10-Q: Specificity, Inc. Q1 2026: Revenue Declines, Net Loss Widens

Specificity, Inc. reported a 20% decrease in revenue and a widening net loss for the first quarter of 2026, citing customer pauses and increased operating costs.

Summary

• Specificity, Inc. reported a net loss of $182,397 for the first quarter ended March 31, 2026, an increase from the $140,216 loss in the same period of 2025.
• Total revenues decreased by 20% to $243,850 in Q1 2026 compared to $298,050 in Q1 2025, attributed to a large customer pausing services.
• Operating expenses decreased to $212,396 from $270,990 year-over-year, primarily due to lower administrative labor and professional fees.
• The company has a net working capital deficit of approximately $1,261,364 as of March 31, 2026.
• The company continues to rely on external financing, including convertible notes and a Strata Purchase Agreement, to fund operations.
• Material weaknesses in internal controls over financial reporting were identified, leading to a restatement of the 2025 annual report and a delay in filing the Q1 2026 report.

Sentiment

Score: 2

Explanation: StockSavvy.ai views this filing as negative due to the increased net loss, declining revenues, and continued going concern warnings, despite some efforts to secure funding.

Positives

• Operating expenses decreased by approximately 21% to $212,396 in Q1 2026 compared to $270,990 in Q1 2025, driven by lower administrative labor and professional fees.
• The company secured $24,000 in proceeds from a Strata equity put notice on June 3, 2026, for operating expenses.
• The company issued 400,000 shares of common stock under the Strata Agreement during Q1 2026, raising $24,000 for operations.
• The company received $100,000 in proceeds from an initial purchase of restricted stock under the Strata Agreement in November 2023.

Negatives

• Net loss increased to $182,397 in Q1 2026 from $140,216 in Q1 2025.
• Revenue decreased by 20% to $243,850 in Q1 2026 from $298,050 in Q1 2025.
• The company has a substantial accumulated deficit of $8,818,356 as of March 31, 2026.
• The company has a net working capital deficit of $1,261,364 as of March 31, 2026.
• The company's ability to continue as a going concern is dependent on raising additional funds and increasing revenues.
• Material weaknesses in internal controls over financial reporting were identified, including lack of segregation of duties, inadequate document retention, and reliance on outside consultants.
• The company delayed filing its Q1 2026 Form 10-Q due to errors identified in its 2025 annual report restatement.

Risks

• The company's ability to continue as a going concern is dependent on its ability to raise additional funds and increase revenues, with substantial doubt raised by current financial conditions.
• Material weaknesses in internal controls over financial reporting could lead to misstatements in financial reporting and potential regulatory issues.
• Reliance on external financing, including convertible notes and the Strata Purchase Agreement, exposes the company to dilution and potential default risks.
• Customer pauses in marketing services can materially affect the timing of expected revenues.
• The company's financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

Future Outlook

The company anticipates higher operating expenses as it continues to raise capital to support sales growth initiatives and capital market equity raise activity. The company's ability to continue as a going concern is dependent on its ability to implement its business plan, raise capital, and generate sufficient revenues to achieve positive net income and cash flow.

Management Comments

• The Company's revenue may fluctuate from year to year depending on the customers digital marketing requirements. Customers are generally permitted to pause future marketing services which could materially affect the timing of expected revenues.
• We anticipate higher operating expenses as we continue to rise over time as we support sales growth initiatives and capital market equity raise activity.
• We may need to raise additional capital to fund our operations and there can be no assurance that additional capital will be available on acceptable terms or at all.
• We must successfully execute our business plan to increase profitability in order to achieve positive cash flows to sustain adequate liquidity without requiring additional funds from external sources to meet minimum operating requirements.

Industry Context

StockSavvy.ai notes that the digital marketing industry is highly competitive and subject to rapid technological changes. Companies like Specificity, Inc., focusing on SMBs, face challenges in acquiring and retaining customers, especially during economic downturns or when competing with larger, more established players. The reliance on technology such as AI and audience ID is standard, but effective implementation and differentiation are key.

Corporate Governance

Legal Proceedings

• The company is not currently party to any pending or threatened litigation in connection with its principal business activities.

Related Party Transactions

• The CEO's employment agreement includes payment of personal living expenses totaling approximately $13,072 in Q1 2026 and $6,455 in Q1 2025.
• A related party note payable of $1,000,000 to the CEO for the acquisition of Pickpocket Inc. remains outstanding, with accrued interest of $162,500 as of March 31, 2026.
• Executive officer advances from the CEO to the company totaled $61,424 as of March 31, 2026, down from $93,394 as of December 31, 2025.

Stakeholder Impact

• Shareholders may experience significant dilution if additional capital is raised through equity or convertible debt securities.
• Creditors and lenders face increased risk due to the company's going concern status and reliance on future financing.
• Employees may face uncertainty regarding job security given the company's financial condition and going concern issues.

Next Steps

• The company intends to leverage the Strata Agreement as necessary to execute its full business plan.
• The company plans to add staff, initiate training, and add additional subject matter expertise to improve internal control processes.
• The company will continue to fund its business by way of equity or debt financing until natural revenues can support the Company.

Key Dates

Recommendation

The company exhibits significant financial distress, including declining revenues, widening net losses, a substantial accumulated deficit, and a going concern warning. Material weaknesses in internal controls and delayed filings further exacerbate these concerns. While capital raises are ongoing, they are insufficient to alleviate the fundamental financial instability. The significant dilution risk from ongoing financing activities and the lack of clear path to profitability make this a sell recommendation.

Keywords

digital marketing, SMB marketing, B2B marketing, B2C marketing, AI marketing, revenue recognition, convertible debt, going concern