ITEM 1A. RISK FACTORS
As a smaller reporting company, the Company is not required to provide the information required by this item; however, the following risk factors should be carefully considered by prospective investors. Any of the risks described below, as well as risks not currently known or currently deemed immaterial, could materially and adversely affect our business, financial condition, results of operations, and the market price of our securities.
RISKS RELATED TO OUR BUSINESS AND FINANCIAL CONDITION
1. We have a limited operating history, minimal revenue, and a history of net losses, which raises substantial doubt about our ability to continue as a going concern.
The Company was incorporated in 2009 but has operated in its current form as an OTCM Protocol developer only since mid-2025. We have generated minimal revenue ($211,877 for the year ended December 31, 2025) and have an accumulated deficit of $(472,097) as of December 31, 2025.
Excluding a non-recurring, non-cash gain of $7,809,856 on the PNXP Share Purchase Agreement, we incurred an operating loss of $(357,386) for fiscal 2025. We had cash of $77 as of December 31, 2025. Management has evaluated these conditions and concluded there is substantial doubt about the Company’s ability to continue as a going concern. There can be no assurance that we will achieve profitability or that our plans to address the going concern will succeed.
2. We will require substantial additional capital to complete the OTCM Protocol platform and sustain operations.
The development of the OTCM Protocol is currently 67% complete. We estimate that completion of the remaining 33% of the platform, together with working capital requirements, will require significant additional funding. We are pursuing a $20,000,000 Security Token Offering under SEC Rule 506(c), but there is no assurance that such offering will be completed on acceptable terms, or at all. If we are unable to raise sufficient capital, we may be forced to curtail development, reduce operations, or cease business entirely. Any equity financing will dilute existing stockholders. Debt financing may impose restrictive covenants or require collateral we do not possess.
3. Our financial statements are unaudited and subject to material adjustment upon completion of an independent audit.
The financial statements included in this Annual Report have not been audited by an independent registered public accounting firm. We have identified three material weaknesses in our internal controls over financial reporting: (i) insufficient accounting staff with U.S. GAAP expertise; (ii) absence of formal written accounting policies; and (iii) limited segregation of duties. The financial statements included in this Annual Report are unaudited. Investors should understand that the absence of an independent audit increases the risk of undetected errors or misstatements in our financial statements.
4. Our intangible asset represents 99.7% of total assets and is subject to impairment risk.
As of December 31, 2025, the OTCM Protocol software platform is recorded at $19,510,400, representing substantially all of our total assets of $19,772,032. This value is based on a replacement cost methodology using 560,000 lines of logical code at $52.00 per line and a 67% weighted completion factor. This valuation involves significant estimates and assumptions. If the platform fails to achieve commercialization, if market conditions change materially, or if different valuation standards are applied in the future, the asset could be subject to partial or total impairment. Any impairment charge would have a material adverse effect on our financial statements and stockholders’ equity.
5. The intangible asset was received in a related-party transaction from our CTO and is subject to additional scrutiny.
The OTCM Protocol software platform was assigned to the Company pursuant to an IP Assignment Agreement dated June 12, 2025, between the Company and Franjose Yglesias, our Chief Technology Officer and co-founder. Mr. Yglesias received 100,000,000 shares of Series A Preferred Stock as consideration, of which 85,000,000 were returned to treasury and 15,000,000 were retained by Mr. Yglesias. Related-party transactions are inherently subject to conflicts of interest. Although the transaction was supported by a third-party software valuation report, the SEC or investors may challenge the valuation methodology, the arm’s length nature of the transaction, or the accounting treatment. Any such challenge could result in a restatement, impairment charge, or regulatory inquiry.
RISKS RELATED TO REGULATION AND LEGAL COMPLIANCE
6. Our ST22 Security Tokens are issuer-sponsored tokenized securities subject to the full requirements of the federal securities laws; failure to maintain compliance could adversely affect our operations.
