Amended Quarterly Report (10-q/a)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

Amendment No. 1

 

 

(Mark One)

☒  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2021

Or

 

☐  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to _______________

Commission File Number: 000-26533

 

MASTERMIND, INC.

(Exact name of registrant as specified in its charter)

 

Nevada		82-3807447
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
1450 W. Peachtree St. NW, Atlanta, Georgia		30309
(Address of principal executive offices)		(Zip Code)

 

[phone]

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act: None

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. :

 

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller reporting company ☒
Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐     No ☒

 

As of February 21, 2022, there were 34,505,520 shares of the registrant’s Common Stock outstanding.

 

 

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EXPLANATORY NOTE

 

The purpose of this Amendment No. 1 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2021 (“Form 10-Q/A”) is to submit Exhibit 101 to the Form 10-Q filed with the Securities and Exchange Commission on February 22, 2022 (the “Form 10-Q”), in accordance with Rule 405 of Regulation S-T. Exhibit 101 consists of the Interactive Data Files required to be filed with the Registrant’s Form 10-Q for the quarterly period ended December 31, 2021.

 

Except as described above, no additional changes, revisions, or updates have been made to the Form 10-Q in this Form 10-Q/A. This Amendment No. 1 to the Form 10-Q speaks as of the original filing date of the Form 10-Q and does not reflect any events that may have occurred subsequent to the filing date of the Form 10-Q.

 

 

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Mastermind, Inc.

 

 

Table of Contents

Form 10-Q/A

 

		Page
Part I	Financial Information
Item 1	Consolidated Financial Statements (unaudited)
	Consolidated Balance Sheets at December 31, 2021 and September 30, 2021 (Unaudited)	3
	Consolidated Statements of Operations for the three months ended December 31, 2021 and 2020 (Unaudited)	4
	Consolidated Statements of Stockholders’ Equity for the three months ended December 31, 2021 and 2020 (Unaudited)	5
	Consolidated Statements of Cash Flows for the three months ended December 31, 2021 and 2020 (Unaudited)	6
	Notes to Consolidated Financial Statements (Unaudited)	7
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
Item 3	Quantitative and Qualitative Disclosures About Market Risk	14
Item 4	Controls and Procedures	14
Part II	Other Information
Item 1	Legal Proceedings	15
Item 1A	Risk Factors	15
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	15
Item 3	Defaults Upon Senior Securities	15
Item 4	Mine Safety Disclosures	15
Item 5	Other Information	15
Item 6	Exhibits	15
Signatures		16

 

 

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Part I. Financial Information

 

 

Item 1.

Consolidated Financial Statements (unaudited)

 

 

Mastermind, Inc.

Consolidated Balance Sheets

(Unaudited)

 

		December 31,				September 30,
		2021				2021
ASSETS
Current assets:
Cash and cash equivalents		$	1,141,070			$	1,075,188
Accounts receivable			1,309,580				1,261,183
Prepaid expenses and other current assets			59,718				31,266
Income tax receivable			77,477				77,477
Total current assets			2,587,845				2,445,114
Right-of-use asset, net			235,581				262,097
Property and equipment, net			53,977				59,495
Total assets		$	2,877,403			$	2,766,706
LIABILITY AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses		$	41,694			$	157,994
Accounts payable and accrued expenses, related party			-				100,000
Unearned revenues			345,521				59,326
Deferred tax liabilities			184,557				168,174
Lease obligation, current			109,776				108,281
Total current liabilities			681,548				593,775
Lease obligation, net of current portion			125,805				153,816
Total liabilities			807,353				747,591
Stockholders' Equity:
Preferred stock, $0.001 par value; 1,000,000 shares authorized; no shares issued and outstanding as of December 31, 2021 and September 30, 2021			-				-
Common stock, $0.001 par value, 125,000,000 shares authorized, 34,505,520 shares issued and outstanding as of December 31, 2021 and September 30, 2021			34,506				34,506
Common stock to be issued; 180,000 and 135,000 shares as of December 31, 2021 and September 30, 2021			180				135
Additional paid in capital			80,685				76,230
Retained earnings			1,954,679				1,908,244
Total stockholders’ equity			2,070,050				2,019,115
Total liabilities and stockholders’ equity		$	2,877,403			$	2,766,706

 

The accompanying notes are an integral part of these consolidated financial statements

 

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Mastermind, Inc.

