to assist the Company in every proper way (but at the Company’s expense) to obtain and from time to time enforce patents, copyrights or other rights on such Inventions in any and all countries, and to that end the VP will execute all documents necessary (even after termination of this Agreement):
(i) to apply for, obtain and vest in the name of the Company alone (unless the Company otherwise directs) letters patents, copyrights or other analogous protection in any country throughout the world and when so obtained or vested to renew and restore the same; and
(ii) to defend any opposition proceedings in respect of such applications and any opposition proceedings or petitions or applications for revocation of such letters patent, copyright or other analogous protection.
(d) The VP shall cooperate in all regards with the Company, in any and all matters, including but not limited to, the execution of any and all documents pertaining to the Company (even after termination of this Agreement).
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(e) The VP acknowledges that while performing the Services under this Agreement the VP may locate, identify and/or evaluate patented or patentable inventions or other business opportunities (the “Third Party Inventions”) having commercial potential in the fields which may be of potential interest to the Company or one of its affiliates. The VP understands, acknowledges and agrees that all rights to, interests in or opportunities regarding, all Third-Party Inventions identified by the Company, any of its affiliates or either of the foregoing persons’ officers, directors, employees (including the VP), agents or consultants during the Employment Term shall be and remain the sole and exclusive property of the Company or such affiliate and the VP shall have no rights whatsoever to such Third-Party Inventions and will not pursue for himself or for others any transaction relating to the Third-Party Inventions which is not on behalf of the Company. Notwithstanding the foregoing, if the Company, having been presented with the opportunity by the VP to pursue such Third-Party Inventions chooses not to do so, then VP may pursue such Third Party Inventions himself without accounting to the Company therefore.
(f) VP agrees that he will promptly disclose to the Company, or any persons designated by the Company, all improvements, Inventions made or conceived or reduced to practice or learned by him, either alone or jointly with others, during the Term.
(g) The provisions of this Section 5 shall survive any termination of this Agreement.
6. Non-Competition, Non-Solicitation and Non-Disparagement.
(a) The VP understands and recognizes that his services to the Company are special and unique and that in the course of performing such services the VP will have access to, and knowledge of, Confidential and Proprietary Information (as defined in Section 5) and the VP agrees that, during the Term and for a period of twelve (12) months thereafter, he shall not in any manner, directly or indirectly, on behalf of himself or any person, firm, partnership, joint venture, corporation or other business entity (“Person”), enter into or engage in any business which is engaged in any business directly competitive with the business of the Company, either as an individual for his own account, or as a partner, joint venturer, owner, executive, employee, independent contractor, principal, agent, consultant, salesperson, officer, director or shareholder of a Person in a business competitive with the Company within the geographic area of the Company’s business, which is deemed by the parties hereto to be nationwide. The VP acknowledges that, due to the unique nature of the Company’s business, the loss of any of its clients or business flow or the improper use of its Confidential and Proprietary Information could create significant instability and cause substantial damage to the Company and its affiliates and therefore the Company has a strong legitimate business interest in protecting the continuity of its business interests and the restriction herein agreed to by the VP narrowly and fairly serves such an important and critical business interest of the Company. For purposes of this Agreement, the Company shall be deemed to be actively engaged on the date hereof in the development and commercialization of hemp related products and in the future in any other business in which it actually devotes substantive resources to study, develop or pursue. Notwithstanding the foregoing, nothing contained in this Section 6(a) shall be deemed to prohibit the VP from (i) acquiring or holding, solely for investment, publicly traded securities of any corporation, some or all of the activities of which are competitive with the business of the Company so long as such securities do not, in the aggregate, constitute more than four percent (4%) of any class or series of outstanding securities of such corporation. This Section 6(a) shall not be enforceable by the Company against VP if the VP (i) is terminated by the Company without Cause; or (ii) terminates this Agreement for Good Reason.
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(b) During the Term and for a period of twelve (12) months thereafter, the VP shall not, directly or indirectly, without the prior written consent of the Company:
(i) solicit or induce any employee of the Company or any of its affiliates to leave the employ of the Company or any such affiliate; or hire for any purpose any employee of the Company or any affiliate or any employee who has left the employment of the Company or any affiliate within one year of the termination of such employee’s employment with the Company or any such affiliate or at any time in violation of such employee’s non-competition agreement with the Company or any such affiliate; or
(ii) solicit or accept employment or be retained by any Person who, at any time during the term of this Agreement, was an agent, client or customer of the Company or any of its affiliates where his position will be related to the business of the Company or any such affiliate; or
(iii) solicit or accept the business of any agent, client or customer of the Company or any of its affiliates with respect to products or services which compete directly with the products or services provided or supplied by the Company or any of its affiliates, or
(iv) Notwithstanding the foregoing, Sections 6(b)(ii) and 6(b)(iii) shall not be enforceable by the Company against VP if the VP (i) is terminated by the Company without Cause; or (ii) terminates this Agreement for Good Reason.
