🏛️ OTCM Protocol Achieves SEC Category 1 Model B Tokenized Securities Framework

Groovy Company, Inc. dba OTCM Protocol A Wyoming Corporation · OTC: GROO · SEC EDGAR CIK: 1499275 📧 invest@otcm.io · 🌐 otcm.io · 📞 1-404-734-3277

FOR IMMEDIATE RELEASE 📅 February 3, 2026

🔐 Becomes First Micro-Cap Focused Platform to Meet All Requirements of Category 1 Model B for Tokenization of Securities Under the SEC's January 2026 Joint Staff Statement

FAIRFIELD, NJ, February 3, 2026 — Groovy Company, Inc. dba OTCM Protocol ("Over The Counter Microcap Protocol") (OTC: GROO) today announced that its Layer 2 platform for the tokenization of OTC microcap equity securities fully complies with the Securities and Exchange Commission's Category 1 (Issuer-Sponsored), Model B framework as defined in the Joint Staff Statement on Tokenized Securities issued January 28, 2026.

The SEC's Joint Staff Statement, issued jointly by the Division of Corporation Finance, Division of Trading and Markets, and Division of Investment Management, established two categories for tokenized securities. Category 1 applies to issuer-sponsored tokenization where the issuer authorizes the creation of tokenized representations of its own securities. Category 2 applies to third-party tokenization without direct issuer involvement. Within Category 1, Model B provides that a crypto asset notifies the issuer's agent to record the transfer of ownership on a master securityholder file maintained off-chain — precisely the architecture OTCM Protocol operates today.

💬 What Our Leadership Is Saying

"From day one, we built OTCM Protocol with the expectation that clear regulatory guidance would eventually arrive. The SEC's January 2026 statement validates our architecture. We didn't need to pivot or retrofit — we were already there."
— Frank Yglesias, Chief Technology Officer, OTCM Protocol

"The distinction between Category 1 and Category 2 is critical for investor protection. Category 2 tokenization creates counterparty risk — if the tokenizer fails, investors may become general creditors. Under Category 1, token holders have a direct ownership claim to real securities held by an SEC-registered transfer agent. There is no intermediary risk."
— Jeff Turner, Chief Legal Officer, OTCM Protocol · Founder, JDT Legal

"Traditional finance abandoned these companies. At Empire, we serve over 500 publicly traded companies. We've watched hundreds lose market maker coverage through no fault of their own. OTCM Protocol gives them a path forward that's fully compliant with SEC guidance."
— Patrick Mokros, Chief Operating Officer, OTCM Protocol · President, Empire Stock Transfer, Inc.

🏗️ Category 1, Model B: How OTCM Protocol's Architecture Qualifies

OTCM Protocol operates under Model B of the SEC's Category 1 framework, in which:

🔗 The Solana blockchain serves as the real-time notification layer for all ST22 Security Token transfers
🏦 Empire Stock Transfer, Inc. — an SEC-registered transfer agent under Exchange Act Section 17A — maintains the authoritative off-chain master securityholder file
⏱️ Cryptographically signed custody attestations (Ed25519 signatures from an HSM-secured key) are published to the Solana blockchain approximately every 400 milliseconds, enabling real-time 1:1 backing verification on every single token transfer
🔒 All underlying Series M Preferred Shares are held in irrevocable custody at Empire Stock Transfer — withdrawal is contractually and structurally prohibited

This architecture eliminates counterparty risk, provides continuous reconciliation between on-chain and off-chain records, and delivers a level of transparency and verifiability unavailable in traditional OTC market infrastructure.

