mmnd20210630

10-Q 1 mmnd20210630_10q.htm FORM 10-Q mmnd20210630_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2021

☐ 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)

(678) 420-4000

(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 August 23, 2021, there were 34,505,520 shares of the registrant’s Common Stock outstanding.

Mastermind, Inc.

Table of Contents

Form 10-Q

		Page
Part I	Financial Information

Item 1	Condensed Consolidated Financial Statements (unaudited)
	Condensed Consolidated Balance Sheets at June 30, 2021 and September 30, 2020	3
	Condensed Consolidated Statements of Operations for the three and nine months ended June 30, 2021 and 2020	4
	Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended June 30, 2021 and 2020	5
	Consolidated Statements of Cash Flows for the nine months ended June 30, 2021 and 2020	6
	Notes to Consolidated Financial Statements	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	16
Item 4	Controls and Procedures	16

Part II	Other Information

Item 1	Legal Proceedings	16
Item 1A	Risk Factors	16
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	16
Item 3	Defaults Upon Senior Securities	16
Item 4	Mine Safety Disclosures	16
Item 5	Other Information	16
Item 6	Exhibits	17

Signatures		18

Part I. Financial Information

Item 1.

Consolidated Financial Statements (unaudited)

Mastermind, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

	June 30,		September 30,
	2021		2020

ASSETS
Current assets:
Cash and cash equivalents	$	1,120,472	$	807,262
Accounts receivable		422,571		747,472
Unbilled receivables		539,362		40,019
Prepaid expenses and other		130,385		173,424
Income tax receivable		117,710		117,710
Total current assets		2,330,500		1,885,887
Right-of-use asset, net		288,251		364,714
Property and equipment, net		58,455		65,828
Total assets	$	2,677,206	$	2,316,429

LIABILITY AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	41,474	$	123,216
Accounts payable and accrued expenses, related party		-		100,000
Unearned revenues		-		82,450
Deferred tax liabilities		210,351		169,452
Lease obligation, current		106,805		102,499
Total current liabilities		358,630		577,617
Lease obligation, net of current portion		181,446		262,215
Notes payable		478,538		301,750
Total liabilities		1,018,614		1,141,582

Stockholders' Equity:
Preferred stock, $0.001 par value; 1,000,000 shares authorized; no shares issued and outstanding as of June 30, 2021 and September 30, 2020		-		-
Common stock, $0.001 par value, 125,000,000 shares authorized, 34,505,520 and 33,870,520 shares issued and outstanding as of June 30, 2021 and September 30, 2020		34,506		33,871
Common stock to be issued; 45,000 shares June 30, 2021		45		-
Additional paid in capital		67,320		-
Retained earnings		1,556,721		1,140,976
Total stockholders’ equity		1,658,592		1,174,847
Total liabilities and stockholders’ equity	$	2,677,206	$	2,316,429

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

Mastermind, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)

	Three months ended June 30,					Nine months ended June 30,
	2021		2020			2021		2020
Revenues	$	895,175	$	862,246		$	2,905,087	$	2,876,379
Cost of revenues		299,119		204,427			1,168,321		978,425
Gross Profit		596,056		657,819			1,736,766		1,897,954

Operating Expenses:
General and administrative		496,797		515,323			1,582,092		1,556,875
Total operating expenses		496,797		515,323			1,582,092		1,556,875
Income from operations		99,259		142,496			154,674		341,079

Other Income (Expense), Net:
Interest income		382		492			970		1,089
Loss on disposal of equipment		-		-			-		(660	)
Other expense		-		(2,500	)		-		(11,945	)
Gain on PPP loan forgiveness		301,750		-			301,750		0
Total other income (expense), net		302,132		(2,008	)		302,720		(11,516	)

Net income before provision for income taxes		401,391		140,488			457,394		329,563
Provision for income taxes		26,508		35,122			41,649		80,575
Net Income	$	374,883	$	105,366		$	415,745	$	248,988

Net income per common share:
Basic	$	0.01	$	0.00		$	0.01	$	0.01
Diluted	$	0.01	$	0.00		$	0.01	$	0.01

Weighted average common shares outstanding:
Basic		34,505,520		33,870,520			34,282,223		33,870,520
Diluted		34,505,520		33,870,520			34,282,223		33,870,520

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

Mastermind, Inc.

