Item 1A. Risk Factors
Generally, as a smaller reporting and emerging growth company, we are required to disclose risk factors if material. We have chosen to present the following Risk Factors which we believe are material to our ongoing business. These do not encompass all possible risks related to our Company.
You should carefully consider the risks described below together with all of the other information included in this annual report before making an investment decision with regard to our securities. The statements contained in or incorporated herein that are not historic facts are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by forward-looking statements. If any of the following risks actually occurs, our business, financial condition or results of operations could be harmed. In that case, you may lose all or part of your investment. In addition to the other information provided in this prospectus, you should carefully consider the following risk factors in evaluating our business before purchasing any of our common stock.
Risks Related to Our Financial Condition
Since our inception, we have incurred recurring net operating losses and negative net working capital and as a result we have had to fund our operations with debt and dilutive equity financing to maintain operations.
Since our inception, we have failed to create cashflows from revenues sufficient to cover our costs and this makes it difficult for us to evaluate our future business prospects with any degree of certainty. We expect we will continue to rely on debt and equity financing. Equity financing, in particular, has created a dilutive effect on our common stock, which has hampered our ability to attract reasonable financing terms. For the foreseeable future, we will continue to rely upon debt and equity financing to maintain operation of our company.
We have generated minimal revenues from operations, which makes it difficult for us to evaluate our future business prospects and make decisions based on those estimates of our future performance.
For the year ended December 31, 2025, we generated insufficient revenues to cover our operating expenses. As a consequence, it is difficult, if not impossible, to forecast our future results based upon our historical data. Our projections are based upon our best estimates on future growth. Because of the related uncertainties, we may be hindered in our ability to anticipate and timely adapt to increases or decreases in our digital marketing revenues, cost of revenues, or general and administrative expenses. If we make poor budgetary decisions as a result of unreliable data, we may never become profitable or incur losses, which may result in a decline in our stock price.
There is substantial doubt about our ability to continue as a going concern and if we are unable to generate significant revenue or secure additional financing, we may be unable to implement our business plan and grow our business.
We are an emerging growth company with growing revenues; however, we are not yet at scale. We are in the process of ramping up our sales capabilities and future developing and refining our digital marketing services. We have an accumulated deficit and have incurred operating losses since our inception and expect losses to continue next fiscal year. Our independent registered public accounting firm has indicated in their report that these conditions raise substantial doubt about our ability to continue as a going concern for a period of 12 months from the issuance date of this report. The continuation of our business as a going concern is dependent upon the continued financial support from our stockholders.
There is uncertainty regarding our ability to grow our business to a greater extent than we can with our existing financial resources, also described above, without additional financing. We entered into a 24-month Strata Purchase Agreement with a private investor who committed to purchase up to $5,000,000 of our registered common stock at a discounted price to market. We intend to leverage this Strata Purchase Agreement to raise equity necessary to execute its full business plan. This source of financing is a short-term solution to our financing and growth needs. We have no other firm agreements, commitments, or understandings to secure additional financing at this time. Our long-term future growth and success is dependent upon our ability to continue selling our digital products and services, generate cash from operating activities and obtain additional financing on favorable terms. There is no assurance that we will be able to continue selling our digital products and services, generate sufficient cash from operations, sell additional shares of common stock or borrow additional funds. Our inability to obtain additional cash could have a material adverse effect on our ability to grow our business to a greater extent than we can with our existing financial resources, also described above.
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Expenses required to operate as a public company will reduce funds available to implement our business plan and could negatively affect our stock price and adversely affect our results of operations, cash flow and financial condition.
Operating as a public company is more expensive than operating as a private company. Public companies have additional administrative and transactional costs to comply with securities laws and periodic compliance filing requirements, which require us to engage third party firms that provide legal, accounting, tax planning and compliance, investor relations, stock transfer agent fees (which are often transactional and expensive) and other professionals that could be costlier than planned if we enter into more complex business transactions. We may reach a point where we may be required to hire an internal team of similar experts to comply with additional SEC reporting requirements as we grow and scale our business. We anticipate that the cost of SEC reporting will be approximately $150,000 annually to meet our regulatory compliance filing requirements. We expect annual costs to rise as many of these third party firms are experiencing staffing cost increases and are passing those costs onto their clients.
