Glossary of Terms

OTCM PROTOCOL Comprehensive Technical Whitepaper  —  Version 7.0  |  Glossary of Terms

Glossary of Terms

This glossary defines all OTCM Protocol-specific terminology, regulatory frameworks, and technical terms used in this whitepaper. Generic blockchain and financial terms familiar to institutional and accredited investors are excluded. Terms marked NEW are introduced in Version 7.0.

OTCM PLATFORM & ARCHITECTURE

OTCM Protocol  —  The ST22 Digital Securities Platform operated by Groovy Company, Inc. dba OTCM Protocol (Over the Counter Microcap), a Wyoming Corporation (CIK: 1499275). OTCM Protocol provides compliant tokenization and secondary trading infrastructure for OTC microcap securities through the nine-layer technology stack described in this whitepaper.

ST22 (Security Token 2022)  —  OTCM Protocol's proprietary digital security standard built on the Solana SPL Token-2022 program with Transfer Hook extensions. ST22 tokens represent direct beneficial ownership in Preferred Series M shares held in perpetual custody by Empire Stock Transfer. Issued exclusively through Regulation D Rule 506(c) and Regulation S private placements to verified accredited investors. All 42 Transfer Hook security controls are enforced on every transfer.

CEDEX (Compliant Exchange for Digital Securities)  —  OTCM Protocol's purpose-built securities trading infrastructure combining centralized order matching efficiency with decentralized Solana settlement. The exclusive venue for all ST22 token secondary trading. CEDEX is the only trading infrastructure capable of maintaining all 42 Transfer Hook security controls on every transaction — external DEXs (Raydium, Orca, Jupiter, Meteora) disable Transfer Hook functionality and cannot be used for ST22 trading.

OTCM Global Unified CEDEX Liquidity Pool  —  The single, protocol-owned liquidity pool shared by all ST22 issuers on CEDEX. Established once by OTCM Protocol's treasury. Deepened continuously by the 5% transaction fee on every CEDEX trade across all issuers, and by investor secondary sale proceeds routing into the pool post-holding period. LP tokens are burned at pool initialization — liquidity withdrawal is mathematically impossible. No per-issuer pools exist.  NEW

Transfer Hook  —  SPL Token-2022 program extension that intercepts every ST22 token transfer and executes 42 sequential security controls before allowing the transaction to complete. Any control failure causes atomic transaction reversion with a specific error code. Transfer Hooks operate at the token transfer primitive — they cannot be disabled, bypassed, or routed around by any party, including OTCM Protocol itself.

Transfer Hook Control 24  —  The specific Transfer Hook control that enforces the mandatory holding period on every ST22 investor wallet. Records the purchase timestamp on-chain at the time of token delivery. Rejects all transfer attempts with Error 6024 (TokensLocked) until the applicable holding period has elapsed: 6 months for U.S. accredited investors (Rule 144) or 12 months for non-U.S. investors (Regulation S). No administrative override exists.  NEW

Alesia Doctrine  —  OTCM Protocol's core security philosophy: compliance enforcement at the lowest possible layer of the technology stack, making regulatory bypass structurally impossible rather than merely discouraged. Named for the strategic encirclement principle — the platform is designed so that no participant, including OTCM Protocol itself, can circumvent the 42 Transfer Hook security controls.

Nine-Layer Architecture  —  OTCM Protocol's complete technology stack: Layer 1 (Solana Foundation), Layer 2 (Transfer Hook Security Enforcement), Layer 3 (Global Unified CEDEX Liquidity Pool), Layer 4 (Custom AMM Engine), Layer 5 (CEDEX Trading Infrastructure), Layer 6 (Oracle Network), Layer 7 (DAO Governance), Layer 8 (Wallet Infrastructure), Layer 9 (Predictive Marketing AI Module).

Custom AMM Engine  —  OTCM Protocol's proprietary Automated Market Maker built specifically to support SPL Token-2022 Transfer Hook enforcement. Operates against the Global Unified CEDEX Liquidity Pool using a Constant Product Market Maker (CPMM) formula (x × y = k). Purpose-built because all major external DEXs disable Token-2022 Transfer Hook functionality.

