GROOVY COMPANY, INC. Annual Report Summary - Fiscal Year Ended December 31, 2025

This summary cuts through the complexity of GROOVY COMPANY, INC.'s latest SEC 10-K filing, offering retail investors a clear, concise overview of the company's performance, financial health, and future outlook. We aim to demystify key aspects of its operations and potential risks.

Company Overview and Strategic Evolution

Since its founding in 2009, Groovy Company, Inc. has undergone significant transformations. Initially an internet portal for dentists and teeth-whitening, the company pivoted to precious metal mining in 2012. By 2021, it shifted again, focusing on blockchain, AI, and web3 software development from Colombia.

Recent Key Developments:

• Name and Ticker Change: In February 2024, the company officially changed its name to Groovy Company, Inc. Its stock ticker symbol on the OTC Markets transitioned from "SANP" to "GROO" in May 2025.
• Reverse Stock Split: Also in May 2025, the company executed a 2,500-for-1 reverse stock split. This action consolidates existing shares, typically to increase the per-share price, but does not alter the total value of an investor's holdings.
• Major Business Shift: In February 2025, Groovy Company exchanged all its previous assets for an 87% controlling stake in Pineapple Express Cannabis Company. While the company continues to develop its blockchain platform, this platform now primarily supports the cannabis company's operational needs and digital asset strategies, marking a significant strategic alignment.

Core Business Focus: The OTCM Protocol

Groovy Company's current core business revolves around developing the OTCM Protocol, a specialized blockchain platform. This platform aims to solve liquidity challenges in the over-the-counter (OTC) securities market.

• The Problem: An estimated $50 billion in "dormant" (inactive) securities in the OTC market are difficult to trade.
• The Solution: The OTCM Protocol aims to convert traditional OTC shares into "ST22 Security Tokens" – digital representations of these shares – facilitating easier trading on the Solana blockchain. The "ST22" designation refers to the company's proprietary standard for these tokens.
• Technical Approach: The company builds this platform as a "Layer-2 solution" on the Solana blockchain, leveraging Solana's existing infrastructure. It states that actual company shares, held securely by a transfer agent, directly back these digital tokens on a one-to-one basis.
• Development Progress: As of December 31, 2025, the OTCM Protocol software is 67% complete and has successfully undergone "Beta Validation" with initial users. The platform has already processed over $7 million in digital transaction volume for three early adopter companies.
• Team: The project is supported by three executive officers, each with 10-year employment agreements, and a team of 12 software developers and contractors.

Financial Performance for the Year Ended December 31, 2025

Groovy Company's financial results for fiscal year 2025 reveal significant operational challenges.

• Revenue: The company generated minimal revenue, reporting only $211,877 for the year ended December 31, 2025. While a slight increase from the prior year's $178,000, this figure remains insufficient to cover operational costs.
• Net Income/Loss: Including a significant one-time gain of $7.8 million from a share purchase agreement (unrelated to core operations), the company reported a net income of approximately $7.4 million. However, excluding this non-recurring gain, the company incurred an operating loss of $357,386 from its primary business activities in 2025.
• Accumulated Deficit: Groovy Company has a history of losses. Its total accumulated deficit reached $(472,097) by the end of 2025, indicating the company has not yet achieved sustained profitability since its inception.

Financial Health

As of December 31, 2025, Groovy Company's financial health shows extreme liquidity challenges and significant financial risk.

• Cash Position: The company reported an alarmingly low cash balance of just $77 at year-end, insufficient to cover operational expenses for any significant period.
• Liquidity and Going Concern: Given its minimal cash, ongoing operational losses, and reliance on future capital raises, management has issued a "going concern" warning. This indicates substantial doubt about the company's ability to continue operations without securing significant additional funding.

Management Discussion and Analysis (MD&A) Highlights

Management's discussion of the company's financial condition and results for fiscal year 2025 emphasizes the critical need for additional capital to sustain operations. The minimal revenue of $211,877 and the operating loss of $357,386 reflect the company's early-stage development and significant investment in the OTCM Protocol without corresponding commercial revenue generation.

Liquidity and Capital Resources: The company's cash position of $77 at year-end is severely inadequate to fund ongoing operations, including software development and administrative expenses. Management explicitly states that the company's ability to continue as a going concern depends on its capacity to raise substantial additional capital, primarily through the planned $20 million Security Token Offering (STO). Without this funding, the company anticipates an inability to meet its obligations as they become due.

Results of Operations: The reported net income of $7.4 million largely stems from a non-recurring $7.8 million gain from a share purchase agreement, masking underlying operational losses. Management acknowledges that sustainable revenue generation from the OTCM Protocol is crucial for future profitability, which currently depends on the platform's completion and successful market adoption.

Critical Accounting Policies and Estimates: An independent accounting firm has not audited the financial statements for this period, meaning their accuracy remains unverified. Furthermore, management has identified "material weaknesses" in internal controls over financial reporting. These weaknesses stem from insufficient expert staff, a lack of formal accounting policies, and inadequate segregation of duties. Management indicates these issues could lead to misstatements in financial reporting and states it is actively addressing them, though the summary does not detail specific remediation plans or timelines.