Our failure to comply with reporting requirements and other provisions of securities laws could negatively affect our stock price and adversely affect our results of operations, cash flow and financial condition. If we fail to meet these requirements, we will be unable to secure a qualification for quotation of our securities on the OTCID, or if we have secured a qualification, we may lose the qualification and our securities would no longer trade on the OTCID. Further, if we fail to meet these obligations and consequently fail to satisfy our SEC reporting obligations, investors will then own stock in a company that does not provide the disclosure available in quarterly, annual reports and other required SEC reports that would be otherwise publicly available leading to increased difficulty in selling their stock due to our becoming a non-reporting issuer.
Risks Related to Our Securities
Our controlling stockholder has significant influence over the Company.
As of December 31, 2025, Jason Wood, our Founder, Chairman and Chief Executive Officer, owns approximately 37% of the issued and outstanding common stock. Additionally, Mr. Wood also holds 1,000,000 shares of Series A Preferred which have voting rights, at all times, equal to 80% of all voting rights. As a result, Jason Wood possesses significant economic influence over our financial and operational affairs. His stock ownership and position as a director of the company may have the effect of delaying or preventing a future change in control, impeding a merger, consolidation, takeover or other business combinations or discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of the company, which in turn could materially and adversely affect the market price of our common stock.
Minority shareholders will be unable to affect the outcome of stockholder voting as long as Jason Wood retains a controlling interest.
OTCID Market May Delist Our Securities From Trading On Its Exchange, Which Could Limit Investors’ Ability To Make Transactions In Our Securities And Subject Us To Additional Trading Restrictions.
Our common stock is listed on the OTCID. We cannot assure you that our securities will be, or will continue to be, listed on the OTCID or any other stock exchange in the future. In order to be eligible to continue listing our common stock on the OTCID our common stock must have a minimum bid price of $0.01, maintain a minimum freely traded float of at least 10% of our total issued and outstanding common stock, maintain at least 50 beneficial shareholders each holding a minimum of 100 shares, not be in bankruptcy, be in good standing in each jurisdiction in which the company is organized or conducts business, and file all required applications and fees with the OTCID. We cannot assure you that we will be able to meet those initial listing requirements at that time. Our inability to maintain a listing on the OTCID could significantly limit an individual investors ability to buy or sell our securities, if at all.
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We may enter into arrangements whereby we may issue our securities to investors at a price which is less than the prevailing market price of our publicly traded common stock.
In order to establish a more reliable source of equity capital, we may issue shares to investors in private placement transactions (so-called PIPE transactions) at a discount to market ranging from 10-25% and include other terms and inducements including issuing stock warrants. In the event we execute a PIPE transaction, our shareholders may experience both price depreciation and share dilution after the transaction closes.
Our independent auditors have issued an audit opinion for Specificity, Inc. that includes a statement describing our going concern status. Our financial status creates doubt whether we will continue as a going concern.
As described in Note 2 of our accompanying audited financial statements, our auditors have issued a going concern opinion regarding the Company. This means there is substantial doubt we can continue as an ongoing business for the next twelve months. The financial statements do not include any adjustments that might result from the uncertainty regarding our ability to continue in business. As such, we may have to cease operations and investors could lose part or all of their investment in our company.
Risks Related to Our Business
We have a limited operating history and have losses that we expect to continue into the future until we are able to scale our business and generate positive cash flow and a net profit.
There is no assurance our future operations will result in profitable revenues. If we cannot generate sufficient revenues to operate profitably, we may suspend or cease operations. As reflected in the financial statements, the Company has $1,555,398 in assets, and an accumulated deficit and working capital deficit of $8,555,039 and $1,138,122, respectively, as of December 31, 2025, and incurred a net loss and cash used in operations of $473,147 and $89,807, respectively, for the year ended December 31, 2025. Based upon our current plans, we expect to incur operating losses in future periods because we will be investing in sales resources to grow our Target Market base that may outpace our revenues in the short run.
We do not have any additional source of funding for our business plans and may be unable to find any such funding if and when needed, resulting in the failure of our business.
In 2024, we entered into a 24-month Strata Purchase Agreement (“Strata Agreement”) with a private investor who committed to purchase up to $5,000,000 of our registered common stock. We intend to use any proceeds raised under this Strata Agreement to execute our business plan. Even with the Strata Agreement, we cannot guarantee that we will be successful in generating sufficient revenues to support our full business plan. Although we have been able to obtain alternative sources of capital including short term loans from our founder and convertible debt, such funding options may not be available or may not be available on terms that are beneficial and/or acceptable to the Company. As a result, we do not have an alternate source of funds should we fail to raise funds under this Strata Agreement and/or complete previous equity offerings under our current S-1 registration. If we do find an alternative source of capital, the terms and conditions of acquiring such capital may result in dilution and the resultant lessening of value of the shares of stockholders.