Bonding Curve  —  A mathematical price discovery mechanism used exclusively for the GROO token (Groovy Company, Inc.'s own ST22 token) during its initial bootstrap phase. Linear formula: P(n) = P0 + (g × n). Not applicable to third-party issuer ST22 tokens, which are issued through Regulation D 506(c) private placements directly to accredited investors.

IDOS (Issuer Determination Opportunity Score)  —  A proprietary composite score generated by the Layer 9 Predictive Marketing AI Module, rating the tokenization readiness of OTC microcap companies across EDGAR filing health, shareholder count, trading history, and corporate action indicators. Used to prioritize the issuer acquisition pipeline.

SECURITIES STRUCTURE & ISSUANCE

Series M Preferred Shares  —  Non-voting, non-dilutive preferred shares created by a third-party issuer through a board resolution and Certificate of Designation filed with the Wyoming Secretary of State. Deposited irrevocably with Empire Stock Transfer under perpetual custody arrangements. Each ST22 token is backed 1:1 by one Series M preferred share. The Series M mechanism provides the legal and economic foundation for Category 1 Model B compliance.  NEW

Certificate of Designation  —  The legal instrument filed by an issuer with the Wyoming Secretary of State authorizing the creation of Preferred Series M shares. Establishes the rights, preferences, and restrictions of the Series M class and constitutes the formal corporate authorization required for SEC Category 1 (Issuer-Sponsored) tokenization.

CUSIP  —  Committee on Uniform Securities Identification Procedures number — a 9-character alphanumeric code identifying a specific security in the United States. CUSIP assignment is a required element of OTCM Protocol's Category 1 compliance architecture, providing a clear ownership chain between the Series M preferred shares and their corresponding ST22 tokens.

Tripartite Agreement  —  The three-party agreement executed among the issuer, OTCM Protocol, and Empire Stock Transfer governing the custody, tokenization, and trading of Series M preferred shares. Establishes the legal relationships, rights, and obligations of each party throughout the lifecycle of the ST22 token issuance.

Protective Conversion Trigger  —  Automatic mechanism converting Series M preferred shares into common stock upon specified events: issuer bankruptcy, SEC enforcement action, criminal indictment of executive officers, or corporate dissolution. Protects ST22 token holders by ensuring they retain equity participation rights in adverse scenarios.

STO (Security Token Offering)  —  A regulated capital raise in which ST22 security tokens are sold to investors under applicable securities law exemptions. On the OTCM Platform, STOs are conducted under Regulation D Rule 506(c) for U.S. accredited investors and Regulation S for non-U.S. investors in offshore transactions. 100% of minted tokens are distributed to verified investors — the issuer receives USD capital proceeds.

EMPIRE STOCK TRANSFER & CUSTODY

Empire Stock Transfer  —  The independent, SEC-registered transfer agent serving as the qualified custodian and sole investor onboarding authority for all ST22 issuances on the OTCM Platform. Registered under Section 17A of the Securities Exchange Act of 1934. Maintains the authoritative Master Securityholder File for all Series M preferred shares. Performs all investor onboarding functions: KYC, KYB, AML, OFAC/SDN screening, and Wallet Verification. Patrick Mokros serves as President.  NEW

KYC (Know Your Customer)  —  Identity verification process performed exclusively by Empire Stock Transfer for all individual investors seeking to participate in ST22 issuances. Includes government-issued photo ID verification, residential address confirmation, liveness check, and source of funds declaration. Completion of KYC is required before any ST22 tokens are delivered to an investor wallet.

KYB (Know Your Business)  —  Entity investor verification process performed exclusively by Empire Stock Transfer for corporate, fund, trust, and other non-individual investors. Includes verification of legal entity formation documents, Ultimate Beneficial Owner (UBO) identification, signatory authorization, and entity accreditation documentation. Required for all non-individual participants in ST22 issuances.  NEW

AML (Anti-Money Laundering)  —  Screening and monitoring program operated by Empire Stock Transfer to detect and prevent the use of ST22 issuances for money laundering or terrorist financing. Includes risk scoring of investor profiles, source of funds analysis, transaction monitoring, and Suspicious Activity Report (SAR) filing with FinCEN where required under the Bank Secrecy Act.