Condensed Consolidated Statements of Stockholders' Equity

Nine Months Ended June 30, 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, 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

Shares of common stock issued and to be issued for services		635,000		635		45,000		45		67,320		-		68,000

Net income		-		-		-		-		-		36,123		36,123
Balance March 31, 2021		34,505,520		34,506		45,000		45		67,320		1,181,838		1,283,709
Net income		-		-		-		-		-		374,883		374,883
Balance June 30, 2021		34,505,520	$	34,506		45,000	$	45	$	67,320	$	1,556,721	$	1,658,592



Balance at September 30, 2019		33,870,520	$	33,871		-	$	-	$	-	$	999,803	$	1,033,674
Net income		-		-								49,474		49,474
Balance at December 31, 2019		33,870,520		33,871		-		-		-		1,049,277		1,083,148
Net income		-		-		-		-		-		94,148		94,148
Balance March 31, 2020		33,870,520		33,871		-		-		-		1,143,425		1,177,296
Net income		-		-		-		-		-		105,366		105,366
Balance June 30, 2020		33,870,520	$	33,871		0	$	0	$	0	$	1,248,791	$	1,282,662

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

Mastermind, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)

	Nine Months Ended June 30,
	2021			2020
Cash flows from operating activities:
Net income	$	415,745		$	248,988
Adjustments to reconcile net income to net cash flows from operating activities:
Gain on PPP loan forgiveness		(301,750	)		-
Stock compensation expense		65,500			-
Depreciation		16,354			20,560
Loss on disposal of equipment		-			660
Changes in assets and liabilities:
Accounts receivable		324,901			(111,274	)
Unbilled receivables		(499,343	)		(43,424	)
Income tax receivable		-			-
Prepaid expenses and other current assets		45,539			(176,167	)
Accounts payable and accrued expenses		(81,743	)		(29,628	)
Accounts payable and accrued expenses, related		(100,000	)		-
Unearned revenues		(82,450	)		(131,353	)
Deferred tax liabilities		40,899			74,240
Net cash flows used in operating activities		(156,348	)		(147,398	)

Cash flows from investing activities:
Purchases of property and equipment		(8,980	)		(5,241	)
Net cash flows used in investing activities		(8,980	)		(5,241	)

Cash flows from financing activities:
Proceeds from PPP note payable		478,538			301,750
Net cash flows provided by financing activities		478,538			301,750

Net change in cash and cash equivalents		313,210			149,111
Cash and cash equivalents at beginning of period		807,262			742,173
Cash and cash equivalents at end of period	$	1,120,472		$	891,284

Supplemental disclosure of cash flow information:
Income taxes paid	$	-		$	-
Interest paid	$	-		$	-

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

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 and NINE months ended June 30, 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, 2020 and 2019 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.

There have been no material changes in the Company’s significant accounting policies during the quarter ended June 30, 2021, other than as described below, as compared to the significant accounting policies described in the Company’s Annual Report on Form 10-K for the year ended September 30, 2020.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) in order to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet for those leases classified as operating leases under prior accounting guidance. ASU 2016-02 requires that a lessee should recognize a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term on the balance sheet. We adopted ASU 2016-02 in the quarter ending December 31, 2019, utilizing the modified retrospective transition method on October 1, 2019. We have elected the package of practical expedients, which allows the Company not to reassess (1) whether any expired or existing contracts as of the adoption date are or contain a lease, (2) lease classification for any expired or existing leases as of the adoption date, (3) initial direct costs for any existing leases as of the adoption date and (4) the application of hindsight when determining lease term and assessing impairment of right-of-use assets. The adoption of the new standard on October 1, 2019, resulted in a lease obligation and related right-of-use asset of approximately $461,740. The impact on the statement of operations was not material.

