SPECIFICITY, INC. The discussion and analysis of our financial condition and results of operations
are based on our financial statements, which we have prepared in accordance with
accounting principles generally accepted in
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As used in this "Management's Discussion and Analysis of Financial Condition and
Results of Operation," except where the context otherwise requires, the term
"we," "us," "our," or "the Company," refers to the business of
Organizational Overview
At our core, we are a digital marketing firm. However, through our diversified holdings, we provide various solutions that combine our marketing expertise to provide support for other segments of our portfolio. Ultimately, Specificity is a tech incubator. We identify technology-based marketing solution entities, take an equity share position in return for utilizing our internal resources to complete the buildout of these technology based solutions. Specificity then uses our marketing prowess to draw clients to these businesses. We have the internal personnel to complete these projects and the marketing capability to deliver lower advertising costs with high conversion campaigns to launch these companies into success.
Currently, our operations are focused on 4 lines of business.
SPECIFICITY is a full-service digital marketing firm that delivers cutting-edge marketing solutions to business to business clients as well as business to consumer clients and currently generates all of our revenue. We've gone to painstaking lengths to develop tools that allow us to identify and market to people who are actively in the buying cycle. We take advantage of the real-time messaging opportunities digital marketing offers to give small and medium-sized businesses a fair chance at online traffic.
BULLSEYE will help businesses revolutionize their direct mail marketing initiatives. With Bullseye, by combining our digital approach along with traditional print marketing, clients can send direct mail to targeted people who are visiting the competition and searching for their products online. In short, we will use behavior to identify and market to people who are already in the buying cycle, increasing conversions and driving sales. BULLSEYE has no remaining build-out and awaits capital to support marketing activities.
THRU THE FUNNEL is a sales engagement platform designed to create qualified leads that help client's sales reps do what they were hired to do: Sell! Our platform targets, engages, illuminates and connects interested prospects with our client's sales team, all in real time. THRU THE FUNNEL development is 60% complete and awaits capital to support marketing activities.
PICK POCKET is a do-it-yourself digital marketing platform for smaller business
owners. We will use behavior-based device ID technology to help clients discover
their ideal customers and market directly to their mobile devices. With no
contracts, middlemen, or hidden fees, Pick Pocket lets clients control their
digital marketing without worrying about agency markups making Fortune 1000
marketing capabilities available to companies with
BULLSEYE, THRU THE FUNNEL and PICK POCKET illuminate our ability to identify smart technology to undertake and support our incubation model as we build-out new, innovative ideas.
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In addition to Device ID extraction and programmatic display, Specificity offers a whole host of marketing services including:
? Email Marketing ? Automated Marketing ? Retargeting Marketing ? Content Marketing
? Social Media Content Creation
? Digital Production Marketing
? Creating Brand Standards ? Logo Creation ? Website Creation ? Brochure Creation ? Print Marketing ? Targeted Print Campaigns
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?
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? Influencer Marketing Collaboration
? Proximity Marketing Strategic Vision
1) First, we endeavor to deliver the latest digital marketing technology to
companies of all sizes making them nationally, regionally and locally
competitive. In this capacity, we come to the table already vertically
integrated and capable of executing any size campaign flawlessly.
2) Secondarily, Specificity is a tech incubator. We identify technology-based
marketing solutions, take an equity share position in return for utilizing
our internal resources to complete the buildout of technology-based
solutions, and then using our marketing prowess to draw clients to these
businesses. We have the internal personnel to successfully complete these
projects and our marketing capabilities will deliver lower advertising
costs to launch new projects making growth faster to attain.
Digital Marketing
As a digital marketing agency, Specificity is an early adopter of innovative digital marketing tools. Our team keeps our clients ahead of the technology curve instead of chasing it. Our ability to identify audiences in granular ways other tech companies have given up on, positions us well to deliver better results at lower costs. By delivering ads to more targeted audiences, our clients enjoy the benefit of focusing 100% of their digital spend on audiences that make sense for their products and services. While the large social media/tech companies are eliminating or limiting access to targeting tools, we continue to add better targeting tools all the time.