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If we are not successful in raising sufficient capital through this Strata Agreement, or any other alternative source of capital to execute our business plan, we will be faced with the following options:
abandon our business plans, cease operations and go out of business;
continue to seek alternative and acceptable sources of capital; or
bring in additional capital that may result in a change of control and/or significant shareholder dilution.
In the event any of the above circumstances occur, you could lose a substantial part or all of your investment. In addition, there can be no guarantee that the total proceeds raised in previous Offerings will be sufficient, as we have projected, to fund our business plans or that we will be profitable. As a result, you could lose any investment you make in our shares.
During the last fiscal quarter of 2025, we issued 500,000 shares under this Strata Agreement at a price per share of $0.20 and received gross proceeds of $100,000.
We operate in an intensely competitive business environment where our competitors are working on incorporating AI into their business models.
We operate in a highly competitive environment in an industry characterized by numerous advertising and marketing agencies of varying sizes, with no single advertising and marketing agency or group of agencies having a dominant position in the marketplace. Our competitors may be larger, more diversified, better funded, and have access to more advanced technology, including AI. Competitive factors include creative reputation, management, personal relationships, quality and reliability of service and expertise in particular niche areas of the marketplace. Our ability to be competitive and successful as a digital marketing company requires investment in our people, efficient use of technology capabilities (including AI solutions) and results for our clients in the form of new customers and/or expanded business relationships.
Recent changes in technology have been closing the gap between small and large competitors in our marketplace. Many of our competitors are actively experimenting with incorporating AI into their marketing services and products, which may allow them to innovate better and more quickly, which could allow them to compete more effectively on quality and price, causing us to lose business and negatively affect our ability to fully implement our business plan. AI may lower barriers to entry in our industry, and we may be unable to effectively compete with the products or services offered by new competitors. AI-related changes to the products and services on offer may affect our customers’ expectations, requirements, or tastes in ways we cannot adequately anticipate or adapt to, causing our business to lose sales, market share, or the ability to operate profitably and sustainably.
According to the April 2025 McKinsey Quarterly report, AI infrastructure spending is expected to exceed $7 trillion by 2030. AI agents and other solutions are continuing to improve as companies gather large learning data sets to train their AI models, but those models are not yet economical. As global AI infrastructure development stabilizes and if AI programming becomes more economical to implement on a wider scale (other than just large well capitalized companies), it could drive more competition within our industry.
We have invested in acquiring digital technology marketing databases, technology stacks and other tools, including alliances with other vertical providers, to build out what we believe will be the right market offering for digital marketing services for our Target Market. If our target market demands an AI generative solution then we may need to pivot a portion of our capital investment to include AI related solutions, provided the cost offering an AI solution is net accretive to our bottom line.
To the extent that we fail to efficiently integrate AI and other emerging technologies into our marketing solutions, maintain existing clients or attract new clients, our business, financial condition, operating results, and cash flows may be affected in a materially adverse manner.
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We possess minimal capital, which may severely restrict our ability to develop our services. If we are unable to raise additional capital, our business will fail.
We possess minimal capital and must limit the amount of marketing we can perform with respect to our services. We feel we require annually a minimum of $1,500,000 in working capital through sales and/or capital raise activities to provide sufficient capital to fully develop our business plan. To support an increase our revenues over time, we need to invest in additional tools (including AI) to create greater efficiency in our operations, expand services with our existing clients, and close on new business from new clients. Our ability to generate new client business is heavily tied to the reputation and reach of our employees and our ability to support their creative digital marketing services with our existing digital technologies. To the extent Specificity cannot generate new business from new and existing clients due to these limitations, Specificity’s ability to grow its business and to increase its revenues will be limited.
Specificity’s business could be adversely affected if it loses or fails to attract or retain key executives or employees.
Our business requires us to obtain staff with expertise in brand marketing, creative design and development, digital marketing tools and analytics, B2C media campaigns, technology development, account managers, and other subject matter specialists. Most importantly, our employees’ skills and relationships with our clients are among our most important assets. An important aspect of our market competitiveness is our ability to retain key employees and management personnel. Compensation for these key employees is an essential factor in attracting and retaining them, and we may not offer sufficient compensation to attract and retain these key employees, which could result in higher than expected turnover.
