RISK DISCLOSURE V8

RISK DISCLOSURE

VERSION 8.0

GROOVY COMPANY, INC. DBA OTCM PROTOCOL

Wyoming Corporation | CIK: 1499275 | OTC: GROO

12 Daniel Rd East, Fairfield, NJ 07004

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

Issuer-Sponsored Tokenized Securities pursuant to SEC–CFTC Joint Interpretive Release No. 33-11412 (March 17, 2026) and SEC Division of Corporation Finance, Division of Investment Management, and Division of Trading and Markets Joint Statement dated January 28, 2026.

CRITICAL WARNING: READ ALL RISK DISCLOSURES CAREFULLY BEFORE USING THE OTCM PROTOCOL PLATFORM OR PURCHASING ANY TOKENS.

CRITICAL CLASSIFICATION NOTICE

Two Different Token Types with Different Risk Profiles

OTCM Protocol operates two fundamentally different token types with distinct regulatory classifications and risk profiles. You must understand which token type you are acquiring.

Token Type	Classification	Asset Backing	Regulatory Status
ST22 Digital Securities	SECURITIES	1:1 Common Class B Shares (third-party) or Series “S” Preferred Shares (OTCMS)	SEC Category 1 Model B — Release No. 33-11412
OTCM Utility Token	Utility Token	None	Utility token framework (counsel analysis pending under five-category taxonomy)

CRITICAL: ST22 Digital Securities ARE SECURITIES under federal securities laws. They are NOT entertainment products, NOT meme tokens, and NOT collectibles. The OTCM Utility Token is a separate utility token with NO asset backing.

PART A: ST22 DIGITAL SECURITIES RISKS

These Are Securities

ST22 Digital Securities are securities under federal securities laws pursuant to SEC–CFTC Release No. 33-11412 (March 17, 2026) — the binding five-category Digital Securities taxonomy — and the SEC’s January 28, 2026 Category 1 (Issuer-Sponsored Tokenized Securities) framework. As securities:

• Federal securities laws APPLY to all ST22 transactions

• ST22 tokens represent true equity ownership (1:1 share backing)

• ST22 holders have issuer-designated shareholder rights including protective conversion triggers

• All risks associated with securities investments APPLY

1. Investment Loss Risk

YOU MAY LOSE YOUR ENTIRE INVESTMENT.

Critical loss scenarios for ST22 Digital Securities:

Risk	Description
100% Loss Possible	Like any security, ST22 tokens can lose all value
Market Risk	Token value depends on underlying company performance and market conditions
Issuer Risk	Underlying companies may fail, reducing or eliminating token value
Liquidity Risk	You may not be able to sell at desired prices or times
Long-Term Risk	Value may decline over extended periods

Category 1 Protections (Limited)

While Category 1 compliance provides certain protections, these do NOT guarantee against loss:

Protection	What It Does	What It Does NOT Do
42 Transfer Hooks	Enforces compliance controls on transactions	Does NOT prevent market losses
Circuit Breakers	Halts trading during extreme volatility	Does NOT guarantee price recovery
1:1 Backing	Ensures true equity ownership	Does NOT guarantee equity value
SEC-Registered Custody	Regulated custody via Empire Stock Transfer	Does NOT insure against issuer failure
Protective Conversion	Converts to common stock on adverse events	Does NOT guarantee common stock value

2. Underlying Company Risks

ST22 Digital Securities represent tokenized equity in underlying companies. These companies carry significant risks:

Risk Category	Description
Bankruptcy Risk	Companies may become insolvent. Protective conversion triggers convert to common stock, but common stock may have no value in bankruptcy.
Fraud Risk	Despite due diligence, companies may commit fraud or misrepresent their condition.
Limited Disclosure	Many tokenized companies are not SEC reporting companies and provide limited financial information.
Non-Operating Companies	Some companies may have ceased meaningful business operations.
Business Failure	Companies may fail for legitimate business reasons.
Dilution Risk	Companies may issue additional shares, diluting existing shareholders.