We have designed the ST22 Security Token framework and our OTCM utility tokens with the intent that they constitute issuer-sponsored tokenized securities under the SEC’s Category 1 issuer-authorized tokenization framework established in the January 28, 2026
Joint Staff Statement on Tokenized Securities. Under this framework, the Company’s ST22 Security Tokens are backed 1:1 by Series “M” Preferred Shares held in perpetual custody by Empire Stock Transfer, Inc., an SEC-registered transfer agent, with the issuer directly authorizing all tokenization activity and the on-chain record constituting part of the official master securityholder file. Tokenized securities remain subject to the full requirements of the federal securities laws, including registration, disclosure, and transfer restriction obligations. Failure to maintain compliance with applicable securities laws could result in enforcement action, fines, or cessation of operations.
7. The regulatory environment for digital assets and tokenized securities is evolving rapidly and unpredictably.
Federal and state laws and regulations governing blockchain technology, digital assets, and tokenized securities are subject to rapid change. The SEC, CFTC, FinCEN, and state regulators are actively developing new rules applicable to digital asset platforms, token offerings, and custody arrangements. New legislation such as potential federal digital asset market structure bills may materially change the regulatory framework under which we operate. We cannot predict the nature, timing, or effect of future regulatory changes. Compliance with new regulations may require significant expenditures or operational changes, and non-compliance could result in enforcement action, fines, or cessation of operations.
8. Our compliance with the SEC’s Category 1 issuer-authorized tokenization framework is subject to evolving regulatory interpretation, and any adverse regulatory determination could materially impair our operations.
The Company has structured its ST22 Security Token framework in accordance with the SEC’s Category 1 issuer-authorized tokenization model, as described in the SEC Joint Staff Statement on Tokenized Securities (January 28, 2026). Under this model, ST22 Security Tokens are issuer-sponsored tokenized securities backed 1:1 by Series “M” Preferred Shares held at an SEC-registered transfer agent, with all tokenization activity directly authorized by the issuing company. While we believe our structure is compliant with this framework, the application of federal securities laws to tokenized instruments continues to evolve. If the SEC, a court, or another regulatory authority determines that our structure does not conform to Category 1 requirements, or if the regulatory framework changes materially, we may be required to modify our platform, register additional securities, or cease certain operations, any of which could have a material adverse effect on our business.
9. We are subject to anti-money laundering, KYC, and sanctions compliance requirements that may be costly to implement.
Our platform incorporates KYC/AML compliance and sanctions screening as part of its SEC regulatory compliance integration. As our platform scales, compliance with the Bank Secrecy Act, FinCEN regulations, OFAC sanctions programs, and applicable state money transmission laws will require ongoing investment. Failure to maintain adequate compliance programs could result in regulatory sanctions, fines, reputational damage, or
criminal liability. The cost of compliance may be greater than anticipated and could adversely affect our operating margins.
RISKS RELATED TO OUR TECHNOLOGY AND OPERATIONS
10. Our platform is built on the Solana blockchain; disruptions to Solana could materially harm our operations.
The OTCM Protocol operates as a Layer-2 solution on the Solana blockchain and relies on Solana’s SPL Token-2022 standards and infrastructure. Solana has experienced network outages, performance degradation, and protocol changes in the past. Any significant disruption, fork, security vulnerability, or fundamental change to the Solana protocol could render our platform non-functional or require costly re-engineering. We do not control the Solana network and cannot guarantee its continued availability or performance.
11. Our smart contracts may contain vulnerabilities that could result in the loss of digital assets or unauthorized access.
The OTCM Protocol’s Transfer Hook Security Foundation incorporates 42 security controls enforced in Rust/Anchor. Despite our security framework, smart contracts are inherently susceptible to bugs, logic errors, and unforeseen attack vectors. Our platform has processed over $7,000,000 in liquidity during beta testing. A successful exploit of a smart contract vulnerability could result in the loss of user funds, regulatory action, litigation, and irreparable reputational damage. There can be no assurance that our security controls will prevent all attacks.