Consolidated Statements of Operations

(Unaudited)

 

		Three months ended December 31,
		2021				2020
Revenues		$	857,114			$	1,077,159
Cost of revenues			323,657				565,302
Gross Profit			533,457				511,857
Operating Expenses:
General and administrative			471,246				505,358
Total operating expenses			471,246				505,358
Income from operations			62,211				6,499
Other Income:
Interest income			607				393
Total other income			607				393
Income before provision for income taxes			62,818				6,892
Provision for income taxes			16,383				2,153
Net Income		$	46,435			$	4,739
Net income per common share:
Basic		$	0.00			$	0.00
Diluted		$	0.00			$	0.00
Weighted average common shares outstanding:
Basic			34,505,520				33,870,520
Diluted			34,505,520				33,870,520

 

The accompanying notes are an integral part of these consolidated financial statements

 

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Mastermind, Inc.

Consolidated Statements of Stockholders' Equity

Three Months Ended December 31, 2021 and 2020

(Unaudited)

 

		Common Stock								Common Stock to be issued								Additional
		Shares				Amount				Shares				Amount				Paid in Capital				Retained Earnings				Total Equity
Balance at September 30, 2021			34,505,520			$	34,506				135,000			$	135			$	76,230			$	1,908,244			$	2,019,115
Shares of common stock to be issued for services			-				-				45,000				45				4,455				-				4,500
Net income			-				-				-				-				-				46,435				46,435
Balance at December 31, 2021			34,505,520			$	34,506				180,000			$	180			$	80,685			$	1,954,679			$	2,070,050
Balance at September 30, 2020			33,870,520			$	33,871				-			$	-			$	-			$	1,140,976			$	1,174,847
Net income			-				-				-				-				-				4,739				4,739
Balance at December 31, 2020			33,870,520			$	33,871				-			$	-			$	-			$	1,145,715			$	1,179,586

 

The accompanying notes are an integral part of these consolidated financial statements

 

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Mastermind, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

 

		Three Months Ended December 31,
		2021				2020
Cash flows from operating activities:
Net income		$	46,435			$	4,739
Adjustments to reconcile net income to net cash flows from operating activities:
Stock compensation expense			4,500				-
Depreciation			5,518				5,867
Changes in operating assets and liabilities:
Accounts receivable			(48,397	)			139,784
Unbilled receivables			-				(370,636	)
Prepaid expenses and other current assets			(28,452	)			(21,448	)
Accounts payable and accrued expenses			(116,300	)			(48,709	)
Accounts payable and accrued expenses, related party			(100,000	)			-
Unearned revenues			286,195				(82,450	)
Deferred tax liabilities			16,383				2,153
Net cash flows provided by (used in) operating activities			65,882				(370,700	)
Cash flows from investing activities:
Purchases of property and equipment			-				(4,346	)
Net cash flows used in investing activities			-				(4,346	)
Net change in cash and cash equivalents			65,882				(375,046	)
Cash and cash equivalents at beginning of period			1,075,188				807,262
Cash and cash equivalents at end of period		$	1,141,070			$	432,216
Supplemental disclosure of cash flow information:
Income taxes paid		$	-			$	-
Interest paid		$	-			$	-

 

The accompanying notes are an integral part of these consolidated financial statements

 

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Mastermind, Inc.

Notes to Consolidated Financial Statements

(Unaudited)

 

 

 

 

1.

Business

 

Mastermind, Inc. (the “Company”, “we”, “us”, or the “organization”) is an involvement marketing service agency that designs, creates and develops branding and marketing campaigns, primarily for large corporate clients with well-known brands. We specialize in customer conversion initiatives that we believe facilitate the involvement of more of the “right customers” with the brands of our clients. We focus on converting prospects to customers. Our programs can take on various forms, including creating and managing content marketing, influencer marketing, social marketing/community management, digital issues management promotions, Augmented Reality Marketing, and UX Analytics & Digital Intelligence.

