Executive Summary / Key Takeaways

• 1606 Corp. has undergone a significant strategic pivot, transitioning from a CBD product seller to an AI company focused on developing specialized chatbots for the CBD industry (ChatCBDW) and public companies (Chat IR).
• Despite launching its AI products and securing partnerships, the company generated no revenue in Q1 2025, highlighting the early stage of monetization for its new business model and contributing to significant financial challenges.
• The company faces substantial doubt about its ability to continue as a going concern, reporting minimal cash reserves ($285 as of March 31, 2025), significant liabilities ($2.35M current liabilities), and a projected cash need of $1.00 million for the next 12 months.
• Recent strategic developments, including a non-binding LOI for acquisition by a private group and a planned transition to the OTCID tier, represent potential catalysts that could address liquidity issues and enhance market visibility, fundamentally altering the company's trajectory.
• Investors should weigh the potential of the company's niche AI technology and strategic partnerships against its precarious financial position, governance weaknesses, and the inherent uncertainties of early-stage commercialization and potential acquisition.

The Pivot: From Hemp to High-Tech Chatbots

1606 Corp. (OTC:CBDW) has embarked on a transformative journey, shifting its core identity from a seller of hemp products to an artificial intelligence company. Formed in February 2021 and spun off from Singlepoint Inc. (SING) in April 2021, the company initially operated in the burgeoning CBD market. However, recognizing the evolving landscape and the potential of AI, 1606 Corp. strategically exited the CBD product business, writing off its remaining inventory in September 2024, to focus entirely on developing AI chatbot solutions.

This pivot centers around building and merchandising specialized AI Chatbots. The company's initial focus in this new direction was the CBD industry, culminating in the launch of ChatCBDW in August 2023. Developed with the assistance of AR XTLabs on Microsoft Azure and integrated with OpenAI's ChatGPT, ChatCBDW is designed to serve CBD retailers and brands. Its core value proposition lies in its ability to provide tailored product recommendations, track user behavior for inventory management, and offer 24/7 customer education and support. The company highlights a "patent possible process" aimed at enhancing the tailoring of product recommendations to merchant specifications, suggesting a potential technological differentiator in this niche.

Expanding its AI portfolio, 1606 Corp. introduced Chat IR in April 2024, an AI bot targeted at public companies. This bot is intended to reside on corporate websites, providing instant answers to investor questions regarding operations and disclosures. Both ChatCBDW and Chat IR are envisioned under a monthly recurring licensing fee model, representing the company's planned revenue stream in its new guise.

The competitive landscape for AI chatbots is dominated by large technology players like Salesforce (CRM), Microsoft (MSFT), and IBM (IBM), which offer broad, enterprise-level AI and chatbot solutions. More direct competition comes from companies like LivePerson (LPSN) and other providers of conversational AI for e-commerce and customer service. While giants like Microsoft boast superior scale, massive R&D budgets (over $20 billion annually), and robust cloud infrastructure leading to potentially lower operating costs per unit (estimated 30-40% lower than smaller players), 1606 Corp. aims to carve out its niche through specialization and agility. The company views the entry of others, such as RedChip's (REDC) launch of a similar IR chatbot, as validation of the market demand for AI-driven solutions in specific verticals.

1606 Corp.'s claimed technological edge, particularly the patent-possible process for tailored recommendations in ChatCBDW, suggests an attempt to build a moat through specialized functionality. While specific quantifiable performance metrics comparing its technology directly to competitors are not detailed, the strategic intent is to offer a more focused and potentially faster-to-deploy solution within its target niches. The company's partnership strategy, such as the beta testing with Cool Blue Distribution and the recent strategic partnership with GPO Plus, Inc. (GPOX) to enhance AI-driven distribution solutions, indicates a focus on leveraging industry relationships and applying its AI capabilities to specific operational challenges within partner ecosystems. The GPO Plus partnership, in particular, aims to optimize logistics, inventory, and sales in the gas station and convenience store market, demonstrating the potential for applying their AI beyond the initial CBD and IR focuses. Furthermore, the company anticipates benefiting from decreasing data management costs from providers like DeepSeek, which could enable more affordable service offerings, potentially improving competitiveness on price against larger, more established players.

Financial Reality and the Going Concern Question

Despite the strategic pivot and the launch of its AI products, 1606 Corp.'s financial performance in the most recent period underscores the significant challenges it faces in monetizing its new business model. For the three months ended March 31, 2025, the company reported no revenue, a stark contrast to the $7,195 generated from consulting services in the same period of 2024 (which was related to a potential BOT customer). This lack of revenue generation from the core AI licensing model is critical.

Operating expenses saw a notable decrease, falling to $174,232 in Q1 2025 from $397,921 in Q1 2024, primarily attributed to lower professional fees. This reduction helped narrow the net loss, which decreased to $208,339 in Q1 2025 compared to $286,437 in Q1 2024. However, these figures must be viewed in the context of minimal cash reserves. As of March 31, 2025, the company held only $285 in cash, down from $2,078 at December 31, 2024.