12. We are dependent on key personnel, and the loss of any founder could severely impair our operations.
Our success is critically dependent on the continued service of our three co-founders: Berj Abajian (CEO), Patrick Mokros (COO), and Franjose Yglesias (CTO). These individuals collectively hold 45,000,000 shares of Series A Preferred Stock representing controlling voting power. Mr. Yglesias is the architect of the OTCM Protocol software platform and possesses specialized technical knowledge that is not easily replaceable. We do not currently maintain key-person life insurance on any of our executive officers. The departure, incapacity, or death of any co-founder could have a material adverse effect on our business and prospects.
13. Our software development platform is 67% complete and may not achieve full functionality or commercial viability.
As of December 31, 2025, the OTCM Protocol platform has achieved beta validation status at 67% weighted completion. Remaining components include the AI Predictive Market Module (0% complete), the Admin Dashboard (0% complete), and the Staking Infrastructure (0% complete), each representing 5% of the total platform by development effort. There is no guarantee that remaining development will be completed on schedule,
within budget, or to the technical specifications required for commercial launch. Delays in development could result in loss of first-mover advantage, customer attrition, and inability to generate transaction fee revenue.
14. Cybersecurity breaches, data loss, or unauthorized access to our systems could harm our business.
We collect and process sensitive information relating to issuers, token holders, and financial transactions. Our systems, including our Solana-based smart contracts, TypeScript/React CEDEX platform, and iOS/Android Web3 Wallet, may be subject to cyberattacks, phishing, ransomware, or insider threats. A cybersecurity incident could result in loss of data, theft of digital assets, regulatory investigation, litigation, and reputational harm. We operate development infrastructure through Digital Ocean with Kubernetes and Tailscale, and our Colombia-based development team introduces additional operational security considerations.
RISKS RELATED TO OUR CAPITAL STRUCTURE AND SECURITIES
15. Our capital structure includes a large number of authorized but unissued preferred shares, which could result in significant dilution.
Our authorized capital includes 100,000,000 shares of Series A Preferred Stock (of which 55,000,000 remain in treasury), 200,000,000 shares each of Series B, C, and S Preferred Stock, and 1,000,000,000 shares of Series M Preferred Stock, all of which are currently unissued. The issuance of any of these securities could result in substantial dilution to holders of our common stock. The terms and preferences of these preferred series have not yet been designated. The Series M Preferred Stock is intended for the ST22 Security Token backing mechanism; issuance of up to 1,000,000,000 shares could significantly affect our capital structure and existing stockholder rights.
16. Our common stock has lost its Rule 15c2-11 eligibility and is currently quoted on the Expert Market; we are working to restore eligibility.
Our common stock is currently quoted on the Expert Market under the ticker symbol "GROO." The Expert Market is a tier of OTC Markets Group that restricts trading to broker-dealers and sophisticated investors only; retail investors generally cannot purchase Expert Market securities through most brokerage platforms. The Company lost its Rule 15c2-11 eligibility, resulting in relegation to the Expert Market, which significantly restricts trading activity and limits investor access. The Company is in the process of filing a Form 211 with FINRA to restore Rule 15c2-11 eligibility and reinstate quotation on the OTC Pink or OTCQB marketplace. There is no assurance that the Company will regain 15c2-11 eligibility within any particular timeframe, or at all. Until eligibility is restored, trading in GROO common stock will remain restricted to the Expert Market, which may adversely affect the market price and liquidity of our common stock.
17. Patrick Mokros, our COO, is also the founder and CEO of Empire Stock Transfer, which serves as our transfer agent and custody provider.
Empire Stock Transfer, Inc., an SEC-registered transfer agent, serves as the Series M Preferred Share custodian for the OTCM Protocol’s ST22 Security Token framework. Empire Stock Transfer was founded by and is led by Patrick Mokros, our Chief Operating Officer and co-founder. This relationship represents a significant related-party arrangement. While we believe the custody services are provided on commercially reasonable terms, conflicts of interest may arise. If Empire Stock Transfer is unable to perform its obligations, or if the relationship is terminated, our ability to operate the ST22 Security Token issuance and custody framework could be materially impaired.