The recently declared 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 stockholders and its 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 $2,170,000 over the calendar years from 2019 through 2039 with no further payments required after December 31, 2039. The Company recorded expenses related to the license of $15,000 and $45,000, for the three and nine months ended June 30, 2021, respectively, and $15,000 and $45,000 for the three and nine months ended June 30, 2020, respectively. As of June 30, 2021, and September 30, 2020, there were no license fee payments required or payable.

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. In connection with the Lease, we have entered into a sublease agreement which provides for the sublease of 9,000 square feet of the total 15,000 of the demised property. The sublessor is not a related party. 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. In satisfaction of our obligation to the Landlord pursuant to the Lease, we made lease payments, net of payments made by the sublessee, of $30,000 and $90,000 during the three and nine months ended June 30, 2021 and 2020, respectively.

During the three and nine months ended June 30, 2021, we made payments to our Majority Stockholders pursuant to the terms of an operating agreement, as amended, for services rendered to us in the aggregate amount of $150,225 and $450,675, respectively. During the three and nine months ended June 30, 2020, the payments were $246,113 and $656,563, respectively. As of June 30, 2021, and September 30, 2020, we owed $-0- and $100,000, respectively, to our three majority stockholders for consulting services. The amounts are included in accounts payable and accrued expenses, related parties on the condensed consolidated balance sheets herein.

4.	Property and Equipment

Property and equipment consist of the following:

	June 30,			September 30,
	2021			2020
Furniture, fixtures and office equipment	$	139,579		$	130,598
Leasehold improvements		73,795			73,795
Property and equipment, gross		213,374			204,393
Less: accumulated depreciation		(154,919	)		(138,565	)
Property and equipment, net	$	58,455		$	65,828

Depreciation expense for the nine months ended June 30, 2021 and 2020 was $16,354 and $20,560, 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 $45,000 for the three and nine months ended June 30, 2021, respectively, and $15,000 and $45,000 for the three and nine months ended June 30, 2020, respectively. Included in prepaid expenses as of June 30, 2021 and September 30, 2020, is $30,000 and $15,000, respectively, of which $15,000 will be expensed per quarter from the dates thereof.

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

Period ending	Amount
Fiscal year ending September 30, 2022	$	60,000
Fiscal year ending September 30, 2022		60,000
Fiscal year ending September 30, 2023		60,000
Fiscal year ending September 30, 2024		60,000
Fiscal year ending September 30, 2025		60,000
Thereafter		1,620,000
	$	1,920,000

6.	Notes Payable- PPP loan

In April 2020, the Company received a loan pursuant to the Paycheck Protection Program under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), as administered by the U.S. Small Business Administration (the “SBA”). The loan is in the principal amount of $301,750 (the “PPP Loan”). The PPP loan was forgiven in June 2021 and the Company recognized a gain on PPP loan forgiveness in Other Income for the three and nine months ended June 30, 2021.

In April 2021, the Company received a loan pursuant to the Paycheck Protection Program under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), as administered by the U.S. Small Business Administration (the “SBA”). The loan is in the principal amount of $478,538 (the “2^nd PPP Loan”).

The 2^nd PPP Loan matures on the two-year anniversary of the funding date and bears interest at a fixed rate of 1.00% per annum. Monthly principal and interest payments, less the amount of any potential forgiveness (discussed below), will commence after the six-month anniversary of the funding date. The Company did not provide any collateral or guarantees for the 2^nd PPP Loan, nor did the Company pay any facility charge to obtain the 2^nd PPP Loan. The Promissory Note provides for customary events of default, including, among others, those relating to failure to make payment, bankruptcy, breaches of representations and material adverse effects. The Company may prepay the principal of the 2^nd PPP Loan at any time without incurring any prepayment charges.

