INVESTMENT RISK DISCLOSURE V8

INVESTMENT RISK DISCLOSURE

VERSION 8.0 | MARCH 2026

GROOVY COMPANY, INC. DBA OTCM PROTOCOL

Wyoming Corporation | CIK: 1499275 | OTC: GROO

12 Daniel Rd East, Fairfield, NJ 07004

SEC Category 1 Model B | Release No. 33-11412 (March 17, 2026) | ST22 Digital Securities

INVESTMENT IN ST22 DIGITAL SECURITIES AND OTCM UTILITY TOKENS INVOLVES SUBSTANTIAL RISK, INCLUDING THE POSSIBLE LOSS OF YOUR ENTIRE INVESTMENT. READ THIS DISCLOSURE IN ITS ENTIRETY BEFORE MAKING ANY INVESTMENT DECISION.

This Investment Risk Disclosure is provided pursuant to SEC–CFTC Joint Interpretive Release No. 33-11412 (March 17, 2026) and the SEC Joint Staff Statement on Tokenized Securities dated January 28, 2026. It supplements, and should be read in conjunction with, the Private Placement Memorandum, Terms and Conditions, Privacy Policy, and Legal Disclaimer.

Nothing in this document constitutes investment, legal, accounting, or tax advice. You should consult qualified professional advisors before making any investment decision.

1. Scope and Applicability

This Investment Risk Disclosure applies to all persons considering or making an investment in ST22 Digital Securities or the OTCM Utility Token through the OTCM Protocol platform, CEDEX (the Compliant Exchange for Digital Securities at cedex.otcm.io), or any related service operated by Groovy Company, Inc. dba OTCM Protocol.

1.1 Two Distinct Investment Products

OTCM Protocol offers two fundamentally different token types. Each carries distinct risk characteristics, regulatory treatment, and investor protections. You must understand which product you are acquiring before committing any capital.

Product	Classification	Asset Backing	Regulatory Framework
ST22 Digital Securities	SECURITIES	1:1 Common Class B Shares (third-party OTC issuers) or Series “S” Preferred Shares (OTCMS)	SEC Category 1 Model B — Release No. 33-11412; Reg D (U.S.); Reg S (non-U.S.)
OTCM Utility Token	Utility Token	None — no asset backing of any kind	Utility token framework (counsel analysis pending — potential Digital Commodity or Digital Tool under five-category taxonomy)

ST22 Digital Securities ARE SECURITIES under federal securities laws. The OTCM Utility Token has NO asset backing whatsoever. Different rules, protections, and risk profiles apply to each.

1.2 Investor Eligibility

ST22 Digital Securities are offered exclusively to:

• U.S. accredited investors as defined in SEC Rule 501(a), verified by Empire Stock Transfer under Reg D

• Non-U.S. persons in offshore transactions under Reg S, verified by Empire Stock Transfer

Empire Stock Transfer, the SEC-registered transfer agent and qualified custodian, is the sole investor onboarding authority for all ST22 issuers. No investor may receive ST22 tokens without completing Empire’s full KYC, KYB (entities), AML, OFAC/SDN, and Wallet Verification process.

2. Risk of Total Loss of Investment

YOU MAY LOSE 100% OF YOUR INVESTMENT IN EITHER ST22 DIGITAL SECURITIES OR THE OTCM UTILITY TOKEN. THERE IS NO GUARANTEE OF ANY RETURN ON INVESTMENT.

2.1 ST22 Digital Securities — Total Loss Scenarios

Scenario	Description
Issuer Bankruptcy	The underlying OTC company may become insolvent. Protective conversion triggers convert Common B shares to common stock, but common stock may have zero value in bankruptcy proceedings.
Business Failure	The underlying company may cease operations, fail to generate revenue, or be unable to sustain its business for any reason.
Fraud	Despite due diligence by OTCM Protocol and Empire Stock Transfer, the underlying issuer may commit fraud, misrepresent material facts, or engage in self-dealing.
Market Collapse	Token value is subject to market conditions. Broad market downturns, sector-specific declines, or loss of investor confidence may reduce token value to zero.
Regulatory Action	SEC, CFTC, or state regulatory enforcement may force cessation of trading, delisting, or platform shutdown.
Platform Failure	OTCM Protocol or CEDEX may cease operations. While underlying shares remain at Empire Stock Transfer, secondary market liquidity would be eliminated.
Technology Failure	Smart contract vulnerabilities, Solana network failures, or oracle system failures could result in loss of tokens or inability to trade.