RISKS RELATED TO EXTERNAL AND MARKET FACTORS
18. The market for illiquid OTC securities is subject to regulatory change that could reduce the size of our addressable market.
Our business model targets approximately 11,000 to 15,000 OTC companies whose securities have become illiquid due to market maker abandonment, Expert Market relegation, or loss of Rule 15c2-11 eligibility. Regulatory changes to SEC Rule 15c2-11, OTC Markets Group policies, or FINRA rules could alter the population of eligible issuers, reduce the demand for our liquidity solutions, or impose additional requirements on our operations. We cannot predict the direction of regulatory change or its effect on our target market.
19. Competition from established DeFi protocols, traditional financial institutions, and other blockchain platforms could reduce our market share.
We operate in a highly competitive environment. Established decentralized finance platforms (including Uniswap, Raydium, and others), traditional securities exchanges and alternative trading systems, and emerging tokenization platforms may develop products or services that compete directly with the OTCM Protocol. Many of these competitors have substantially greater financial resources, technology infrastructure, regulatory relationships, and brand recognition than we do. We cannot guarantee that we will be able to compete effectively or that our Category 1 issuer-authorized tokenization compliance architecture will constitute a sustainable competitive advantage.
20. Cryptocurrency and blockchain market conditions are highly volatile and could adversely affect the value of our SOL treasury and blockchain assets.
As of December 31, 2025, we hold blockchain-based current assets of $61,555, representing GROO ST22 Security Tokens minted during the OTCM Protocol beta program (Note 14). Our planned SOL treasury strategy, which contemplates allocating 40% of STO proceeds to Solana (SOL), would expose us to significant cryptocurrency price risk. The value of SOL and other digital assets can fluctuate dramatically and
unpredictably. A material decline in cryptocurrency values could reduce our treasury reserves, impair our ability to fund operations, and adversely affect our financial condition.
21. Our operations in Colombia through Santo Blockchain Labs expose us to foreign regulatory, currency, and operational risks.
We conduct our primary software development operations through Santo Blockchain Labs de Colombia, S.A.S., our subsidiary in Medellin-Bogota, Colombia. Operations in Colombia expose us to risks including: changes in Colombian law, regulation, or tax policy; foreign currency fluctuation between the Colombian peso and the U.S. dollar; political instability; labor law requirements that differ from U.S. standards; and potential difficulty enforcing contracts or intellectual property rights in a foreign jurisdiction. Any adverse development in our Colombian operations could disrupt development timelines and increase costs.
22. We do not anticipate paying dividends on our common stock in the foreseeable future.
We have never declared or paid cash dividends on our common stock and do not anticipate doing so in the foreseeable future. We intend to retain all available funds and any future earnings for use in the operation and development of our business. Investors seeking current income from dividends should not invest in our common stock.
23. The Company does not currently have a Chief Financial Officer; the absence of a qualified CFO with expertise in both securities accounting and digital assets creates financial reporting and compliance risk.
The Company currently does not have a Chief Financial Officer (CFO) or a dedicated Principal Financial Officer with formal qualifications in both U.S. securities accounting and digital asset financial reporting. The financial statements contained in this Annual Report have been prepared under the supervision of management without the benefit of a credentialed CFO. This creates risk that financial disclosures may not fully conform to U.S. GAAP as applied to early-stage blockchain companies, that internal controls over financial reporting may be inadequate, and that the Company may fail to timely identify or properly account for complex transactions involving tokenized securities, non-monetary asset exchanges, or digital asset valuations under ASC 820 and ASC 845.
The Company is actively engaged in the process of recruiting a CFO with demonstrated expertise in both SEC reporting for smaller reporting companies and digital asset accounting, including familiarity with the evolving regulatory guidance applicable to tokenized securities. There can be no assurance that the Company will be able to identify and retain a qualified CFO on acceptable terms or within a timeframe that prevents material weakness in its financial controls. Until a qualified CFO is appointed, the Company’s financial reporting will remain subject to heightened risk of error, restatement, or regulatory comment.
