Specificity Inc (SPTY)

Specificity Inc Q3 2024 Financial Analysis

Report Date: 2025-04-30
Period Covered: Quarter ended September 30, 2024
Form Type: 10-Q

Executive Summary

• Revenue: $213,675 for Q3 2024, down from $270,888 in Q3 2023 (−21.1%).
• Gross Profit: $50,375 (23.6% margin), versus $217,514 (80.3% margin) in the prior-year quarter.
• Operating Loss: $(211,762) in Q3 2024, compared with $(31,170) in Q3 2023.
• Net Loss: $(224,262) vs. $(64,597) year-over-year.
• Cash Position: $38,019 as of September 30, 2024 (down from $49,149 at December 31, 2023).
• Total Liabilities: $1,967,380, marginally below Dec 2023’s $1,976,893.

Profit & Loss Analysis

• Revenue Decline Drivers: A seasonal pullback in client marketing spend and fewer new campaign launches reduced quarterly billings.
• Cost Increase: Cost of services rose to $163,300 (vs. $53,374 LY) driven by higher third-party data and platform fees to support advanced targeting.
• Expense Inflation: SG&A and capital-raise costs jumped due to increased legal, accounting, and compliance fees related to the change of auditor and preparations for re-audit.
• One-Time Charges: Q3 recognized $(12,500) in convertible debt modification losses and $(29,242) lease-termination expense. Excluding these items, underlying operating losses would narrow.

Balance Sheet Highlights

• Assets: Total assets of $47,837, down from $89,141 at year-end, reflecting continued cash burn and high working-capital financing balances.
• Working Capital Deficit: $(926,307) at September 30, 2024, essentially flat vs. year-end.
• Debt Composition: Predominantly short-term funding loans ($115,896), convertible notes ($209,672), and related-party advances ($1,278,169), plus $1,000,000 noncurrent note payable to related party.

Liquidity & Going Concern

• Cash Burn: $150,781 used in operations over the first nine months.
• Financing: $139,651 provided by financing, including working-capital loans and modest equity raises.
• Going Concern: Significant doubt remains; the company depends on new capital infusions and execution of a $5 million Stratum purchase agreement.

Pros and Cons

Pros:

• Cutting-edge AI and MAID-based targeting platform with multistage offerings for agencies and SMBs.
• Single operating segment simplifies resource allocation and cost control.
• Existing $5 million strata commitment provides near-term equity support.

Cons:

• Recurring net losses and negative operating cash flow strain liquidity.
• High reliance on short-term, high-cost working-capital financing and related-party debt.
• Deferred SEC filings and auditor change introduce reputational and compliance risks.

Analyst Conclusion: Specificity Inc must stabilize revenue growth, control service costs, and secure longer-tenor financing. While its technology suite and market positioning are sound, the near-term focus should be on extending the runway through cost rationalization and strategic capital raises to avert further going-concern pressure.

Revenue is generated principally under fixed monthly digital marketing service contracts within a single operating segment, covering: Tradigital Partner (agency whitelabel), Putthru (enterprise-grade SMB platform), Pickpocket (DIY SMB platform), and ad hoc services. The filing does not disclose individual segment revenues.

Specificity’s financial trajectory hinges on scaling recurring digital-service revenues and reducing dependency on expensive working-capital loans. Key health indicators include margin recovery via improved pricing, lower third-party data costs, and controlled SG&A. Future challenges involve navigating regulatory scrutiny post-auditor change, meeting ongoing SEC reporting obligations, and securing multi-year financing on favorable terms. Opportunities lie in cross-selling platform modules, converting Stratum commitments into liquidity, and leveraging AI enhancements to widen client appeal and improve unit economics.