OFAC/SDN Screening  —  Real-time verification performed by Empire Stock Transfer against the U.S. Treasury Office of Foreign Assets Control Specially Designated Nationals (SDN) list and related sanctions programs. Applied to all investor onboarding and updated hourly. ST22 Transfer Hook Control 2 enforces OFAC screening on every on-chain transfer in addition to the Empire onboarding check.

Wallet Verification  —  The process by which Empire Stock Transfer registers and verifies an investor's Solana wallet address in the Master Securityholder File and the Transfer Hook whitelist before any ST22 tokens are delivered. Wallet addresses not registered with Empire cannot receive ST22 tokens — the Transfer Hook rejects all transfers to unverified wallets.  NEW

Master Securityholder File  —  The authoritative, legally binding record of all Series M preferred share ownership maintained by Empire Stock Transfer. The Master Securityholder File is the official shareholder register for all ST22-backed securities. Every ST22 Transfer Hook notification to Empire constitutes an effective entitlement order under UCC Article 8, triggering an update to this file.

1:1 Attestation Oracle  —  Empire Stock Transfer's cryptographic custody verification feed, updated approximately every 400 milliseconds, confirming that the total circulating supply of ST22 tokens does not exceed the number of Series M preferred shares held in custody. Transfer Hook Control 1 rejects any mint or transfer that would cause the token supply to exceed the custodied share count.

REGULATORY FRAMEWORK

Digital Securities  —  Financial instruments formatted as crypto assets with ownership recorded on a crypto network, as formally defined by SEC Release No. 33-11412 (March 17, 2026). ST22 tokens satisfy every element of this definition. The formal classification of ST22 tokens as Digital Securities under Release No. 33-11412 is the authoritative regulatory basis for the OTCM Platform's compliance architecture.  NEW

SEC Category 1 Model B (Issuer-Sponsored Tokenization)  —  The SEC's preferred tokenization architecture as established by the January 28, 2026 Joint Staff Statement on Tokenized Securities and SEC Release No. 33-11412. Requires: (1) direct issuer authorization through board resolution, (2) integration with the official shareholder register through an SEC-registered transfer agent, and (3) SEC-registered transfer agent custody. OTCM Protocol operates exclusively within Category 1 Model B. Category 2 (Third-Party Sponsored) tokenization is disfavored by the SEC and not supported on the OTCM Platform.

January 28, 2026 Joint Staff Statement  —  The landmark statement issued jointly by the SEC's Division of Corporation Finance, Division of Investment Management, and Division of Trading and Markets establishing the definitive regulatory taxonomy for tokenized securities. Established the Category 1 (Issuer-Sponsored) and Category 2 (Third-Party Sponsored) classification framework. Formally validates OTCM Protocol's architecture as the preferred model for compliant securities tokenization.

SEC Release No. 33-11412  —  SEC and CFTC joint interpretation published March 17, 2026 establishing that Digital Securities — financial instruments formatted as crypto assets with ownership recorded on a crypto network — are a recognized asset class subject to full securities law compliance. ST22 tokens are explicitly designed to satisfy every element of this definition.

Regulation D Rule 506(c)  —  SEC exemption from Securities Act registration permitting general solicitation of securities offerings to verified accredited investors with no limit on the amount raised. The primary offering exemption for U.S. investor participation in ST22 issuances. Requires: (1) all purchasers be accredited investors, (2) issuer take reasonable steps to verify accreditation, and (3) Form D filed with the SEC within 15 days of first sale. Accreditation verification is performed by Empire Stock Transfer.

Regulation S  —  SEC exemption permitting offers and sales of securities to non-U.S. persons in offshore transactions without SEC registration. The offering exemption for international investor participation in ST22 issuances. Requires purchasers to not be U.S. persons as defined in Rule 902(k) and not purchasing for the account of any U.S. person. Subject to a 12-month distribution compliance period enforced on-chain by Transfer Hook Control 24.

Rule 144  —  SEC rule governing the resale of restricted securities by non-affiliates. In the OTCM context: ST22 tokens acquired in a Regulation D 506(c) offering are restricted securities subject to a 6-month minimum holding period before resale. The holding period is enforced on-chain by Transfer Hook Control 24, which records the purchase timestamp and rejects all transfer attempts until the period has elapsed.