Competitive Position

The market for blockchain-based solutions, especially those targeting digital assets and security tokens, is highly competitive and rapidly evolving. Groovy Company operates in an emerging sector where established technology firms and numerous startups vie for market share.

• Industry Landscape: The company faces competition from other blockchain platforms, traditional financial technology providers, and potentially from existing OTC market infrastructure providers who may develop their own tokenization solutions. While the specific niche of tokenizing "dormant" OTC securities may offer some differentiation, the overall digital asset market remains crowded.
• Competitive Advantages/Disadvantages: Its reliance on the Solana blockchain presents both an advantage (leveraging established infrastructure) and a disadvantage (dependence on a third-party platform). The company's early stage of development, limited financial resources, and lack of audited financials could significantly disadvantage it when attracting customers or partners compared to more established entities.
• Barriers to Entry: The regulatory complexities and technical expertise required for blockchain development and security token offerings can act as barriers to entry, but these also pose significant challenges for Groovy Company itself.

Future Plans and Projections

Groovy Company has outlined ambitious future plans, though these remain highly speculative given its current financial state:

• Platform Completion: The immediate goal is to complete the remaining 33% of the OTCM Protocol software.
• Capital Raise: The company plans to raise $20 million through a "Security Token Offering" (STO) – a public sale of digital tokens – to fund ongoing operations and development.
• Projected Income from Staking: They project annual "staking rewards" (earnings from holding and validating digital assets) of 20-30%, expecting to generate between $480,000 and $640,000 annually from staking Solana (SOL) tokens. This represents a revenue stream separate from their core platform development.
• Growth Targets: The company aims to onboard 100 companies to its platform within the first year post-launch, with an ambitious target of 5,000 companies within five years.
• Revenue Projections: They project significant revenue growth, from an estimated $1.1 million to $50.5 million annually within an unspecified timeframe, likely tied to the five-year growth target.
• Global Expansion: Long-term aspirations include international expansion to exchanges in Toronto, Shanghai, Hong Kong, Australia, Frankfurt, Mexico, and Brazil.

Investors must understand that these are forward-looking statements and projections, not guarantees, and are subject to significant risks and uncertainties.

Significant Risks for Investors

Investing in Groovy Company, Inc. carries exceptionally high risks, particularly given its current financial condition and operational stage:

1. Going Concern Risk: The most immediate and severe risk involves the company's ability to continue operations. With only $77 in cash and ongoing losses, its survival entirely depends on successfully raising the planned $20 million. Failure to do so would likely lead to the cessation of operations.
2. Significant Dilution Risk: To raise $20 million for a company with minimal revenue and a low market capitalization (implied by the reverse stock split), Groovy Company would likely need to issue a substantial number of new shares or tokens. This would significantly dilute existing shareholders' ownership percentage and potentially the value of their investments.
3. Unreliable Financials & Internal Controls: The lack of audited financial statements and admitted "material weaknesses" in accounting mean reported financial figures may not be accurate or reliable. This makes it extremely difficult for investors to assess the company's true financial health and performance.
4. Concentrated Asset Value: Nearly all the company's reported assets (99.7%) are tied to the OTCM Protocol software, valued at $19.5 million. This valuation is an internal estimate based on a third-party assessment, and its realization entirely depends on the platform's successful completion, market acceptance, and commercial viability. If the platform fails or its value is challenged, the company's asset base would be severely impaired.
5. Related-Party Transactions: The acquisition of the core software asset from the Chief Technology Officer (a co-founder) in exchange for preferred stock, while supported by a third-party valuation, constitutes a related-party transaction. This warrants extra scrutiny due to potential conflicts of interest.
6. Regulatory Uncertainty: The blockchain, digital assets, and tokenized securities sectors face rapidly evolving and uncertain regulatory environments. New laws, interpretations, or enforcement actions could significantly impact Groovy Company's business model, increase compliance costs, or even render parts of its operations illegal. For example, security token offerings could face stringent registration requirements.
7. Reliance on Solana Blockchain: The OTCM Protocol relies on Solana. Any major issues with the Solana blockchain, such as network outages, security breaches, or significant performance degradation, could severely disrupt or render Groovy Company's platform inoperable.
8. Software Development & Security Risks: The OTCM Protocol is only 67% complete. There is no guarantee that the remaining development will finish on time, within budget, or that the final product will function as intended or be free from critical bugs and security vulnerabilities.
9. Key Personnel Dependence: The company relies heavily on its small team of three co-founders, particularly the CTO who designed the core platform. The departure or incapacitation of any key personnel could critically impair the company's ability to execute its plans.
10. Unproven Business Model: The concept of tokenizing dormant OTC securities is innovative but unproven at scale. There is no guarantee of market adoption, regulatory approval for widespread use, or the ability to generate sustainable revenue from this model.

Important Note for Investors: Trading Your Shares

Groovy Company's common stock currently trades on the "Expert Market" tier of OTC Markets Group. This market restricts trading to professional investors and does not provide a reliable public trading market for retail investors. Consequently, if you invest, you may find it extremely difficult to buy or sell your shares, potentially leading to illiquidity and significant challenges in realizing your investment.