We are heavily focused on attracting and retaining key employees that are integral to delivering our digital marketing services. We expect for the next 12 months that total compensation will consist of a base salary, stock compensation and any other form of compensation available given our financial resources. If we fail to hire and retain a sufficient number of key employees, we may not be able to compete effectively.
Management succession at our operating units is very important to the ongoing results because as in any service business, the success of a particular agency is dependent upon the leadership of key executives and management and its relationships with its clients. If key executives were to leave our company, the relationships that Specificity has with its clients could be adversely affected. We have outsourced certain executive level advisory roles to cover financial reporting and compliance, data services and other key functions in the interim and plan to recruit full time executives when our operations allow us to get to scale. Our CEO is a key executive, and an unexpected absence, departure or otherwise could have a material impact on the company’s operations and ability to grow.
Specificity clients are able to pause their digital services which could materially disrupt our revenues and ability to scale our business in a sustainable manner
Due to the nature of our services and competition in the marketplace, we may offer clients the ability to pause their digital services for 30 days or more for a number of reasons, including allowing them time to follow-up on qualified lead generation sourced using our services, seasonal factors, product or service branding refreshes or changes that require time to generate market awareness, other unforeseen cash flow factors, executive management transitions, and merger and acquisition transactions.
Specificity is exposed to the risk of client defaults.
Despite our advanced billing approach, we are still exposed to the risk of significant uncollectible receivables from our clients in the event we provide services and fail to follow up on collecting for services. The risk of material loss could significantly increase in periods of severe economic downturn. Such a loss could have a material adverse effect on our results of operations, cash flows and financial position. We often incur expenses on behalf of our clients in order to secure a variety of media time and space. While we take precautions against default on payment for these services (such as billing in advance for services, setting an advertising spend budget, credit analysis, advance billing of clients, and in some cases acting as an agent for a disclosed principal) and have historically had a very low of .
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Specificity is subject to regulations and litigation risk that could restrict our activities or negatively impact our revenues.
Advertising and marketing communications businesses are subject to increasing government regulation, both domestic and foreign. There has been an increasing trend in the United States and in Europe for advertisers to resort to litigation and self-regulatory bodies to challenge comparative advertising on the grounds that the advertising is false and deceptive. Moreover, there has recently been an expansion of specific rules, prohibitions, media restrictions, labeling disclosures, and warning requirements with respect to advertising for certain products. Proposals have been made to ban the advertising of specific products and to impose taxes on or deny deductions for advertising which, if successful, may have an adverse effect on advertising expenditures and consequently, on our revenues.
In addition, laws and regulations related to consumer privacy, use of personal information and digital tracking technologies have been proposed or enacted in the United States and certain international markets (including the European Union’s General Data Protection Regulation, or “GDPR,” the proposed European Union “ePrivacy Regulation” and the recently enacted California Consumer Privacy Act, or “CCPA”). We face increasing costs of compliance in an uncertain regulatory environment and any failure to comply with these legal requirements could result in regulatory penalties or other legal action. Furthermore, these laws and regulations may impact the efficacy and profitability of certain digital marketing and analytics services we provide to clients, making it difficult to achieve our clients’ goals. These and other related factors could affect our business and reduce demand for certain of our services, which could have a material adverse effect on our results of operations and financial position.
Compliance with data privacy laws requires ongoing investment in systems, policies and personnel and will continue to impact our business in the future by increasing legal, operational and compliance costs. While we have taken steps to comply with data privacy laws, we cannot guarantee that our efforts will meet the evolving standards imposed by data protection authorities. In the event that we are found to have violated data privacy laws, we may be subject to additional potential private consumer, business partner or securities litigation, regulatory inquiries, governmental investigations and proceedings and we may incur damage to our reputation. Any such developments may subject us to material fines and other monetary penalties and damages, divert management’s time and attention, and lead to enhanced regulatory oversight all of which could have a material adverse effect on our business and results of operations.
We rely extensively on information technology systems and cybersecurity incidents could adversely affect us.
Increased cybersecurity threats and attacks, which are becoming more sophisticated, pose a risk to third-party service providers and even within our systems and networks. Risk of security breaches remains a possibility within the infrastructure of these large global data and technology companies that we use to execute our services. We manage our cybersecurity risks by leveraging the digital environment of large data and cloud infrastructures owned and operated by the largest technology companies in the world. We use the world’s largest third-party service providers, including data and cloud providers, to store, transmit and process data. We manage our cybersecurity risks within our own technology environment, by using our mobile computing devices as a terminal to access data and information necessary to execute our services. To be clear, we do not directly store or process digital marketing data or information on our mobile computing devices.