2.2 OTCM Utility Token — Total Loss Scenarios

Scenario	Description
Zero Backing	The OTCM Utility Token has NO underlying assets, NO equity backing, and NO intrinsic value floor. It can decline to effectively zero.
Platform Abandonment	If OTCM Protocol ceases operations, the utility token loses its primary use case (governance, fee discounts, staking).
Market Sentiment	Value is driven entirely by market sentiment and perceived platform utility. Both can evaporate rapidly.
Regulatory Reclassification	If regulators classify the OTCM Utility Token as a security, trading may be restricted or prohibited.

3. ST22 Digital Securities — Specific Investment Risks

3.1 Underlying Company Risks

ST22 Digital Securities represent tokenized equity in OTC microcap companies. Many of these companies:

• Have lost OTC Markets quotation eligibility under Rule 15c2-11

• Have ceased filing reports with the SEC

• May have ceased meaningful business operations

• Are in financial distress, bankruptcy, or insolvency

• Have limited or no current financial disclosure available to investors

• May issue additional shares that dilute existing shareholders

OTCM Protocol does NOT verify issuer financial statements, does NOT guarantee issuer solvency, and does NOT take responsibility for the accuracy of issuer-provided information. The issuer and its management bear primary responsibility for information accuracy.

3.2 Common Class B Share Characteristics and Limitations

ST22 tokens issued by third-party OTC companies are backed 1:1 by Common Class B Shares with characteristics determined by each issuer’s Certificate of Designation:

Characteristic	Status	Investment Risk
Equity Backing	True 1:1 ownership of Common B shares	Equity can lose all value
Voting Rights	Issuer-designated per Certificate of Designation	May include full, limited, or no voting — varies by issuer
Dividends	At issuer discretion per Certificate of Designation	No guaranteed income; most OTC microcaps pay no dividends
Liquidation Preference	As specified per Certificate of Designation	May receive nothing in bankruptcy
Conversion Rights	Convertible to common stock on demand or via protective triggers	Common stock may be worthless
CUSIP Assignment	Each Common B class receives official CUSIP	CUSIP does not guarantee value

3.3 Protective Conversion Trigger Risks

ST22 tokens include automatic protective conversion triggers that convert Common B shares to common stock upon specified adverse events (bankruptcy, SEC enforcement, criminal indictment, loss of Empire services, material breach). However:

• Common stock received upon conversion may have ZERO VALUE in bankruptcy

• Conversion is automatic and irrevocable — you cannot opt out

• Not all adverse events are covered — triggers are limited to those specified in the Certificate of Designation

• Conversion does NOT guarantee recovery of any portion of your investment

• Common stock may be subject to additional dilution after conversion

3.4 Holding Period Restrictions

Investor Type	Holding Period	Enforcement
U.S. Accredited (Reg D)	6 months under SEC Rule 144	Enforced by Transfer Hook Control 24 — mathematically locked
Non-U.S. (Reg S)	12-month distribution compliance period	Enforced by Transfer Hook Control 24 — mathematically locked

During the holding period, you cannot sell, transfer, or otherwise dispose of your ST22 tokens regardless of market conditions. This means you bear the full risk of price decline during the lock period with no ability to exit.

4. Market, Liquidity, and Volatility Risks

4.1 Price Volatility

ST22 Digital Securities may experience extreme price volatility. OTC microcap securities are inherently illiquid and subject to wide bid-ask spreads, thin order books, and significant price swings on relatively small trading volumes. The 24/7/365 trading schedule on CEDEX means there is no market closure to pause activity during periods of extreme volatility.