 

 

 

 

2.	Interim Financial Statements and Basis of Presentation

 

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information pursuant to Rule 8-03 of Regulation S-X. Accordingly, these unaudited consolidated financial statements do not include all of the information and disclosures required by U.S. GAAP for complete financial statements. In the opinion of management, the accompanying unaudited consolidated financial statements include all adjustments (consisting only of normal recurring adjustments), which we consider necessary, for a fair presentation of those financial statements. The results of operations and cash flows for the three months ended December 31, 2021 may not necessarily be indicative of results that may be expected for any succeeding period or for the entire fiscal year. These consolidated financial statements should be read in conjunction with our audited financial statements included in our Annual Report on Form 10-K as of and for the fiscal years ended September 30, 2021 and 2020 as filed with the Securities and Exchange Commission.

 

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and judgments, which are evaluated on an ongoing basis, and that affect the amounts reported in our unaudited financial statements and accompanying notes. Management bases its estimates on historical experience and on various other assumptions that it believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the amounts of revenues and expenses that are not readily apparent from other sources. Actual results could differ from those estimates and judgments. In particular, significant estimates and judgments include those related to revenue recognition, allowance for doubtful accounts, useful lives and valuation of property and equipment.

 

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There have been no material changes in the Company’s significant accounting policies during the quarter ended December 31, 2021, as compared to the significant accounting policies described in the Company’s Annual Report on Form 10-K for the year ended September 30, 2021.

 

The pandemic related to the coronavirus (COVID-19) could adversely impact our future results, especially if our customers are negatively impacted by the decrease in economic activity caused by the virus. If our customers fail to reach budgeted revenue projections and reduce their expenditures proportionally, we could experience lower than expected growth in revenue or lower overall revenue. We could also experience delays or declines in revenue and new business and or implementations of marketing campaigns if customers or potential customers delay or cancel their plans due to the economic slowdown caused by the virus. Additionally, our operations could be impacted, and we could experience higher costs if, despite our mitigation and prevention efforts, the virus spread prevents affected employees from performing key duties.

 

 

 

 

3.	Related Party Transactions

 

On January 3, 2012, we entered into a perpetual license agreement (the “Perpetual License”) with Mastermind Marketing, Inc. (the “Licensor”), which provides for licenses of trademarks, internet domains, and certain intellectual property as defined in the Perpetual License. The Licensor is one of our members and its chief executive officer is also our chief executive officer. The Perpetual License, which may be terminated at any time by either party, is effective January 3, 2012 and provides for aggregate payments of $2,100,000 over the calendar years from 2019 through 2039 with no further payments required after December 31, 2039. The Company has recorded expenses related to the license of $15,000 and $15,000, for the three months ended December 31, 2021, and 2020, respectively.

 

On January 3, 2014, we entered into a commercial lease agreement (the “Lease”) with 1450 West Peachtree, LLC, a Georgia limited liability company (the “Landlord”), for the lease of our corporate facility in Atlanta, Georgia. The manager of the Landlord is also our chief executive officer. The term of the lease is 10 years from the date of the agreement and provides for monthly rent and payment of operating expenses on a triple-net basis. The monthly rent terms of the lease have been altered by the landlord due to another tenant occupying space the Company verbally agreed to allow the landlord to remove from the space available to the Company. During the three months ended December 31, 2021, and 2020, we made lease payments of $30,000 and $30,000, respectively, in satisfaction of our obligation pursuant to the Lease.

 

During the three months ended December 31, 2021, and 2020, we made payments to our three members pursuant to the terms of our operating agreement, as amended, for services rendered to us. The Company recorded expenses to our three members during the three months ended December 31, 2021, and 2020, aggregating $196,225 and $196,225, respectively. As of September 30, 2021, we owed $100,000 to our three majority stockholders for consulting services which is included in accounts payable and accrued expenses, related parties on the consolidated balance sheets herein. During the three months ended December 31, 2021, the $100,000 was paid.

 

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4.	Property and Equipment

 

Property and equipment consist of the following:

 

		December 31,				September 30,
		2021				2021
Furniture, fixtures and office equipment		$	145,987			$	145,987
Leasehold improvements			73,795				73,795
Property and equipment, gross			219,782				219,782
Less: accumulated depreciation			(165,805	)			(160,287	)
Property and equipment, net		$	53,977			$	59,495

 

Depreciation expense for the three months ended December 31, 2021 and 2020 was $5,518 and $5,867, respectively.