(c) The Company and the VP each agree that both during the Term and at all times thereafter, neither party shall directly or indirectly disparage, whether or not true, the name or reputation of the other party or any of its affiliates, including but not limited to, any officer, director, employee or shareholder of the Company or any of its affiliates.
(d) In the event that the VP breaches any provisions of Section 5 or this Section 6 or there is a threatened breach, then, in addition to any other rights which the Company may have, the Company shall be entitled, without the posting of a bond or other security, to seek injunctive relief to enforce the restrictions contained in such Sections, in addition to any other remedies at law or in equity to which the Company may be entitled.
(e) Each of the rights and remedies enumerated in Section 6(d) shall be independent of the others and shall be in addition to and not in lieu of any other rights and remedies available to the Company at law or in equity. If any of the covenants contained in this Section 6, or any part of any of them, is hereafter construed or adjudicated to be invalid or unenforceable, the same shall not affect the remainder of the covenant or covenants or rights or remedies which shall be given full effect without regard to the invalid portions. If any of the covenants contained in this Section 6 is held to be invalid or unenforceable because of the duration of such provision or the area covered thereby, the parties agree that the court making such determination shall have the power to reduce the duration and/or area of such provision and in its reduced form such provision shall then be enforceable.
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(f) In the event that an actual proceeding is brought in equity to enforce the provisions of Section 5 or this Section 6, the VP shall not use as a defense that there is an adequate remedy at law nor shall the Company be prevented from seeking any other remedies which may be available.
(g) The prov1s1ons of this Section 6 shall survive any termination of this Agreement.
7. Representations and Warranties by the VP.
The VP hereby represents and warrants to the Company as follows:
(i) Neither the execution or delivery of this Agreement nor the performance by the VP of his duties and other obligations hereunder violate or will violate any statute, law, determination or award, or conflict with or constitute a default or breach of any covenant or obligation under (whether immediately, upon the giving of notice or lapse of time or both) any prior employment agreement, contract, or other instrument to which the VP is a party or by which he is bound.
(ii) The VP has the full right, power and legal capacity to enter and deliver this Agreement and to perform his duties and other obligations hereunder. This Agreement constitutes the legal, valid and binding obligation of the VP enforceable against him in accordance with its terms. No approvals or consents of any persons or entities are required for the VP to execute and deliver this Agreement or perform his duties and other obligations hereunder.
8. Termination. The VP’s employment hereunder shall be terminated upon the VP’s death and may be terminated as follows:
(a) The VP’s employment hereunder may be terminated by the Board of Directors of the Company for Cause that is not cured by the VP within thirty (30) days after receipt of written notice by the Company to VP of such Cause. Any of the following actions by the VP shall constitute “Cause”:
(i) The continued willful, intentional failure, willful disregard or willful refusal by the VP to perform his duties hereunder;
(ii) Any willful, intentional grossly negligent act by the VP having the effect of injuring, in a material way (whether financial or otherwise and as determined in good- faith by a majority of the Board of Directors of the Company), the business or reputation of the Company or any of its affiliates, including but not limited to, any officer, director, executive or shareholder of the Company or any of its affiliates;
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(iii) Willful and intentional misconduct by the VP in respect of the duties or obligations of the VP under this Agreement, including insubordination with respect to the lawful directions received by the VP from the Board of Directors of the Company;
(iv) The VP’s conviction of any felony or a misdemeanor involving moral turpitude (including entry of a nolo contendere plea);
(v) The determination by the Company, after diligent investigation by the Company following a written allegation by another employee of the Company, that the VP engaged in harassment prohibited by law (including, without limitation, age, sex or race discrimination), unless the VP’s actions were specifically directed in writing by the Board of Directors of the Company;
(vi) Any intentional misappropriation or intentional embezzlement of the property of the Company or its affiliates (whether or not a misdemeanor or felony); and
(vii) Breach by the VP of any of the provisions of Sections 5, 6, or 7 of this Agreement; and
(viii) An intended and willful material breach by the VP of any provision of this Agreement other than those contained in Sections 5, 6, or 7 which is not cured by the VP within thirty (30) days after written notice thereof is given to the VP by the Company.