4.2 Liquidity Risks

Risk	Description
Insufficient Depth	The Global Unified CEDEX Liquidity Pool may have insufficient depth for large trades, resulting in extreme slippage
No Market Makers	OTCM Protocol does not employ traditional market makers. Liquidity is provided solely by the Global Pool and participating traders
Single Venue	ST22 Digital Securities trade exclusively on CEDEX. There is no alternative venue if CEDEX experiences disruption
Graduation Risk	Tokens on the bonding curve may never reach graduation threshold ($250,000 market cap, 127,000+ holders, or 72 hours)
Permanent Lock	The Global Unified CEDEX Liquidity Pool LP tokens are burned — while this prevents rugpulls, it also means pool composition cannot be rebalanced

4.3 Circuit Breaker Limitations

OTCM Protocol implements circuit breakers (Transfer Hook Control 21) that automatically halt all trading when price moves exceed 10% within a 5-minute window. The halt lasts 15 minutes. However:

• Circuit breakers provide a temporary pause, not price protection

• Prices may continue declining after the halt lifts

• You may be unable to sell during circuit breaker activation

• Circuit breakers do NOT guarantee price recovery

• Multiple consecutive circuit breaker triggers are possible

4.4 Concentration Limits

Transfer Hook Control 23 enforces a 4.99% maximum wallet concentration limit per ST22 token. While this prevents single-entity market cornering, it does not prevent coordinated activity by multiple wallets or protect against price manipulation by entities holding just below the threshold.

5. Regulatory and Legal Risks

5.1 Securities Law Classification

ST22 Digital Securities are unambiguously Category 5 Digital Securities under SEC–CFTC Release No. 33-11412 (March 17, 2026). This classification subjects all ST22 transactions to the full requirements of federal securities laws, including the Securities Act of 1933, the Securities Exchange Act of 1934, and all applicable anti-fraud provisions.

5.2 Regulatory Change Risk

Risk	Description
Reclassification	The SEC may modify or withdraw Release No. 33-11412 or the Category 1 framework, affecting ST22 classification
Enforcement Action	The SEC, CFTC, FinCEN, state regulators, or DOJ may take enforcement action against OTCM Protocol, issuers, or the platform
CEDEX Status	CEDEX has not been registered as an ATS or national securities exchange. A no-action letter was filed March 30, 2026 but no assurance can be given that relief will be granted
State Blue Sky Laws	Each U.S. state has independent securities laws. Compliance in one state does not guarantee compliance in all states
International Restrictions	Non-U.S. jurisdictions may restrict, prohibit, or impose additional requirements on tokenized securities
Tax Treatment	Tax treatment of ST22 Digital Securities is evolving and may differ by jurisdiction. Consult a qualified tax advisor

5.3 No Registration

ST22 DIGITAL SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR UNDER ANY STATE SECURITIES LAWS. THE SEC HAS NOT PASSED UPON THE MERITS OF OR GIVEN ITS APPROVAL TO ANY SECURITIES OFFERED THROUGH THE OTCM PROTOCOL PLATFORM.

6. Technology, Platform, and Infrastructure Risks

6.1 Blockchain and Smart Contract Risks

Risk	Description
Solana Network Dependency	OTCM Protocol operates on Solana Mainnet-Beta. Network outages, congestion, protocol changes, or consensus failures may prevent trading or cause transaction failures
Smart Contract Vulnerabilities	Despite formal verification by Certora and external audits by Quantstamp and Halborn, undiscovered vulnerabilities may exist in Transfer Hook programs, CEDEX AMM, or liquidity pool contracts
Oracle System Failures	The 1:1 custody attestation oracle publishes on-chain every ~400ms. Oracle failures, latency, or manipulation could affect custody verification
Finality Risk	Blockchain reorganizations, while rare on Solana, could theoretically reverse confirmed transactions
RPC Infrastructure	OTCM Protocol relies on Helius for RPC infrastructure. Provider failures may prevent transaction submission

6.2 Platform and Operational Risks

Risk	Description
Platform Failure	OTCM Protocol could cease operations due to financial, regulatory, or technical reasons. While shares remain at Empire, secondary market liquidity would be eliminated
Single-Venue Dependency	ST22 tokens trade exclusively on CEDEX. External DEXs (Raydium, Orca, Meteora) disable Transfer Hooks, making them incompatible. If CEDEX ceases operation, no alternative venue exists
Key Person Risk	OTCM Protocol depends on a small leadership team. Loss of critical personnel could materially impair operations
Empire Dependency	The entire compliance architecture depends on Empire Stock Transfer. Patrick Mokros serves as both OTCM COO and Empire President, creating potential conflicts of interest
Funding Risk	OTCM Protocol is an early-stage company. Operational funds may be exhausted before the platform achieves profitability

6.3 Wallet and Custody Risks

• Lost private keys result in PERMANENT, IRRECOVERABLE loss of tokens. Neither OTCM Protocol nor Empire Stock Transfer can recover lost wallet keys.