 

 

 

5.	Licensing Agreements

 

On January 3, 2012, we entered into a perpetual license agreement (the “Perpetual License”) with Mastermind Marketing, Inc. (the “Licensor”), which provides for licenses of trademarks, internet domains, and certain intellectual property as defined in the Perpetual License. The Licensor is one of our members and its chief executive officer is also our chief executive officer. The Perpetual License, which may be terminated at any time by either party, is effective January 3, 2012 and provides for aggregate payments of $2,100,000 over the calendar years from 2019 through 2039 with no further payments required after December 31, 2039. The Company has recorded expenses of $15,000 and $15,000 for the three months ended December 31, 2021, and 2020, respectively.

 

In consideration for the Perpetual License, we agreed to pay the following fees through fiscal year 2040 (calendar year 2039):

 

Fiscal Years Ending September 30,		Amount
2022		$	60,000
2023			60,000
2024			60,000
2025			60,000
2026			60,000
Thereafter			1,620,000
		$	1,920,000

 

 

 

6.	Commitments and Contingencies

 

On January 3, 2014, we entered into a commercial lease agreement (the “Lease”) with 1450 West Peachtree, LLC, a Georgia limited liability company (the “Landlord”), for the lease of our corporate facility in Atlanta, Georgia. The manager of the Landlord is also our chief executive officer. The term of the lease is 10 years from the date of the agreement and provides for monthly rent and payment of operating expenses on a triple-net basis. The monthly rent terms of the lease have been altered by the landlord due to another tenant occupying space the Company verbally agreed to allow the landlord to remove from the space available to the Company. During the three months ended December 31, 2021, and 2020, we made lease payments of $30,000 and $30,000, respectively, in satisfaction of our obligation pursuant to the Lease.

 

The Lease provides for the following total lease commitments pursuant to the Lease and we have also provided our expected portion of the lease commitments based on the updated verbal agreement with the landlord:

 

Fiscal Years Ending September 30,		Total Lease Commitment				Expected Lease Commitment
2022		$	274,500			$	90,000
2023			384,000				120,000
2024			97,500				30,000
		$	756,000			$	240,000

 

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We are not a party to any legal proceedings, other than ordinary routine litigation incidental to our business, which we believe will not have a material effect on our financial position or results of operations.

 

 

 

7.	Income Taxes

 

Prior to February 14, 2018, the effective date of the Business Combination, no provision for income taxes was made since we were treated as a partnership for income tax purposes and the income or loss was passed through to our members.

 

We are required to file federal and state income tax returns in the United States. The preparation of these tax returns requires us to interpret the applicable tax laws and regulations in effect in such jurisdictions, which could affect the amount of tax paid by us. In consultation with our tax advisors, we base our tax returns on interpretations that are believed to be reasonable under the circumstances. The tax returns, however, are subject to routine reviews by the various federal and state taxing authorities in the jurisdictions in which we file tax returns. As part of these reviews, a taxing authority may disagree with respect to the income tax positions taken by us (“uncertain tax positions”) and, therefore, may require us to pay additional taxes. As required under applicable accounting rules, we accrue an amount for our estimate of additional income tax liability, including interest and penalties, which we could incur as a result of the ultimate or effective resolution of the uncertain tax positions. We account for income taxes using the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributed to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences and carry-forwards are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is established when necessary to reduce deferred tax assets to amounts expected to be realized.

 

There were no unrecognized material tax benefits at December 31, 2021, and September 30, 2021. Our policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. There were no accrued interest or penalties associated with any unrecognized tax benefits, nor was any interest expense recognized during the periods presented. We have determined we have no uncertain tax positions.

 

Tax returns are subject to examination by the federal and state taxing authorities for generally three years after filed. There are no income tax examinations currently in process.

 

The Company files it’s income tax returns on the cash basis of accounting utilizing a December 31 tax year end. Deferred tax assets relating to current liabilities result from accounts payable and accrued expenses which are not currently deductible for tax purposes. Deferred tax liabilities relating to current assets result from accounts receivables and prepaid expenses which are not currently recognized as income for tax reporting purposes.

 

As of December 31, 2021, the Company has approximately $687,000 of net operating loss carryforwards that are available to offset future taxable income. In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.

 

On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) was signed into law making significant changes to the Internal Revenue Code. Changes include, but are not limited to, a federal corporate tax rate decrease from 35% to 21% for tax years beginning after December 31, 2017, the transition of U.S international taxation from a worldwide tax system to a territorial system, and a one-time transition tax on the mandatory deemed repatriation of foreign earnings. We have estimated our provision for income taxes in accordance with the Tax Act and guidance available as of the date of this filing.