As digital marketing continues to evolve, Specificity finds itself with an incredibly unique opportunity. While the large tech companies and social media firms are removing targeting mechanisms from their platforms, businesses are waking up to the fact that more targeted audiences lower their CPA (cost per acquisition) and dramatically improve their ROI. As each day goes by, business owners have learned that the less targeted their campaigns are the more money and time they waste. Reaching the audiences they were easily able to reach just a few years back is made more expensive with the removal of targeting mechanisms. It is all done in the name of political correctness, but it is obvious to most, that their true motivation is to drive ad spend up to drive revenue for themselves.
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All of these events put Specificity in a great position to acquire new clients
in mass. Our capital raise will in large part be used to grow our sales team in
two regions initially and then expand quickly thereafter. The two regions we are
starting with are the
We also know that clients with these revenues spend on average,
In addition to being home to many companies we seek to engage, there is another
reason these two regions were selected.
While we project strong revenue growth in 2023, our other mission is to buildout internal capacity to facilitate growth. A portion of our capital raise will go towards that end. Having a well-trained staff in place will not only allow for the expeditious on-boarding of new clients but will also go a long way in retaining clients we bring on. Strong client retention is foundational to long-term success in our business. We have already automated much of what we do so the length of time required to properly train people is drastically reduced.
Tech Incubator
In the digital marketing space, there are numerous opportunities for project completion. Men and women across the country have great ideas but not the resources to finish their projects. Our model is simple, once we identify these opportunities, we will negotiate an equity share position in return for using our resources to complete the buildout. These resources include our website design team, programmers, graphic designers, digital marketers and management.
Due to the nature of what we do, we welcome these projects with both the ability to help complete them and the ability to market them. We can identify the audience most likely to use them and then aggressively advertise to that audience. Our goal in doing so is to spin them off into their own company and then take our profit when the time is right.
PickPocket
This model is being proven now. Specificity acquired, then completed a digital marketing platform called PickPocket. It offers its users location-based device ID extraction in a self-serve platform wherein users can define the parameters of their own campaign. It aims to compete with the marketing mechanisms in social media companies. Just as they are removing targeting capabilities, PickPocket will hit the market offering very granular targeting. Users on PickPocket are in total control of their campaign and can dictate spend level, locations to target, and the duration of the campaign. Forty-eight hours after the campaign is complete, PickPocket clients get an email containing detailed analytics, including foot traffic attribution reporting. This reporting tells the client how many people physically visited their location out of all the device IDs that were marketed to during the campaign. The report also contains tracking for impressions, clicks, form fills, and ecommerce conversions where appropriate. We have launched PickPocket and will be fully capitalizing the marketing through fiscal year 2023.
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The Investor Center
Another project we have brought in-house is the Investor Center. This is an online portal allowing investors to completely customize their own user experience. They can choose what news feeds to populate on their home screen, which stocks to follow, what industries to track, which OTC companies to follow, which companies seeking private investment to keep track of and much, much more. This service is subscription based.
In addition to providing users with a customized experience, The Investor Center brings together companies seeking investment with brokers, investors and private equity firms. Paid advertising on the platform is available for companies seeking to garner investor attention or for brokers seeking to offer their services to investors. There are many revenue streams available, and our sales team will investigate every available opportunity.
Currently, we have completed the website buildout with full functionality and will be launching very soon. The future goal for the investor center is to utilize a full stack developer to turn this into a native app for iPhone and Android.
Going Concern
As reflected in the accompanying financial statements, during the year ended
While the Company is continuing operations and generating revenues, the
Company's cash position is not significant enough to support the Company's daily
operations. To fund operations and reduce the working capital deficit, the
Company has raised capital through the sale of common and preferred stock. While
the Company believes in the viability of its strategy to generate revenues and
in its ability to raise additional funds, there can be no assurances to that
effect, nor can there be assurance that such funds will be at acceptable terms.
See Note 7 for additional fund received during the year ended
Critical Accounting Policies and Estimates
Our significant accounting policies are more fully described in the notes to our consolidated financial statements. Those material accounting estimates that we believe are the most critical to an investor's understanding of our financial results and condition are discussed immediately below and are particularly important to the portrayal of our financial position and results of operations and require the application of significant judgment by our management to determine the appropriate assumptions to be used in the determination of certain estimates.