Rule 144 Holding Period  —  The 6-month minimum period from the date of purchase and full payment during which U.S. accredited investors may not resell or transfer ST22 tokens. Enforced on-chain by Transfer Hook Control 24. After expiry, additional Rule 144 conditions apply: current public information requirement (EDGAR reporting), volume limitations (1% of outstanding per 90-day window), and manner of sale requirements.  NEW

Regulation S Distribution Compliance Period  —  The 12-month period from the date of acquisition during which non-U.S. investors may not offer or sell ST22 tokens to U.S. persons or in the U.S. market. Enforced on-chain by Transfer Hook Control 24. After expiry, tokens may be sold into the Global Unified CEDEX Liquidity Pool subject to all other Transfer Hook controls.  NEW

Form D  —  SEC filing required from the issuer within 15 days of the first sale of securities under a Regulation D exemption. Filed by the ST22 issuer — not by OTCM Protocol. Contains information about the offering, the issuer, and the use of proceeds. Annual amendments required until the offering is completed or terminated.

Accredited Investor  —  An individual or entity meeting SEC criteria under Rule 501 of Regulation D. Individual thresholds: income exceeding $200,000 ($300,000 joint) in each of the two most recent years, or net worth exceeding $1 million excluding primary residence, or holder of Series 7, 65, or 82 licenses. Entity thresholds: $5 million or more in assets for entities not formed to purchase the securities. Accreditation verification is performed exclusively by Empire Stock Transfer for all ST22 issuances.

UCC Article 8  —  Uniform Commercial Code provisions governing the transfer of investment securities. Every ST22 Transfer Hook notification to Empire Stock Transfer upon an on-chain transfer constitutes an effective entitlement order under UCC §8-102(a)(8), triggering an update to the Master Securityholder File. Wyoming's Digital Asset Statute reinforces this compliance framework at the state law level.

Wyoming Digital Asset Statute  —  W.S. 34-29-101 et seq. — Wyoming legislation providing state-law recognition of digital asset ownership, property rights, and transfer mechanics. OTCM Protocol's incorporation under the Wyoming Business Corporation Act (W.S. 17-16-101 et seq.), combined with the Digital Asset Statute, provides dual state-law recognition for ST22 token transfers, reinforcing the UCC Article 8 compliance framework.  NEW

Rule 15c2-11  —  SEC rule requiring broker-dealers to review and maintain current issuer information before publishing quotations for OTC securities. Companies that fail to maintain current SEC reporting obligations lose broker-dealer quotation eligibility, rendering their shares untradeable. The primary regulatory mechanism that traps shareholders in thousands of OTC microcap companies — the market failure that OTCM Protocol's tokenization infrastructure is designed to address.

Blue Sky Laws  —  State-level securities laws regulating the offering and sale of securities to protect investors from fraud. Under Rule 506(c), federal preemption under the National Securities Markets Improvement Act (NSMIA) applies, meaning state securities registration is generally not required for ST22 offerings. However, notice filings and fees may be required in certain states. CLO Jeff Turner (JDT Legal) coordinates state blue sky compliance for all ST22 issuances.

Form 144  —  SEC filing required when an affiliate or holder of restricted securities sells more than 5,000 shares or $50,000 of a security in any 3-month period under Rule 144. Filed by the investor — not by OTCM Protocol or Empire Stock Transfer. The Transfer Hook's on-chain holding period enforcement helps investors avoid inadvertent Rule 144 violations.

COMPLIANCE & AML INFRASTRUCTURE

FinCEN (Financial Crimes Enforcement Network)  —  U.S. Treasury bureau that collects and analyzes financial transaction data to combat money laundering, terrorist financing, and related crimes. Empire Stock Transfer files Suspicious Activity Reports (SARs) and Currency Transaction Reports (CTRs) with FinCEN as required under the Bank Secrecy Act. OTCM Protocol is enrolled in FinCEN's Section 314(b) voluntary information-sharing program.