All or a portion of the 2^nd PPP Loan may be forgiven by the SBA and the Lender upon application by the Company. Under the CARES Act, loan forgiveness is available for the sum of documented payroll costs, covered rent payments, and covered utilities during the eight-week period or twenty-four week period beginning on the funding date of the 2^nd PPP Loan. For purposes of the CARES Act, payroll costs exclude compensation of an individual employee in excess of $100,000, prorated annually. Not more than 40% of the forgiven amount may be for non-payroll costs. Forgiveness is reduced in certain cases if full-time equivalent headcount declines, or if salaries and wages for employees with salaries of $100,000 or less annually are reduced by more than 25%. Although the Company currently believes that its use of the 2^nd PPP Loan will meet the conditions for forgiveness of the loan, the Company cannot assure that the 2^nd PPP Loan will be forgiven, in whole or in part.

7.	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 and nine months ended June 30, 2021, we made lease payments of $30,000 and $90,000, respectively, and for three and nine months ended June 30, 2020, we made lease payments of $30,000 and $90,000, 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:

Period	Total Lease Commitment		Expected Lease Commitment
Three months ending fiscal year September 30, 2021	$	88,500	$	30,000
Fiscal year ending September 30, 2022		363,000		120,000
Fiscal year ending September 30, 2023		384,000		120,000
Fiscal year ending September 30, 2024		97,500		30,000
	$	933,000	$	300,000

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.

8.	Income Taxes

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.

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.

There were no unrecognized tax benefits at June 30, 2021 and September 30, 2020. 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.

9.	Stockholders’ Equity

Preferred Stock

As of June 30, 2021, and September 30, 2020, 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 June 30, 2021 and September 30, 2020.

Common Stock

As of June 30, 2021, and September 30, 2020, we were authorized to issue a total of 125,000,000 shares of common stock. During the nine months ended June 30, 2021, the Company issued in the aggregate 635,000 shares of restricted common stock to three consultants. As of June 30, 2021, and September 30, 2020, there were 34,505,520 and 33,870,520 shares of common stock issued and outstanding, respectively.

Dividends

During the nine months ended June 30, 2021 and 2020, there were no dividends declared or paid.

Common Stock Options

As of June 30, 2021, and September 30, 2020, 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 nine months ended June 30, 2021 and 2019.

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 June 30, 2021 and September 30, 2020.

10.

Concentration of Credit Risk and Major Customers

For the three months ended June 30, 2021, three clients represented approximately 28%, 16%, 15% and 15%, respectively, of our total revenues. For the nine months ended June 30, 2021, two customers represented approximately 14% and 12%, respectively, of our total revenues. For the three months ended March 31, 2021, three customers represented approximately 20%, 17% and 15%, respectively of our outstanding accounts receivable.

For the three months ended June 30, 2020, five clients represented approximately 20%, 17%, 16%, 14% and 14%, respectively, of our total revenues. For the nine months ended June 30, 2020, four clients represented approximately 16%, 15%, 13% and 10%, respectively, of our total revenues.

11.

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 condensed consolidated financial statements presented herein.

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, 2020.

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. Our senior executives Daniel Dodson (CEO), Michael Gelfond (President), and Ricardo Rios (SVP) have developed solid reputations and contacts over their careers that will be instrumental in driving new business (see below for bios on these officers).

Mastermind Key Leadership

Daniel Dodson, CEO and founding partner of Mastermind Marketing in 1984. Under his leadership, Mastermind has grown into a nationally-recognized, award-winning integrated digital marketing agency that ranks at the top of both Ad Age's and Chief Marketer's top agencies. Dan is a renowned expert in Involvement Marketing -- leveraging social, mobile, digital and promotion to get more people involved with the right brand benefits at the right time to drive revenue and deliver measurable ROI. He has been published in numerous trade publications and spoken about Involvement Marketing on dozens of occasions.