• Phishing attacks, fake websites, and social engineering may result in credential theft and token loss

• No SIPC or FDIC insurance covers ST22 tokens or custody arrangements

• Empire Stock Transfer custody does NOT guarantee share value — only that shares are held in regulated custody

7. SOL Treasury Concentration Risk (OTCMS Offering)

EXTREME RISK: For the OTCM Security Token (OTCMS) offering, 40% of proceeds ($8,000,000) are allocated to SOL cryptocurrency purchases. 100% of treasury allocation is in a single digital asset.

Parameter	Value
SOL Allocation	$8,000,000 (40% of $20,000,000 offering)
Diversification	NONE — 100% in a single cryptocurrency
95% Decline Scenario	$8,000,000 reduces to approximately $400,000
Insurance	NONE — not covered by FDIC, SIPC, or any government agency
Correlation Risk	SOL price decline may coincide with ST22 platform activity decline, compounding losses

8. Category 1 Investor Protections and Their Limitations

Category 1 Model B compliance provides structural investor protections — but these protections address compliance, fraud prevention, and custodial integrity. They do NOT protect against market losses, business failures, or poor investment decisions.

Protection	What It Does	What It Does NOT Do
42 Transfer Hook Controls	Enforce KYC, AML, OFAC, accreditation, holding periods, velocity limits, and circuit breakers on every transaction inside the Solana runtime	Does NOT prevent market price declines or business failures of underlying issuers
1:1 Custody Attestation	Ed25519 cryptographic oracle verifies every ~400ms that token supply does not exceed custodied shares at Empire	Does NOT guarantee the economic value of the custodied shares
Empire Stock Transfer Custody	SEC-registered transfer agent and qualified custodian holds all backing shares in irrevocable custody	Does NOT provide SIPC, FDIC, or any government insurance
Permanent Liquidity Lock	Global Unified CEDEX Liquidity Pool LP tokens burned at initialization — rugpull mathematically impossible	Does NOT guarantee sufficient liquidity depth for large trades
Circuit Breakers	Halt trading when price moves >10% in 5 minutes for 15-minute cool-down	Does NOT prevent continued decline after halt lifts
Protective Conversion	Auto-converts to common stock upon bankruptcy, SEC enforcement, criminal indictment, loss of Empire, or material breach	Does NOT guarantee common stock has any value
Jito MEV Protection	Private transaction bundles prevent frontrunning and sandwich attacks on CEDEX	Does NOT prevent all forms of market manipulation
Wallet Concentration Limit	4.99% maximum per wallet prevents single-entity cornering	Does NOT prevent coordinated multi-wallet activity

9. No Guarantees

Groovy Company, Inc. dba OTCM Protocol makes NO guarantees, representations, or warranties regarding:

• Any return on investment, price appreciation, or price stability for any token

• Continued operation, availability, or functionality of the platform or CEDEX

• Liquidity availability for any ST22 Digital Security or the OTCM Utility Token

• Accuracy, completeness, or timeliness of any information provided by issuers

• Suitability of any investment for any particular investor

• Compliance with securities laws in all applicable jurisdictions

• Success, viability, or continued operation of any underlying company

• Effectiveness of Category 1 protections in preventing investment losses

• Future regulatory treatment of ST22 Digital Securities or the OTCM Utility Token

THE PLATFORM AND ALL SERVICES ARE PROVIDED “AS IS” AND “AS AVAILABLE” WITHOUT WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED.

10. Limited Issuer Obligations

Issuers of ST22 Digital Securities on the OTCM Protocol platform are NOT required to:

• Provide ongoing financial reports or statements

• File periodic reports with the SEC (10-K, 10-Q, 8-K)

• Update business information or operational status

• Communicate with ST22 token holders

• Achieve any business objectives or milestones

Tokenization on OTCM Protocol does NOT create ongoing disclosure obligations beyond the Certificate of Designation requirements. You may have NO access to current financial information about the underlying company.