SAR (Suspicious Activity Report)  —  FinCEN filing required when a financial institution detects a transaction of $5,000 or more that it suspects involves money laundering, fraud, or other financial crimes. Filed by Empire Stock Transfer as part of its AML program obligations. The filing requirement is confidential — institutions cannot disclose a SAR filing to the subject of the report.

SDN (Specially Designated Nationals)  —  The OFAC list of individuals, entities, and vessels with whom U.S. persons are prohibited from conducting any business. Empire Stock Transfer screens all investors against the SDN list during onboarding. Transfer Hook Control 2 provides continuous real-time OFAC screening on every on-chain transfer, updated hourly from OFAC's published SDN list data.

FATF (Financial Action Task Force)  —  International standard-setting body establishing AML/CFT requirements for financial institutions and virtual asset service providers. Jurisdictions designated as high-risk by FATF receive enhanced due diligence treatment under Empire Stock Transfer's investor onboarding protocol, including mandatory senior compliance officer approval before investment eligibility is confirmed.

BSA (Bank Secrecy Act)  —  31 U.S.C. § 5311 et seq. — U.S. federal law requiring financial institutions to establish Customer Identification Programs (CIP), file SARs and CTRs, and maintain transaction records. Empire Stock Transfer operates a BSA-compliant program covering all ST22 investor onboarding and transfer agent functions. OTCM Protocol is enrolled in FinCEN BSA E-Filing for required regulatory submissions.

PCAOB (Public Company Accounting Oversight Board)  —  Organization overseeing audits of public companies to protect investors. Groovy Company, Inc. dba OTCM Protocol is a public reporting company (CIK: 1499275) subject to PCAOB audit standards. Auditors of the Company must be PCAOB-registered.

SOLANA & SPL TOKEN-2022 TECHNICAL TERMS

SPL Token-2022  —  Solana's next-generation token program, developed by Solana Labs as an upgrade to the original SPL Token program. Introduces advanced compliance features including Transfer Hook extensions, confidential transfer capabilities, metadata extensions, and permanent delegate authorities. The foundational standard on which all ST22 tokens are built.

Solana  —  The Layer 1 blockchain network on which OTCM Protocol operates. Selected for its high throughput (65,000+ TPS), sub-400ms block confirmation, and SPL Token-2022 Transfer Hook compatibility. The 400ms block time is architecturally significant — it matches the refresh interval of Empire Stock Transfer's 1:1 attestation oracle.

CPMM (Constant Product Market Maker)  —  The AMM formula x × y = k implemented in OTCM Protocol's Custom AMM Engine for post-graduation trading in the Global Unified CEDEX Liquidity Pool. Provides algorithmically-determined pricing and continuous liquidity without requiring traditional market makers. All CPMM arithmetic uses u128 overflow-safe calculations to prevent precision errors.

Sandwich Attack  —  A market manipulation technique where an attacker places buy and sell orders immediately before and after a target transaction to profit from the price movement they create. OTCM Protocol's Transfer Hook price impact circuit breaker (Control 16 — maximum 2% price impact per transaction) and TWAP deviation check (Control 17) collectively eliminate the economic viability of sandwich attacks on CEDEX.

MEV (Maximal Extractable Value)  —  Profit that validators or block producers can extract by reordering, including, or excluding transactions within blocks. OTCM Protocol's Transfer Hook architecture — specifically the price impact and TWAP controls — is designed to eliminate MEV extraction opportunities on ST22 trades by preventing large-impact transactions and front-running scenarios.

Circuit Breaker  —  Automated trading halt mechanism implemented in OTCM Protocol's Transfer Hook controls. Two variants: (1) price impact circuit breaker — rejects individual transactions exceeding 2% price impact (Control 16); (2) volume-based halt — suspends trading for 24 hours if any single wallet attempts to sell more than 30% of circulating supply within a 24-hour window (Control 18).

CPI (Cross-Program Invocation)  —  Solana mechanism allowing one smart contract program to call functions in another. OTCM Protocol implements CEI (Checks-Effects-Interactions) pattern enforcement in all Transfer Hook controls to prevent reentrancy attacks via CPI — a critical security control given the financial nature of the platform.

Groovy Company, Inc. dba OTCM Protocol  |  CIK: 1499275  |  Version 7.0  |  March 2026  |  Confidential