 

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8.	Stockholders’ Equity

 

Preferred Stock

 

As of December 31, 2021, and September 30, 2021, we were authorized to issue a total 1,000,000 shares of preferred stock. There were no shares of Preferred Stock issued or outstanding as of December 31, 2021 and September 30, 2021.

 

Common Stock

 

As of December 31, 2021, and September 30, 2021, we were authorized to issue a total of 125,000,000 shares of common stock. As of December 31, 2021, and September 30, 2021, there were 34,505,520 shares of common stock issued and outstanding, respectively.

 

Dividends

 

During the three months ended December 31, 2021 and 2020, there were no dividends declared or paid.

 

Common Stock Options

 

As of December 31, 2021, and September 30, 2021, there were fully-vested, non-qualified stock options exercisable by our former chief executive officer and sole director into 525,667 shares of our common stock at an exercise price of $0.15 per share. There were no stock options exercised or issued during the three months ended December 31, 2021 and 2020.

 

A 2018 Equity Incentive Plan consisting of four million (4,000,000) shares of Common Stock was also adopted by written consent of holders of 85% of the voting securities. No options or shares have been issued under this plan as of December 31, 2021 and September 30, 2021.

 

 

 

9.	Concentration of Credit Risk and Major Customers

 

For the three months ended December 31, 2021, four clients represented approximately 24%, 16%, 14% and 12%, respectively, of our total revenues. As of December 31, 2021, two customers represented approximately 47% and 23%, respectively of our outstanding accounts receivable.

 

For the three months ended December 31, 2020, three clients represented approximately 10%, 10% and 33%, respectively of our total revenues.

 

 

 

10.	Subsequent Events

 

The Company has evaluated subsequent events through the date the financial statements were issued. The Company has determined that there are no such events that warrant disclosure or recognition in the consolidated financial statements presented herein.

 

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Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Forward-Looking Statements

 

This quarterly report on Form 10-Q contains certain statements that are “forward-looking” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Litigation Reform Act”). These forward-looking statements and other information are based on our beliefs as well as assumptions made by us using information currently available.

 

The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “will,” “should” and similar expressions, as they relate to us, are intended to identify forward-looking statements. Such statements reflect our current views with respect to future events and are subject to certain risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated, expected, intended or using other similar expressions.

 

In accordance with the provisions of the Litigation Reform Act, we are making investors aware that such forward-looking statements, because they relate to future events, are by their very nature subject to many important factors that could cause actual results to differ materially from those contemplated by the forward-looking statements contained in this quarterly report on Form 10-Q. For example, we may encounter competitive, technological, financial and business challenges making it more difficult than expected to continue to develop and market our products; the market may not accept our existing and future products; we may not be able to retain our customers; we may be unable to retain existing key management personnel; and there may be other material adverse changes in our operations or business. Certain important factors affecting the forward-looking statements made herein also include, but are not limited to (i) continued downward pricing pressures in our targeted markets, (ii) the continued acquisition of our customers by certain of our competitors, and (iii) continued periods of net losses, which could require us to find additional sources of financing to fund operations, implement our financial and business strategies, meet anticipated capital expenditures and fund research and development costs. In addition, assumptions relating to budgeting, marketing, product development and other management decisions are subjective in many respects and thus susceptible to interpretations and periodic revisions based on actual experience and business developments, the impact of which may cause us to alter our marketing, capital expenditure or other budgets, which may in turn affect our financial position and results of operations. For all of these reasons, the reader is cautioned not to place undue reliance on forward-looking statements contained herein, which speak only as of the date hereof. We assume no responsibility to update any forward-looking statements as a result of new information, future events, or otherwise except as required by law. For further information, you are encouraged to review our filings with the Securities and Exchange Commission (“SEC”), including our Current Report on Form 8-K, as filed with the SEC on February 22, 2018, as amended on April 20, 2018, and risk factors as discussed therein under Item 2.01.