Issuers ARE required to: authorize Common Class B creation via board resolution, file the Certificate of Designation with their state of incorporation, deposit shares with Empire Stock Transfer under irrevocable custody, and honor protective conversion triggers. Transfer Hook security controls cannot be disabled.

11. Platform Characteristics

What OTCM Protocol IS

• SEC Category 1 Model B compliant ST22 Digital Securities infrastructure under Release No. 33-11412

• Operator of CEDEX (Compliant Exchange for Digital Securities) at cedex.otcm.io

• Solana-based tokenization and trading platform with SPL Token-2022 Transfer Hooks

• Integrated with Empire Stock Transfer (SEC-registered transfer agent and qualified custodian)

• Provider of 42 Transfer Hook compliance controls enforced at the Solana runtime level

What OTCM Protocol Is NOT

• NOT a registered national securities exchange

• NOT a registered broker-dealer

• NOT a registered investment advisor

• NOT a transfer agent (Empire Stock Transfer provides custody and onboarding)

• NOT providing investment, legal, tax, or accounting advice

• NOT insured by SIPC, FDIC, or any government agency

12. Investor Acknowledgment and Acceptance

By investing in ST22 Digital Securities or OTCM Utility Tokens through the OTCM Protocol platform, you acknowledge and confirm that:

For ST22 Digital Securities:

• You understand ST22 tokens ARE SECURITIES under federal securities laws

• You qualify as an accredited investor under SEC Rule 501(a) (U.S.) or as a non-U.S. person under Reg S

• You understand you may lose your ENTIRE investment

• You have conducted your own due diligence on the underlying issuer

• You understand Category 1 protections do NOT guarantee against investment losses

• You understand protective conversion may result in worthless common stock

• You understand the 6-month (Reg D) or 12-month (Reg S) holding period is mathematically enforced

• You have consulted with qualified financial, legal, and tax advisors

For OTCM Utility Token:

• You understand the OTCM Utility Token has NO asset backing whatsoever

• You understand it is highly speculative and may lose 100% of its value

• You understand it is NOT a security and NOT an ST22 Digital Security

• You understand staking rewards are NOT guaranteed

For Both Products:

• You have read and understood this entire Investment Risk Disclosure

• You will not invest more than you can afford to lose completely

• You will comply with all applicable laws and regulations

• You will maintain the security of your own wallet private keys

• You accept all risks described in this document and in the related Risk Disclosure, Terms and Conditions, and Private Placement Memorandum

YOU MAY LOSE YOUR ENTIRE INVESTMENT. THERE IS NO GUARANTEE OF ANY RETURN. PROCEED ONLY IF YOU FULLY UNDERSTAND AND ACCEPT ALL RISKS DESCRIBED IN THIS DOCUMENT.

13. Contact Information

Contact	Information
General / Investors	invest@otcm.io
Chief Technology Officer	frank@otcm.io
Compliance	compliance@otcm.io
Privacy	privacy@otcm.io
Mailing Address	12 Daniel Rd East, Fairfield, NJ 07004
Phone	1-404-734-3277
Website	otcm.io
CEDEX Trading	cedex.otcm.io
Issuers Gateway	otcm.network

Document Information

Field	Value
Document Title	Investment Risk Disclosure
Version	8.0
Effective Date	March 2026
Legal Entity	Groovy Company, Inc. dba OTCM Protocol
Entity Jurisdiction	Wyoming Corporation
SEC EDGAR CIK	1499275
OTC Ticker	GROO
Governing Law	New Jersey State Law and Federal Securities Law
Regulatory Framework	SEC Category 1 Model B — Release No. 33-11412 (March 17, 2026)

This document may be updated at any time. Investors are responsible for reviewing current disclosures. Continued use of the platform constitutes acceptance of updated disclosures.

ST22 Digital Securities are Category 5 Digital Securities under SEC–CFTC Release No. 33-11412 (March 17, 2026). The OTCM Utility Token is a utility token with no asset backing. This document does not constitute an offer to sell or solicitation of an offer to buy any securities. Groovy Company, Inc. dba OTCM Protocol is a Wyoming Corporation (CIK: 1499275).