⚙️ 42 Transfer Hook Controls: Compliance at the Protocol Level

Every ST22 Security Token transfer triggers 42 SPL Token-2022 Transfer Hook security controls executed atomically before any transaction settles, including:

🛡️ Hook 1 — Custody Verification: Confirms circulating supply ≤ custodied Series M shares (oracle-verified every ~400ms)
🌐 Hook 2 — OFAC Screening: Real-time SDN list check (updated hourly) on every counterparty
📊 Hook 3 — AML Risk Scoring: XGBoost machine-learning risk model (0–100 scale; ≤30 approve, ≥71 reject)
✅ Hook 4 — KYC / Accreditation Verification: Programmatic third-party verification required before any transfer
⚡ Hook 5 — Price Impact Circuit Breaker: 2% TWAP limit enforced per transaction
💧 Hook 6 — Liquidity Ratio: 150% minimum liquidity ratio maintained at all times

"Every ST22 Security Token is backed 1:1 by Series M Preferred Shares physically held by Empire Stock Transfer. Our 42 Transfer Hook security controls ensure compliance at the protocol level — not through policy, but through code."
— Frank Yglesias, CTO, OTCM Protocol

💰 The Market Problem OTCM Protocol Solves

OTCM Protocol's Category 1 Model B compliant infrastructure addresses a critical and quantifiable market failure:

📊 Market Metric	📈 Estimated Scale
OTC companies with impaired or eliminated liquidity	11,000+
Shareholders affected	~5 million
Estimated trapped shareholder value	$50+ billion
Companies losing 15c2-11 eligibility annually	500–1,000+

When trading volume falls below approximately $5,000 per day, market makers withdraw coverage, leaving companies and their shareholders without access to liquidity or capital markets. No existing platform — institutional or retail, centralized or decentralized — addresses this market. OTCM Protocol was purpose-built for exactly this failure.

🏢 About Groovy Company, Inc. dba OTCM Protocol

Groovy Company, Inc. dba OTCM Protocol (OTC: GROO; SEC EDGAR CIK: 1499275) is a Wyoming corporation developing Solana-native blockchain infrastructure for the tokenization of OTC microcap equity securities as Digital Securities under federal securities law.

The Company's nine-layer protocol stack on Solana includes:

⚡ CEDEX — Centralized-Decentralized Exchange combining centralized order coordination with decentralized on-chain settlement
🔐 42 SPL Token-2022 Transfer Hook compliance controls enforced atomically on every transaction
💧 Federated Liquidity Protocol with permanently locked capital
🤖 Predictive AI Module (Layer 9) scoring 15,000+ OTC issuers across 140+ EDGAR-derived features
🏦 Empire Stock Transfer custody integration under SEC Category 1 Model B and Regulation D Rule 506(c)

The Company was founded on a single conviction: that the $50 billion in shareholder value trapped across 11,000+ illiquid OTC companies represents not a niche problem but a systemic failure of market infrastructure — one that blockchain technology, properly engineered, can permanently fix. Three beta issuers have processed more than $7 million in liquidity through the platform prior to broader launch.

All ST22 Security Token offerings are conducted under Regulation D Rule 506(c), limited to verified accredited investors. The Company does not operate as a broker-dealer.

🌐 otcm.io · 💼 invest.otcm.io 🔗 LinkedIn · 🐦 X / Twitter · ▶️ YouTube

⚖️ Forward-Looking Statements

This document contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Statements regarding the Company's platform, regulatory compliance, issuer onboarding, market opportunity, and anticipated benefits are forward-looking and subject to risks and uncertainties. Actual results may differ materially from those expressed or implied. OTCM Protocol undertakes no obligation to update forward-looking statements. This release does not constitute an offer to sell or solicitation of an offer to buy any securities. ST22 Security Tokens have not been registered under the Securities Act of 1933 and are offered only to verified accredited investors under Regulation D Rule 506(c).

📬 Media and Investor Contact

Groovy Company, Inc. dba OTCM Protocol 📧 invest@otcm.io 📞 1-404-734-3277 🌐 otcm.io · invest.otcm.io 📊 OTC: GROO · SEC EDGAR CIK: 1499275 📍 Fairfield, NJ 07004

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