ST22 tokens issued by third-party OTC companies are backed by Common Class B Shares with issuer-designated characteristics:

Characteristic	Status	Implication
Equity Backing	True 1:1 ownership	Real equity, but equity can lose value
Conversion Rights	Convertible to common stock	On demand or protective triggers
Dividends	At issuer discretion per Certificate of Designation	No guaranteed dividend payments
Voting Rights	Issuer-designated per Certificate of Designation	Varies by issuer — may include full, limited, or no voting
Liquidation Preference	As specified per Certificate of Designation	Varies by issuer

3. Market and Volatility Risks

ST22 Digital Securities trade on CEDEX and are subject to market risks:

Risk	Description
Price Volatility	Prices may fluctuate significantly based on market conditions
Liquidity Risk	Limited trading volume may make selling difficult
Slippage	Large trades may execute at prices significantly different from quoted
24/7 Trading	Continuous trading means no market closure protection
Global Markets	International events may affect prices at any time

Circuit Breaker Limitations

OTCM Protocol implements circuit breakers that halt trading when price moves exceed 10% within 5 minutes. However:

• Circuit breakers provide a pause, not price protection

• Prices may continue declining after the 15-minute halt lifts

• You may be unable to sell during circuit breaker activation

• Circuit breakers do NOT guarantee price recovery

4. Custody and Backing Risks

ST22 tokens are backed by shares held at Empire Stock Transfer, an SEC-registered transfer agent and qualified custodian. Custody risks include:

Risk	Description
Custodian Risk	Although SEC-regulated, custodian failure could affect operations
Oracle Risk	Custody verification relies on oracle systems that may fail
Verification Delays	Custody verification occurs every ~400ms but delays are possible
Regulatory Changes	Transfer agent regulations may change

Protective Conversion Trigger Limitations

Protective conversion triggers provide bankruptcy protection by converting Common B shares to common stock upon adverse events. However:

• Common stock received may have zero value in bankruptcy

• Conversion is automatic — you cannot opt out

• Trigger events are defined in Certificate of Designation — not all adverse events trigger conversion

• Conversion does NOT guarantee recovery of investment

5. Regulatory Risks

ST22 Digital Securities operate under SEC Category 1 Model B framework and Release No. 33-11412. Regulatory risks include:

Risk	Description
Regulatory Changes	SEC guidance or binding rules may change, affecting ST22 classification or trading
Enforcement Risk	Regulatory enforcement actions could affect platform operations
Jurisdictional Risk	Your jurisdiction may restrict or prohibit tokenized securities
Compliance Changes	New compliance requirements may affect trading
Tax Obligations	Securities transactions have tax implications — consult tax advisor

Accredited Investor Requirement

ST22 Digital Securities are offered under Reg D to U.S. accredited investors and under Reg S to non-U.S. investors:

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

• Accreditation or eligibility verification by Empire Stock Transfer is required before purchase

• Providing false accreditation information is illegal

• Non-accredited U.S. investors cannot purchase ST22 tokens

6. Technical and Platform Risks

Blockchain Risks

Risk	Description
Network Risk	Solana network outages or congestion may prevent trading
Transaction Failures	Transactions may fail or execute incorrectly
Finality Risk	Blockchain reorganizations could theoretically reverse transactions
Fee Volatility	Network fees may increase significantly during congestion

Platform Risks

Risk	Description
Platform Failure	OTCM Protocol could cease operations
Smart Contract Bugs	Despite formal verification and audits, smart contracts may contain vulnerabilities
Technical Failures	System failures could prevent trading or cause losses
No SIPC/FDIC	Unlike traditional brokerages, no SIPC or FDIC insurance

Security Risks

Risk	Description
Wallet Security	Lost private keys mean permanent loss of tokens
Phishing	Fake websites may attempt to steal credentials
Hacks	Despite security measures, systems could be compromised
No Recovery	Lost or stolen tokens generally cannot be recovered

PART B: OTCM UTILITY TOKEN RISKS

This Is a Utility Token (NOT a Security)

The OTCM Utility Token is a utility token providing platform governance participation, fee discounts, and staking rewards. It is NOT backed by securities and is NOT an ST22 Digital Security.

Characteristic	OTCM Utility Token
Classification	Utility Token (counsel analysis pending — potential Digital Commodity or Digital Tool under five-category taxonomy)
Asset Backing	NONE
Purpose	Governance participation, fee discounts, staking
Securities Status	NOT a security (different from ST22)

7. Total Loss Risk (OTCM Utility Token)

YOUR TOKENS MAY BECOME COMPLETELY WORTHLESS.

Risk	Description
100% Loss Possible	OTCM Utility Tokens can lose 100% of their value
No Asset Backing	Unlike ST22, there is NO underlying equity backing
Permanent Loss	Lost value cannot be recovered
No Minimum Value	Tokens can trade at effectively zero
Utility Depreciation	Platform changes may reduce utility value

8. Extreme Volatility Risks (OTCM Utility Token)

Risk	Description
Extreme Swings	Token prices may experience movements exceeding 90% in a single day
Flash Crashes	Prices can drop dramatically in seconds
Whale Risk	Large holders may significantly impact price
Sentiment Driven	Value derives from platform utility and market sentiment
Liquidity Risk	May be unable to sell at desired prices