Dan has a wealth of experience working with leading brands in almost every industry including 7/11, AT&T, Bank of America, Bayer, BMW, Chase, Chick-fil-A, Ciba Vision, Citi, Coors Brewing Company, The Coca-Cola Company, Dreyer's, ESPN, Fruit-of-the-Loom, Georgia Pacific, Hanes, Harley-Davidson, Harman, The Home Depot, Johnson & Johnson, Kodak, Kroger, Macy's, Mazda, MTV, Nabisco, NBC, Nestle, Roche, Saks 5th Avenue, Sears, Sharp Electronics, Shell, UPS, Valvoline, Verizon, and many others.

Prior to Mastermind, Dan was a certified public accountant at HLB Gross Collins, P.C. where he worked on a variety of manufacturing and service businesses.

Michael Gelfond, President, is recognized leader in digital marketing with a deep experience helping clients drive results for clients.

After graduating from the UGA in 1995 Gelfond started his career with iXL, one of the first global digital agencies. After a successful IPO, Mike and other colleagues saw an opportunity to spin-off the Atlanta operations private and launched Creative Digital Group in 2002. After building Creative Digital into one of the Southeast’s fastest-growing interactive agencies, they were acquired by LBi, the world’s premier independent global digital agency, in 2007. After pioneering this successful venture, Gelfond left LBi in the summer of 2010 and joined Mastermind Marketing, the Southeast’s leading social, mobile, digital and promotion agency as EVP and Partner.

During his career Mike has helped guide some of the world’s most well-known brands such as ATT, Bayer, Coca-Cola, ING, Pebble Beach Resorts, Roche, The Home Depot and The NFL Network, to name a few. He is a frequent speaker and contributor to National and Southeast TV, radio and print on all matters digital. In 2010, Mike was a recipient of Atlanta Business Chronicle’s 40 Under 40 award.

Ricardo Rios, Senior VP, has been with Mastermind for 3 years. He is results-driven, versatile traditional and digital marketing executive with a strong business background and 19 years of agency and client-side experience with clients including Citi, Harley-Davidson, PayPal, The Home Depot, Exxon, and others.

Prior to Mastermind, Ricardo was Vice President of Digital Marketing for Citi Retail Services, a division of Citigroup.

During his time at Citi, he successfully built out a digital consultancy function that provided key marketing services to Citi’s retail partners including The Home Depot, Macy’s, Best Buy, Staples and other major retailers. He started his career with an Agency start-up and was recognized as part of the “Top 25 WSI Consultant Earners List” from a network of over 1500 digital marketing consultants worldwide.

Ryan Wofford, VP Strategy, leads strategic planning for Mastermind across a variety of disciplines, including brand strategy and communications, UX, analytics, as well as social and digital strategy. He has been with Mastermind for almost 4 years and is a seasoned strategic marketing leader with two decades of experience, delivering conversions and measurable results for Fortune 500 global companies and small businesses alike. Ryan has developed and executed marketing strategies to help clients achieve business goals and communication objectives through digital execution that increased sales pipelines and conversions, strengthened brand awareness and loyalty, and positioned companies as thought leaders within their industries.

Ryan has lead development of social and key event activation strategies and executions for clients like Bayer Crop Science's corporate and marketing communications groups for the past two years. In addition to the always-on social strategy, key campaigns he has helped lead include Feed A Bee, Thankful 4 Ag, Citrus Matters and more. Ryan also leads social media strategic planning for Bayer’s Animal Health division in the US, which includes their key social campaigns like Share for Shelters, and PAWS – these campaigns help raise awareness of the lack of domestic abuse shelters that can accept survivors of domestic abuse and their pets.

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, 2020 and 2019. 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 June 30, 2021 vs. June 30, 2020

Revenues

Revenues for the three months ended June 30, 2021 were $895,175 as compared with $862,246 for the comparable prior year period, an increase of $32,929 or 3.8%. The increase is attributable to the timing of project work being completed. These fluctuations in work accomplished for revenue recognition are normal occurrences in our business.