We also have access to sensitive or personal data or information that is subject to privacy laws and regulations when we process client payment for our services. We leverage PCI compliant merchant card processors to manage, protect against, detect, prevent, respond to and mitigate cybersecurity incidents.
We use organizational training for employees to develop an understanding of cybersecurity risks and threats may be unable to prevent material security breaches, theft, modification or loss of data, employee malfeasance and additional known and unknown threats. Any breakdown or breach in our systems or data-protection policies, or those of our third-party service providers, could adversely affect our reputation or business.
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We are dependent upon our current officers.
We currently are managed by two key officers, and we are entirely dependent upon them in order to conduct our operations. If they should resign or die, there will be no one to run Specificity, and the company has no Key Man insurance. If our current officers are no longer able to serve as such and we are unable to find another person to replace them, it will have a negative effect on our ability to continue active business operations and could result in investors losing some or all of their investment in us.
We have identified material weaknesses in our internal control over financial reporting which, if not remediated, could result in material misstatements in our financial statements.
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements may not be prevented or detected on a timely basis. As of December 31, 2025, we have identified three continuing material weaknesses in internal control over financial reporting that pertain to:
We had not established adequate financial reporting monitoring activities to mitigate the risk of management override, specifically because there are few employees and only one officers with management functions and therefore there is lack of segregation of duties.
We had inadequate document retention policies and procedures to ensure that all financial transactions were maintained and easily accessible.
We had inadequate policies and procedures related to internal control over financial reporting and as such relied heavily on outside consultants and advisors to assist us in the preparation of the annual and quarterly financial statements and partners with us to ensure compliance with US GAAP and SEC disclosure requirements.
We currently do not have an independent board of directors and audit committee oversight. The lack of oversight by an independent board of directors could result in failure to ensure robust financial reporting, internal controls and inaccurate disclosures. Additionally, the lack of oversight could result in a conflict of interest, undermine board objectivity, transparency, and compliance.
In July of 2024 we engaged an outside consultant to provide fractional Chief Financial Officer and SEC Reporting Compliance services to assist us with developing a remediation plan. Our outside consultant developed an information repository for all financial transactions and implemented monthly financial accounting and reporting procedures. Our outside consultant is developing a remediation plan for 2026 which includes (i) continued financial management coaching and development and (ii) collaborating with senior management and operational teams to put in place critical policies and procedures to address our lack of segregation of duties as practical given the staff size as we scale our operations. We cannot assure you our remediation efforts will occur within a specific timeframe as we are continuing to develop a formal set of plans.
These identified material weaknesses will not be remediated until all necessary internal controls have been designed, implemented, tested and determined to be operating effectively. In addition, we may need to take additional measures to address the material weakness or modify the planned remediation steps, and we cannot be certain that the measures we have taken, and expect to take, to improve our internal controls will be sufficient to address the issues identified, to ensure that our internal controls are effective or to ensure that the identified material weakness- will not result in a material misstatement of our consolidated financial statements. Moreover, we cannot assure you that we will not identify additional material weakness in our internal control over financial reporting in the future.
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Until we remediate the material weakness, our ability to record, process and report financial information accurately, and to prepare financial statements within the time periods specified by the rules and forms of the SEC, could be adversely affected. This failure could negatively affect the market price and trading liquidity of our common units, cause investors to lose confidence in our reported financial information, subject us to civil and criminal investigations and penalties and generally materially and adversely impact our business and financial condition.
Items 1B. Unresolved Staff Comments.
There are no unresolved staff comments.
Item 1C. Cybersecurity
We do not maintain personally identifiable information or client data outside our third party platform platforms service providers. As a digital marketing services provider, we utilize social media and other marketing platforms to build client marketing campaigns and direct marketing services. The vast majority of market data and analytical tools we use are developed and supported by large technology companies and as such rely on their infrastructure to ensure their web-based solutions have the appropriate cybersecurity protections to ensure our digital marketing services are secure. We leverage our proprietary digital analytical tools to develop more target marketing plans for our clients. We utilize PCI compliant merchant processors to ensure that client payments for services and ad spend are securely processed and cybersecurity risks minimized for us and our clients. In the ordinary course of our business, we do not have a large or complex data environment or systems that process sensitive information and as such we maintain an information security and cybersecurity program and a cybersecurity governance framework to manage our potential cybersecurity risk by outsourcing to sophisticated platform providers.