(b) The VP’s employment hereunder may be terminated by the Board of Directors of the Company due to the VP’s Disability. For purposes of this Agreement, a termination for “Disability” shall occur (i) when the Board of Directors of the Company has provided a written termination notice to the VP supported by a written statement from a reputable independent physician to the effect that the VP shall have become so physically or mentally incapacitated as to be unable to resume, within the ensuing nine (9) months, his employment hereunder by reason of physical or mental illness or injury, or (ii) upon rendering of a written termination notice by the Board of Directors of the Company after the VP has been unable to substantially perform his duties hereunder for ninety (90) or more consecutive days, or more than one hundred and twenty (120) days in any consecutive twelve month period, by reason of any physical or mental illness or injury. For purposes of this Section 8(b), the VP agrees to make himself available and to cooperate in any reasonable examination by a reputable independent physician retained by the Company.
(c) The VP’ s employment hereunder may be terminated by the Board of Directors of the Company (or its successor) upon the occurrence of a Change of Control. For purposes of this Agreement, “Change of Control” means (i) the acquisition, directly or indirectly, following the date hereof by any person (as such term is defined in Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended), in one transaction or a series of related transactions, of securities of the Company representing in excess of fifty percent (50%) or more of the combined voting power of the Company’s then outstanding securities if such person or his or its affiliate(s) do not own in excess of 50% of such voting power on the date of this Agreement, or (ii) the future disposition by the Company (whether direct or indirect, by sale of assets or stock, merger, consolidation or otherwise) of all or substantially all of its business and/or assets in one transaction or series of related transactions (other than a merger effected exclusively for the purpose of changing the domicile of the Company).
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(d) The VP’s employment hereunder may be terminated by the VP for Good Reason. For purposes of this Agreement, “Good Reason” shall mean (i) any material breach by the Company of this Agreement that is not cured by the Company within 60 days after receipt of written notice by VP to the Company of such material breach; or (ii) any material diminution in the duties, responsibilities, rights, or privileges, which were applicable to and enjoyed by the VP at the commencement of the Term, without the consent of the VP, except as a result of the termination of the VP’s employment by the Company.
9. Compensation upon Termination.
(a) If the VP’s employment is terminated as a result of his death or Disability, the Company shall pay to the VP or to the VP’s estate, as applicable, his 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.
(b) If the VP’s employment is terminated by the Board of Directors of the Company for Cause, then the Company shall pay to the VP his Base Salary through the date of his termination and the VP shall have no further entitlement to any other compensation or benefits from the Company.
(c) If the VP’s 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 VP his Base Salary for a period of twelve (12) months following such termination, (ii) pay the VP any accrued and any earned but unpaid Bonus, (iv) pay the VP 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. All Stock Options that have not vested as of the date of such termination shall be accelerated and deemed to have vested as of such termination date and shall remain exercisable for a period as outlined in the Company’s Stock Option program.
(d) If the VP’s employment is terminated by the VP for Good Reason, by the Company without Cause, then the Company shall (i) pay VP 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 twelve (12) equal monthly installments), and (ii) pay VP the Bonus he would have earned had he remained with the Company for six (6) months from the date which such termination occurs, and (iii) pay VP any expense reimbursement amounts owed, and payment for any unused vacation days, through the date of termination. All Stock Options that are scheduled to vest in the contract year of the date of such termination shall be accelerated and deemed to have vested as of the termination date. All Stock Options that have not vested (or deemed to have vested pursuant to the preceding sentence) shall be deemed expired, null and void. Any Stock Options that have vested as of the date of termination shall remain exercisable for a period as outlined in the Company’s Stock Option program.
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(e) This Agreement sets forth the only obligations of the Company with respect to the termination of the VP’s employment with the Company, and the VP acknowledges that, upon the termination of his employment, he shall not be entitled to any payments or benefits which are not explicitly provided for herein.
(f) The provisions of this Section 9 shall survive any termination of this Agreement.
10. Miscellaneous.
(a) This Agreement shall be governed by, and construed and interpreted in accordance with, the laws of the State of Arizona, without giving effect to its principles of conflicts of laws.
(b) Any dispute arising out of, or relating to, this Agreement or the breach thereof (other than Sections 5 or 6 hereof), or regarding the interpretation thereof, shall be finally settled by arbitration conducted in Arizona in accordance with the rules of the American Arbitration Association then in effect before a single arbitrator appointed in accordance with such rules. Judgment upon any award rendered therein may be entered and enforcement obtained thereon in any court having jurisdiction. The arbitrator shall have authority to grant any form of appropriate relief, whether legal or equitable in nature, including specific performance. For the purpose of any judicial proceeding to enforce such award or incidental to such arbitration or to compel arbitration and for purposes of Sections 5 and 6 hereof, the parties hereby submit to the non- exclusive jurisdiction of the Supreme Court of the State of Arizona, and agree that service of process in such arbitration or court proceedings shall be satisfactorily made upon it if sent by registered mail addressed to it at the address referred to in paragraph (g) below. Each party shall be responsible for its/his own attorney’s fees in such arbitration, and all of the costs and expenses incurred with respect to the arbitration proceeding (except for the filing fee, which shall be borne solely by the party commencing the arbitration) shall be divided equally between the parties. Judgment on the arbitration award may be entered by any court of competent jurisdiction.