 

Overview

 

Mastermind, Inc. is a digital marketing agency that plans, executes and analyzes digital marketing initiatives for clients in numerous industries including Fashion, Automotive, Spirits & Beer, Business-to-business, Consumer Electronics, Banking & Financial Services, Consumer Packaged Goods, Food & Beverage, Healthcare, Home Improvement, Restaurants, Retail, Technology, and Communications. Mastermind offers a unique approach to digital and social marketing called Involvement Marketing (IM). IM is aimed at involving more people with each clients' brand in ways that inspire them to take an action (e.g.- becoming aware of the brand, trying it, purchasing more of it, and/or even becoming an advocate for the brand through social media). Mastermind's Involvement Marketing initiatives encompass any one, or combination of tactics including Content Marketing, Digital/Mobile Marketing, Influencer Marketing, Social Marketing & Community Management, Promotion Marketing, Digital/Social Issues Management, UX Analytics & Digital Intelligence, and Augmented Reality Marketing.

 

Mastermind has assembled a team of highly experienced, cross-functional marketing experts to develop and execute Involvement Marketing initiatives (see key executive bios below). These experts have extensive backgrounds in digital/social marketing & media, content development, influencer marketing, promotion, digital contingency communications & PR, research, strategy, creative message development, and analytics. Mastermind has also developed a disciplined approach to Involvement Marketing that ensures the right tactic(s) is employed to best achieve the objective and that it is executed flawlessly. The team is led by our senior executives described in our 10-K as of and for the fiscal year ended September 30, 2021.

 

Mastermind has worked with some of the widely recognized brands in in dozens of industries. While the agency does not have a client in every industry currently, its experience provides the confidence of potential major clients to consider hiring Mastermind. Mastermind works with clients on both a project-basis and ongoing services basis. Mastermind is developing innovative marketing technology initiatives with the potential to drive more interest from potential clients in the next few years.

 

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Critical Accounting Policies

 

Our significant accounting policies are described in Note 2 to the financial statements which are included in our Annual Report on Form 10-K as of and for the fiscal years ended September 30, 2021 and 2020. Our discussion and analysis of our financial condition and results of operations are based upon these financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We evaluate our estimates on an on an on-going basis. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. In the past, actual results have not been materially different from our estimates. However, results may differ from these estimates under different assumptions or conditions.

 

Results of Operations

 

Three Months Ended December 31, 2021 vs. December 31, 2020

 

Revenues

 

Revenues for the three months ended December 31, 2021 were $857,114 as compared with $1,077,159 for the comparable prior year period, a decrease of $220,045 or 20.4%. The decrease is attributable to the timing of project work being completed, and also the revenue being recognized for direct expenses (media, influencer fees, etc.) attributable to jobs. These fluctuations in work accomplished and revenue being recognized for direct expenses are normal occurrences in our business.

 

Gross Profit

 

Gross profit for the three months ended December 31, 2021 was $533,457 or 62.2% of revenues, compared with $511,857 or 47.5% of revenues, for the comparable prior year period. The increase in gross profit dollars was a result of higher margins, more revenue from projects without direct expenses or with less direct expenses. The increase in gross margin percentage is primarily the Company has more projects with less direct expenses in the three months ended December 31, 2021 compared to same period of last year. Direct cost includes expenses for media, sponsorship fees, etc.

 

General and Administrative Expenses

 

General and administrative expenses for the three months ended December 31, 2021 were $471,246 as compared with $505,358 for the comparable prior year period, a decrease of $34,112 or 6.75%. The decrease was primarily as a result of decreases in freelance subcontract expenses of $7,497, professional fees (including public company expenses) of $20,175 and other general and administrative costs of $12,429, partially offset by increases in computer expenses of $7,231 and stock compensation expense of $4,500.

 

Other Income and Expense

 

Other income, net for the three months ended December 31, 2021 was $607 as compared to $393 for the comparable prior year period.

 

Liquidity and Capital Resources

 

As of December 31, 2021, we had cash of $1,141,070, an increase of $65,882 when compared with a balance of $1,075,188 as of September 30, 2021.

 

During the three months ended December 31, 2021, $65,882 was provided by operating activities as compared with net cash used in operating activities of $370,700 for the comparable prior year period. Our uses of cash for operating activities have primarily consisted of salaries and wages for our employees; costs incurred in connection with performance on client projects; facility and facility-related costs, material and professional fees. The sources of our cash flows from operating activities have consisted primarily of payments received from clients in connection with the performance on contractually agreed-upon projects. Net cash flows from operating activities for the current year were a result of the net income, stock compensation expense and depreciation expense and changes in current assets and liabilities of $9,429.