9. Staking Risks (OTCM Utility Token)

Risk	Description
Lock-up Risk	Staked tokens may be locked during critical price movements
APY Volatility	Staking rewards depend on ST22 trading volume and may vary significantly
Smart Contract Risk	Staking contracts may fail or be exploited
Opportunity Cost	Staked tokens cannot be sold during price increases
Reward Reduction	APY may decrease if more participants stake

10. Protocol Governance Participation Risks

Risk	Description
Governance Attacks	Malicious actors may attempt to influence governance
Minority Position	Your votes may be outvoted by larger holders
Parameter Changes	Protocol Governance may change protocol parameters affecting token value
Governance Limitations	The 42 Transfer Hook compliance controls are immutable and cannot be modified by governance vote

PART C: GENERAL RISKS (BOTH TOKEN TYPES)

11. Market Manipulation Risks

While OTCM implements 42 Transfer Hook security controls, manipulation risks remain:

Risk	Description	Mitigation
Pump and Dump	Coordinated buying followed by selling	Circuit breakers, wallet limits
Wash Trading	Fake volume creation	AML analytics via Chainalysis KYT + TRM Labs
Whale Accumulation	Large position building	4.99% wallet concentration limit
Social Manipulation	False information spreading	Cannot be prevented by technology
Coordination	Private groups coordinating trades	Difficult to detect

12. Psychological Risks

Trading involves psychological risks. If you are experiencing difficulty controlling trading behavior, trading affecting relationships or responsibilities, emotional distress from trading losses, or borrowing money to trade — please seek professional help. Trading should not negatively impact your mental health or financial stability.

13. Operational Risks

Third-Party Dependencies

Dependency	Risk
Empire Stock Transfer	Custodian failure affects ST22 backing
Solana Network	Network issues affect all trading
Oracle Systems	Oracle failures affect custody verification
RPC Providers (Helius)	RPC issues may prevent transactions
Wallet Software	Wallet bugs may cause losses

Business Continuity Risks

Risk	Description
Key Person Risk	Loss of critical team members
Funding Risk	Platform may exhaust operational funds
Competition Risk	Better platforms may emerge
Technology Risk	Technology may become outdated
Market Conditions	Prolonged bear markets may affect viability

14. Geographic Restrictions

Restriction	Details
OFAC Sanctioned Countries	All OFAC-sanctioned jurisdictions
Crypto-Prohibited Jurisdictions	Jurisdictions where crypto trading is illegal
Certain US States	States with specific restrictions
Non-Accredited (ST22)	Non-accredited U.S. investors cannot purchase ST22 tokens

15. Disclaimers and Limitations

No Warranties or Guarantees

Limitation	Description
Maximum Liability	Our maximum liability is limited as specified in Terms of Service
No Consequential Damages	We are not liable for indirect, incidental, or consequential damages
No Investment Advice	Nothing on our platform constitutes investment, legal, or tax advice
Your Responsibility	You are solely responsible for all trading decisions
Indemnification	You agree to indemnify OTCM Protocol from claims arising from your use

16. Acknowledgment and Acceptance

By using OTCM Protocol, you acknowledge:

For ST22 Digital Securities:

• You understand ST22 tokens are SECURITIES under federal securities laws

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

• You understand you may lose your entire investment

• You have reviewed the specific risks of the underlying company

• You understand Category 1 protections do NOT guarantee against loss

• You understand protective conversion may result in worthless common stock

For OTCM Utility Token:

• You understand OTCM Utility Token has NO asset backing

• You understand it is a utility token, NOT a security

• You accept the risk of total loss of all funds

• You understand staking rewards are NOT guaranteed

For Both Token Types:

• You have read and understood ALL risk disclosures

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

• You will comply with all applicable laws

• You will maintain security of your own wallets

• You accept all risks associated with blockchain-based assets

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

Contact for Questions

Resource	Contact
General / Investors	invest@otcm.io
Chief Technology Officer	frank@otcm.io
Educational Materials	otcm.info
Professional Advice	Consult with qualified financial, legal, and tax advisors

Document Information

Field	Value
Document Version	8.0
Effective Date	March 2026
Entity Jurisdiction	Wyoming Corporation
Governing Law	New Jersey State Law and Federal Securities Law
Regulatory Framework	SEC Category 1 Model B — Release No. 33-11412 (March 17, 2026)

By clicking “I Accept” or using the platform, you confirm you have read, understood, and accepted all risks described in this document.

This Risk Disclosure document may be updated at any time. Users are responsible for reviewing current disclosures regularly. 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. Groovy Company, Inc. dba OTCM Protocol is a Wyoming Corporation (CIK: 1499275).