(c) This Agreement shall be binding upon and inure to the benefit of the parties hereto, and their respective heirs, legal representatives, successors and assigns.
(d) This Agreement, and the VP’s rights and obligations hereunder, may not be assigned by the VP. The Company may assign its rights, together with its obligations, hereunder in connection with any sale, transfer or other disposition of all or substantially all of its business or assets or other Change of Control.
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(e) This Agreement cannot be amended orally, or by any course of conduct or dealing, but only by a written agreement signed by the parties hereto.
(f) The failure of either party to insist upon the strict performance of any of the terms, conditions and provisions of this Agreement shall not be construed as a waiver or relinquishment of future compliance therewith, and such terms, conditions and provisions shall remain in full force and effect. No waiver of any term or condition of this Agreement on the part of either party shall be effective for any purpose whatsoever unless such waiver is in writing and signed by such party.
(g) All notices, requests, consents and other communications, required or permitted to be given hereunder, shall be in writing and shall be delivered personally or by an overnight courier service or sent by registered or certified mail, postage prepaid, return receipt requested, to the parties at the addresses set forth on the first page of this Agreement, and shall be deemed given when so delivered personally or by overnight courier, or, if mailed, five days after the date of deposit in the United States mails. Either party may designate another address, for receipt of notices hereunder by giving notice to the other party in accordance with this paragraph (g).
(h) This Agreement sets forth the entire agreement and understanding of the parties relating to the subject matter hereof, and supersedes all prior agreements, arrangements and understandings, written or oral, relating to the subject matter hereof which shall be deemed null and void. No representation promises or inducement has been made by either party that is not embodied in this Agreement, and neither party shall be bound by or liable for any alleged representation, promise or inducement not so set forth.
(i) As used in this Agreement, “affiliate” of a specified Person shall mean and include any Person controlling, controlled by or under common control with the specified Person.
G) The section headings contained herein are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement.
(k) This Agreement may be executed in any number of counterparts, each of which shall constitute an original, but all of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.
| 1606 Corp. | |||
| By: | /s/ Greg Lambrecht | ||
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| Name: | Greg Lambrecht | |
| Title: | CEO | ||
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| By: | /s/ Austen Lambrecht |
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| Name: | Austen Lambrecht | ||
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EXHIBIT 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO SECURITIES EXCHANGE ACT OF 1934
RULE 13a-14(a) OR 15d-14(a)
I, Gregory Lambrecht, certify that:
| 1. | I have reviewed this Form 10-K for 1606 Corp. for the year ended December 31, 2023; |
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| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
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| a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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| b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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| c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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| d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on the most recent evaluation of internal control over financial reporting, to the registrant’s other certifying officer and registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
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| a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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| b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
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| Date: April 17, 2024 | By: | /s/ Gregory Lambrecht |
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| Name: | Gregory Lambrecht |
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| Title: | Chief Executive Officer |
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| (Principal Executive Officer) |
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EXHIBIT 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO SECURITIES EXCHANGE ACT OF 1934
RULE 13a-14(a) OR 15d-14(a)
I, Gregory Lambrecht, certify that:
| 1. | I have reviewed this Form 10-K for 1606 Corp. for the year ended December 31, 2023; |
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| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
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| a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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| b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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| c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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| d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s other certifying officer and registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
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| a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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| b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
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| Date: April 17, 2024 | By: | /s/ Gregory Lambrecht |
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| Name: | Gregory Lambrecht |
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| Title: | Chief Financial Officer |
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| (Principal Financial and Accounting Officer) |
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EXHIBIT 32.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND
PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
The undersigned, Chief Executive Officer and Chief Financial Officer of 1606 Corp., hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to their knowledge, the Annual Report on Form 10-K of 1606 Corp. for year ended December 31, 2023, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and that the information contained in the Annual Report on Form 10-K fairly presents in all material respects the financial condition and results of operations of 1606 Corp.
| Date: April 17, 2024 | By: | /s/ Gregory Lambrecht |
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| Gregory Lambrecht |
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| Chief Executive Officer and Chief Financial Officer |
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| (Principal Executive Officer and Principal Financial and Accounting Officer) |
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A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signatures that appear in typed form within the electronic version of this written statement required by Section 906, has been provided to 1606 Corp. and will be retained by 1606 Corp. and furnished to the Securities and Exchange Commission or its staff upon request.