 

During the three months ended December 31, 2020, net cash used in operations of $370,700 was a result of our net income and depreciation expenses, offset by the changes in current assets and liabilities of $381,306.

 

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During the three months ended December 31, 2021, there was no investing activities as compared to $4,346 for the comparable prior year period. The net cash outflows during the three months ended December 31, 2020, were a result of the purchase of computers and office equipment.

 

During the three months ended December 31, 2021, and 2020, the Company did not have any cash flow activity from financing activities.

 

The ability to attract additional capital investments for more rapid expansion in the future will depend on many factors, including the availability of credit, rate of revenue growth, ability to acquire new client opportunities, the timing of new service product introductions and enhancements to existing services/products, and the opportunities to acquire complimentary businesses that may be made available to us from time-to-time. We believe that as of December 31, 2021, our cash position and cash flows from our operations will be sufficient to fund our working capital and planned strategic activities, excluding acquisitions, if any, for at least the next twelve months.

 

Any potential future sale of equity or debt securities may result in dilution to our stockholders, and we cannot be certain that additional public or private financing will be available in amounts or on terms acceptable to us, or at all. If we are required to raise additional financing, but are unable to obtain such financing, we may be required to delay, reduce the scope of, or eliminate one or more aspects of our operations or business development activities.

 

The pandemic related to the coronavirus could adversely impact our liquidity and capital resources, especially if our customers are negatively impacted by the decrease in economic activity caused by the virus. If our customers fail to reach budgeted revenue projections and reduce their expenditures proportionally, we could experience lower than expected growth in revenue or lower overall revenue. We could also experience delays or declines in revenue and new business and or implementations of marketing campaigns if customers or potential customers delay or cancel their plans due to the economic slowdown caused by the virus. Additionally, our operations could be impacted, and we could experience higher costs if, despite our mitigation and prevention efforts, the virus spread prevents affected employees from performing key duties.

 

This quarterly report on Form 10-Q contains certain statements that are “forward-looking” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Litigation Reform Act”). These forward-looking statements and other information are based on our beliefs as well as assumptions made by us using information currently available.

 

Off-Balance Sheet Arrangements

 

As of December 31, 2021, we did not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our financial condition, results of operations, liquidity, capital expenditures or capital resources.

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

 

Not applicable.

 

Item 4.

Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

Based on an evaluation under the supervision and with the participation of our management, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act were not effective as of December 31, 2021, to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and (ii) accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. Based on this evaluation, our management concluded that, as of December 31, 2021, our internal control over financial reporting was not effective due to (i) insufficient segregation of duties in the finance and accounting functions due to limited personnel; and (ii) inadequate corporate governance policies. In the future, subject to working capital limitations, we intend to take appropriate and reasonable steps to make improvements to remediate these deficiencies.

 

Changes in Internal Control Over Financial Reporting

 

There have not been any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) under the Exchange Act) during the fiscal period to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

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Part II. Other Information

 

Item1.

Legal Proceedings

 

We are not a party to any legal proceedings, other than ordinary routine litigation incidental to our business, which we believe will not have a material effect on our financial position or results of operations.

 

Item 1A.

Risk Factors

 

Not applicable for smaller reporting companies.

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

None.

 

Item 3.

Defaults Upon Senior Securities

 

None.

 

Item 4.

Mine Safety Disclosures

 

Not Applicable.

 

Item 5.

Other Information

 

None.

 

Item 6.

Exhibits

 

The following exhibits are filed or furnished with this report:

 

Exhibit No.	Description
31.1*	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*	Certification of Principal Financial and Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*	Certification of Principal Executive, Financial and Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS**	Inline XBRL Instance Document
101.SCH**	Inline XBRL Taxonomy Extension Schema
101.CAL**	Inline XBRL Taxonomy Extension Calculation
101.DEF**	Inline XBRL Taxonomy Extension Definitions
101.LAB**	Inline XBRL Taxonomy Extension Label
101.PRE**	Inline XBRL Taxonomy Extension Presentation
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

 

* Included herewith

 

**       XBRL information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

	Mastermind, Inc.
Date: March 1, 2022	By:	/s/ Daniel A. Dodson
		Daniel A. Dodson Chief Executive Officer (Principal Executive, Financial and Accounting Officer)

 

 

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