Gross Profit

Gross profit for the three months ended June 30, 2021 was $596,056 or 66.6% of revenues, compared with $657,819 or 76.3% of revenues, for the comparable prior year period. The decrease in gross profit dollars and gross margin percentage is primarily due to the timing of outside direct costs associated with revenue being realized projects. Direct cost includes expenses for media, sponsorship fees, etc.

General and Administrative Expenses

General and administrative expenses for the three months ended June 30, 2021 were $496,797 as compared with $515,323 for the comparable prior year period, a decrease of $18,526 or 3.6%. The lower expenses were primarily attributable to lower personnel expenses in the comparable period of a year earlier.

Other Income and Expense

Other income, net for the three months ended June 30, 2021 was $302,132 as compared to other expense of $2,008 for the comparable prior year period. The current period includes a gain on PPP loan forgiveness of $301,750.

Nine Months Ended June 30, 2021 vs. June 30, 2020

Revenues

Revenues for the nine months ended June 30, 2021 were $2,905,087 as compared with $2,876,379 for the comparable prior year period, an increase of $28,708 or 1%. The increase is attributable to the timing of project work being completed. These fluctuations in work accomplished for revenue recognition are normal occurrences in our business.

Gross Profit

Gross profit for the nine months ended June 30, 2021 was $1,736,766 or 60% of revenues, compared with $1,897,954 or 66% of revenues, for the comparable prior year period. The decrease in gross profit dollars and the gross margin percentage is primarily due to the timing of outside direct costs associated with revenue being realized projects. Direct cost includes expenses for media, sponsorship fees, etc.

General and Administrative Expenses

General and administrative expenses for the nine months ended June 30, 2021 were $1,582,092 as compared with $1,556,875 for the comparable prior year period, an increase of $25,217 or 1.6%. Our general and administrative expenses increased primarily as a result of $65,500 for stock-based compensation expenses related to shares issued to consultants. This increase was partially offset by reduced general and administrative costs.

Other Income and Expense

Other income, net, for the nine months ended June 30, 2021, was $302,720, compared to other expenses, net of $11,516 for the comparable prior year period. Other income, net, for the nine months ended June 30, 2021, includes $301,750 related to the gain on the PPP loan forgiveness. The prior year expenses were primarily related to merger and acquisitions or related activities, and minimal losses on disposal of equipment as well as minimal interest income.

Liquidity and Capital Resources

As of June 30, 2021, we had cash of $1,120,472, an increase of $313,210 when compared with a balance of $807,262 as of September 30, 2020.

During the nine months ended June 30, 2021, we used $156,348 in operating activities as compared to $147,398 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 offset by the gain on the PPP loan forgiveness and changes in current assets and liabilities of $352,197.

During the nine months ended June 30, 2020, net cash used in operations of $147,398 was a result of our net income and depreciation expenses, offset by the changes in current assets and liabilities of $417,606.

During the nine months ended June 30, 2021, we had net cash of $8,980 used in investing activities as compared to $5,241 for the comparable prior year period. The net cash outflows during the nine months ended June 30, 2021, and 2020 are a result of the purchase of computers and office equipment.

During the nine months ended June 30, 2021, and 2020, the Company received $478,538 and $301,750, respectively. Both amounts were related to amounts received under the Paycheck Protection Program.

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 June 30, 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 recently declared 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.

Off-Balance Sheet Arrangements

As of June 30, 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 June 30, 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 June 30, 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.

Part II. Other Information

Item1.

Legal Proceedings

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	Inline Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

* Included herewith

** Filed with this report in accordance with Rule 406T of Regulation S-T, the information in these exhibits shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act or otherwise subjected to liability under that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, except as expressly set forth by specific reference in such filing.

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: August 23, 2021

By:

/s/ Daniel A. Dodson

Daniel A. Dodson

Chief Executive Officer

(Principal Executive, Financial and Accounting Officer)