The balance sheet reveals a precarious liquidity position. Total current assets were a mere $285, while total current liabilities stood at $2.35 million as of March 31, 2025. This includes accounts payable and accrued liabilities of $528,118, accrued interest of $31,450, a note payable to a related party (Singlepoint) of $63,456 (which is in default), convertible notes (net) of $108,609, a derivative liability of $93,656, and a significant note payable to a shareholder (former CEO) totaling $1.53 million. This shareholder note is unsecured, non-interest bearing, and critically, due in full on December 31, 2025.

The company explicitly states that it has yet to achieve significant profitable operations and is dependent on its ability to raise capital to sustain operations and achieve viability. These factors, combined with the minimal cash balance and substantial current liabilities, raise substantial doubt about the company's ability to continue as a going concern for the next twelve months from the report's issuance date (May 13, 2025). Management estimates a cash need of approximately $1.00 million to continue operations for this period and plans to pursue additional equity financing through private placements, acknowledging there is no guarantee of success. The scheduled maturities of related party and convertible notes debt remaining as of March 31, 2025, total $1.82 million, adding further pressure on liquidity in the near term.

The company's internal controls also present a risk. As of March 31, 2025, management concluded that disclosure controls and procedures were not effective due to material weaknesses, specifically the lack of a functioning audit committee and inadequate segregation of duties. These control deficiencies increase the risk of material misstatements in financial reporting.

Strategic Maneuvers and Future Outlook

Despite the significant financial headwinds, 1606 Corp. has recently announced strategic moves that could potentially alter its trajectory. On March 11, 2025, the company signed a non-binding Letter of Intent (LOI) to be acquired by a private group for $1 million. This group, focused on acquiring waste management companies, intends to enter the public markets and potentially utilize AI technologies. While non-binding and subject to definitive agreements, this LOI introduces the possibility of a change in control and access to capital that could address the immediate going concern risk and provide resources for future development, albeit under new ownership and potentially a different strategic focus (integrating AI into waste management).

Further enhancing its market positioning and visibility, the company announced on May 20, 2025, a planned transition from the OTC Pink to the OTCID tier, effective July 1, 2025. This move is described as a "meaningful advancement" in transparency, regulatory compliance, and market visibility, which could be beneficial for future capital raising efforts or the potential acquisition.

The company's stated plan of operation continues to focus on signing businesses for its chatbot services under the monthly recurring licensing fee model. Sales efforts involve a combination of direct outreach (website, online ads, email campaigns) and leveraging Independent Sales Organizations (ISOs) such including distributors, web designers, IR firms, and payment processors, both within and outside the CBD industry. The partnership with GPO Plus exemplifies this approach, aiming to integrate 1606's AI into a partner's platform to tap into a large market.

The strategic LOI with Adnexus, focused on AI in drug discovery, and the subsequent news applauding Adnexus's AI-driven drug launch, signal 1606's ambition to apply its AI capabilities beyond its initial chatbot offerings, potentially into higher-value sectors. However, the financial commitment and timeline for realizing value from such ventures remain unclear, especially given the company's current liquidity constraints.

The outlook for 1606 Corp. is bifurcated. On one hand, the core AI chatbot business, while strategically sound in targeting specific niches with potentially differentiated technology, has yet to generate meaningful revenue, leaving the company in a dire financial state with substantial debt maturities looming in 2025. On the other hand, the potential acquisition LOI and the OTCID transition offer possible pathways to recapitalization and improved market standing, fundamentally changing the investment narrative from one focused on organic AI growth to one centered on a potential change of control and integration into a different business.

Conclusion

1606 Corp. is a company in transition, having shed its legacy CBD product business to pursue the potentially higher-growth AI chatbot market. Its strategic focus on niche applications like CBD merchandising and investor relations, supported by proprietary technology and strategic partnerships, presents a compelling vision. However, the financial reality reflected in the Q1 2025 results – zero revenue from the new model, minimal cash, significant liabilities, and a going concern warning – highlights the immense execution risk and capital requirements needed to realize this vision organically.

The investment thesis for CBDW is currently dominated by its precarious financial position and the uncertainty surrounding its ability to secure necessary funding. While the strategic pivot to AI is directionally sound and the company has demonstrated the ability to develop relevant technology and form partnerships, the lack of revenue generation is a critical hurdle. The recent non-binding LOI for acquisition and the planned OTCID transition introduce significant potential catalysts that could provide a lifeline, but their successful completion is not guaranteed. Investors considering CBDW must weigh the speculative potential of its AI technology and the possibility of a transformative acquisition against the immediate and substantial financial risks, including the high likelihood of further dilution or potential failure to continue operations without external capital. The path forward for 1606 Corp. remains highly uncertain and dependent on external financing or the successful completion of the proposed acquisition.