Use of Estimates
The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Concentration of Credit Risk
Cash and cash equivalents are maintained at financial institutions and, at
times, balances may exceed federally insured limits of
Cash and Cash Equivalents
The Company classifies its highly liquid investments with maturities of three months or less at the date of purchase as cash equivalents. Management determines the appropriate classification of its investments at the time of purchase and reevaluates the designations of each investment as of the balance sheet date for each reporting period. The Company classifies its investments as either short-term or long-term based on each instrument's underlying contractual maturity date. Investments with maturities of less than 12 months are classified as short-term and those with maturities greater than 12 months are classified as long-term. The cost of investments sold is based upon the specific identification method.
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Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable is recorded net of an allowance for doubtful accounts, if needed. The Company considers any changes to the financial condition of its financial institutions used and any other external market factors that could impact the collectability of its receivables in the determination of its allowance for doubtful accounts. The Company does not expect to have write-offs or adjustments to accounts receivable which could have a material adverse effect on its financial position, results of operations or cash flows as the portion which is deemed uncollectible is already taken into account when the revenue is recognized.
Revenue Recognition
The
The Company provides online marketing services. The Company's revenue is generated on services priced at fixed rates. Revenue is recorded as services are performed which typically all occurs within a calendar month.
Right of Use Assets and Liabilities
The Company determines if an arrangement is a lease at inception. This determination generally depends on whether the arrangement conveys to the Company the right to control the use of an explicitly or implicitly identified fixed asset for a period of time in exchange for consideration. Control of an underlying asset is conveyed to the Company if the Company obtains the rights to direct the use of and to obtain substantially all of the economic benefits from using the underlying asset. The Company has lease agreements which include lease and non-lease components, which the Company has elected to account for as a single lease component for all classes of underlying assets. Lease expense for variable lease components are recognized when the obligation is probable. Operating lease right of use ("ROU") assets and lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Operating lease payments are recognized as lease expense on a straight-line basis over the lease term. The Company primarily leases buildings (real estate) which are classified as operating leases. ASC 842 requires a lessee to discount its unpaid lease payments using the interest rate implicit in the lease or, if that rate cannot be readily determined, its incremental borrowing rate. As an implicit interest rate is not readily determinable in the Company's leases, the incremental borrowing rate is used based on the information available at commencement date in determining the present value of lease payments.
The lease term for all of the Company's leases includes the non-cancellable period of the lease plus any additional periods covered by either a Company option to extend (or not to terminate) the lease that the Company is reasonably certain to exercise, or an option to extend (or not to terminate) the lease controlled by the lessor. Options for lease renewals have been excluded from the lease term (and lease liability) for the majority of the Company's leases as the reasonably certain threshold is not met.
Lease payments included in the measurement of the lease liability are comprised of fixed payments, variable payments that depend on index or rate, and amounts probable to be payable under the exercise of the Company option to purchase the underlying asset if reasonably certain.
Variable lease payments not dependent on a rate or index associated with the
Company's leases are recognized when the event, activity, or circumstance in the
lease agreement on which those payments are assessed as probable. Variable lease
payments are presented as operating expenses in the Company's statement of
operations in the same line as expense arising from fixed lease payments. As of
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Fair Value Measurements
The Company follows FASB ASC 820, Fair Value Measurements and Disclosures ("ASC
820") to measure and disclosure the fair value of its financial instruments. ASC
820 establishes a framework for measuring fair value in
Level 1 Quoted market prices available in active markets for identical assets or
liabilities as of the reporting date.
Level 2 Pricing inputs other than quoted prices in active markets included in
Level 1, which are either directly or indirectly observable as of the
reporting date.
Level 3 Pricing inputs that are generally unobservable inputs and not
corroborated by market data.
Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.
The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.
The carrying amounts reported in the Company's financial statements for cash, accounts receivable, prepaids and other current assets, accounts payable, etc. approximate their fair value because of the immediate or short-term mature of these financial instruments.
Property and Equipment
Property and equipment is recorded at cost. Expenditures for major additions and betterments are capitalized. Maintenance and repairs are charged to operations as incurred. Depreciation of property and equipment is computed by the straight-line method (after taking into account their respective estimated residual values) over the assets estimated useful life of five (5) years. Upon sale or retirement of equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in the statement of operations.
Impairment of Long-Lived Assets
Long-lived assets are reviewed for impairment when there is evidence that events
or changes in circumstances indicate that the carrying amount of an asset or
asset group may not be recoverable. Recoverability of assets to be held and used
is measured by comparing the carrying amount of an asset or asset group to
estimated undiscounted future cash flows expected to be generated by the asset
or asset group. If the carrying amount of an asset or asset group exceeds its
estimated future cash flows, an impairment charge is recognized for the amount
by which the carrying amount of the asset or asset group exceeds the estimated
fair value of the asset or asset group. Long-lived assets to be disposed of by
sale are reported at the lower of their carrying amounts or their estimated fair
values less costs to sell and are not depreciated. As of
Income Taxes
The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the fiscal year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the fiscal years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statement of operations in the period that includes the enactment date.
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The Company's income tax returns are based on calculations and assumptions that
are subject to examination by the Internal Revenue Service and other tax
authorities. In addition, the calculation of the Company's tax liabilities
involves dealing with uncertainties in the application of complex tax
regulations. The Company recognizes liabilities for uncertain tax positions
based on a two-step process. The first step is to evaluate the tax position for
recognition by determining if the weight of available evidence indicates that it
is more likely than not that the position will be sustained on audit, including
resolution of related appeals or litigation processes, if any. The second step
is to measure the tax benefit as the largest amount that is more than 50% likely
of being realized upon settlement. While the Company believes it has appropriate
support for the positions taken on its tax returns, the Company regularly
assesses the potential outcomes of examinations by tax authorities in
determining the adequacy of its provision for income taxes. The Company
continually assesses the likelihood and amount of potential adjustments and
adjusts the income tax provision, income taxes payable and deferred taxes in the
period in which the facts that give rise to a revision become known. As of
Per Share Information
Basic net income (loss) per common share is computed by dividing net income
(loss) by the weighted average number of shares of common stock outstanding
during the year. Diluted net income (loss) per common share is computed by
dividing net income (loss) by the weighted average number of shares of common
stock outstanding during the year, increased by the potentially dilutive common
shares that were outstanding during the year. As of
Stock Based Compensation
The Company recognizes as compensation expense all share-based payment awards made to employees, directors, and consultants including grants of stock, stock options and warrants, based on estimated fair values. Fair value is generally determined based on the closing price of the Company's common stock on the date of grant and is recognized over the service period.
New Accounting Pronouncements
In
The FASB issues ASUs to amend the authoritative literature in ASC. There have been a number of ASUs to date that amend the original text of ASC. The Company believes those issued to date either (i) provide supplemental guidance, (ii) are technical corrections, (iii) are not applicable to the Company or (iv) are not expected to have a significant impact on the Company.
Results of Operations for the Year Ended
Revenues
During the year ended
Cost of Revenues
During the year ended
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Operating Expenses
During the year ended
Other Expenses
During the year ended
Net Loss
As a result of the above, Net Loss increased by
Liquidity and Capital Resources
We have, since inception, financed operations and capital expenditures through the sale of stock and convertible notes and debt. Our immediate sources of liquidity include cash and cash equivalents, accounts receivable, and unbilled receivables.
At
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. 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.
Generally, the Company has insufficient capital to maintain operations. Cashflows from operations of the Company and all its subsidiary holdings will not sustain the Company's operations, let alone its filing requirements, unless there is substantial influx of cash flow through either debt and/or equity financing.
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Cash Flows from Operating Activities
Cash provided by operating activities provides an indication of our ability to generate sufficient cash flow from our recurring business activities.
For the year ended
For the year ended
Cash Flows from Investing Activities
For the year ended
For the year ended
Cash Flows from Financing Activities
Cash provided by (used in) financing activities provides an indication of our debt financing and proceeds from capital raise transactions.
For the year ended
For the year ended
In the short term, we must raise additional capital through debt or equity financing to support our business operations and grow our business. Over the long term, we must successfully execute our growth plans to increase profitable revenue and income streams to generate positive cash flows to sustain adequate liquidity without impairing growth initiatives or requiring the infusion of additional funds from external sources to meet minimum operating requirements. 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.
Off-Balance Sheet Arrangements
We have no off-balance sheet financing arrangements.
Contractual Obligations
Not required of smaller reporting companies.
Item 8. Financial Statements and Supplementary Data
Our consolidated financial statements and notes thereto and the report of our independent registered public accounting firm, are set forth on pages F-1 through F-18 of this report.
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