Table of Contents

Form 10-Q

Part I. Financial Information

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

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

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

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

Mastermind, Inc.

Notes to Consolidated Financial Statements

(unaudited)(Unaudited)

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, 2020.2021.

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. 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, 20202021 and 2019.2020. 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 MarchDecember 31, 2021 vs. MarchDecember 31, 2020

Revenues

Revenues for the three months ended MarchDecember 31, 2021 were $932,753$857,114 as compared with $947,846$1,077,159 for the comparable prior year period, a decrease of $15,093$220,045 or 1.6%20.4%. The decrease is attributable to the timing of project work being completed.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 revenue recognitiondirect expenses are normal occurrences in our business.

Gross Profit

Gross profit for the three months ended MarchDecember 31, 2021 was $628,853$533,457 or 67.4%62.2% of revenues, compared with $578,480$511,857 or 61%47.5% of revenues, for the comparable prior year period. The increase in gross profit dollars andwas 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 duethe Company has more projects with less direct expenses in the three months ended December 31, 2021 compared to the timingsame period of outside direct costs associated with revenue being realized projects.last year. Direct cost includes expenses for media, sponsorship fees, etc.

General and Administrative Expenses

General and administrative expenses for the three months ended MarchDecember 31, 2021 were $579,937$471,246 as compared with $462,492$505,358 for the comparable prior year period, an increasea decrease of $117,445$34,112 or 25.4%6.75%. Over halfThe decrease was primarily as a result of this increase ($65,500) is due to stock- baseddecreases 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 for shares issued to outside consultants for investor relations services and mergers and acquisitions consulting. Taxes and Licenses also increased $32,277.expense of $4,500.

Other Income and Expense

Other income, net for the three months ended MarchDecember 31, 2021 was $195$607 as compared to $199$393 for the comparable prior year period.

SixMonths EndedMarch 31, 2021vs.March 31, 2020

Revenues

Revenues for the six months ended March 31, 2021 were $2,009,912 as compared with $2,014,133 for the comparable prior year period, a decrease of $4,221 or 0.2%. The decrease 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 six months ended March 31, 2021 was $1,140,710 or 56.8% of revenues, compared with $1,240,135 or 61.6% 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 six months ended March 31, 2021 were $1,085,295 as compared with $1,041,552 for the comparable prior year period, an increase of $43,743 or 4.2%. 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 six months ended March 31, 2021 was $588, compared to other expenses, net of $9,508 for the comparable prior year period. 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 MarchDecember 31, 2021, we had cash of $470,884, a decrease$1,141,070, an increase of $336,378$65,882 when compared with a balance of $807,262$1,075,188 as of September 30, 2020.2021.

During the sixthree months ended MarchDecember 31, 2021, we used $329,212 in$65,882 was provided by operating activities as compared with net cash provided byused in operating activities of $45,344$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 offset byand changes in current assets and liabilities of $446,630.$9,429.

During the sixthree months ended MarchDecember 31, 2020, net cash provided byused in operations of $45,344$370,700 was a result of our net income and depreciation expenses, partially offset by the changes in current assets and liabilities of $112,803.$381,306.

During the sixthree months ended MarchDecember 31, 2021, we had net cash of $7,166 used inthere was no investing activities as compared to $5,241$4,346 for the comparable prior year period. The net cash outflows during the sixthree months ended MarchDecember 31, 2021, and 2020, arewere a result of the purchase of computers and office equipment.

During the sixthree months ended MarchDecember 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 MarchDecember 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 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.

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 MarchDecember 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.

Not applicable.

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 MarchDecember 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 MarchDecember 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.

Part II. Other Information

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.

With the exception of risk factors disclosed in Item 8.01 of our Form 8-K as filed with the Securities and Exchange Commission on April 15, 2020, there have not been any material changes from the risk factors previously disclosed under Item 2.01 of our Current Report on Form 8-K as filed with the Securities and Exchange Commission on February 22, 2018, as amended on April 20, 2018.Not applicable for smaller reporting companies.

The risk factor disclosed in Item 8.01 of our Form 8-K as filed with the Securities and Exchange Commission on April 15, 2020 was as follows:

A pandemic, epidemic or outbreak of an infectious disease in the markets in which we operate or that otherwise impacts our employees, facilities, or advisors could adversely impact our business and financial reporting process.

On January 4, 2021, the Company issued 235,000 shares of common stock pursuant to a consulting agreement.

On January 4, 2021, the Company issued 100,000 shares of common stock pursuant to a consulting agreement.

On January 4, 2021, the Company issued 300,000 shares of common stock pursuant to a consulting agreement.

The Company issued the foregoing securities in reliance on an exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended, and/or Rule 506(b) promulgated thereunder, as there was no general solicitation to the investors and the transactions did not involve a public offering.None.

None.

Not Applicable.

None.

The following exhibits are filed or furnished with this report:

* Included herewith

**       Filed with this report in accordance with Rule 406TXBRL information is furnished and not filed or a part of Regulation S-T, the information in these exhibits shall not be deemed to be “filed”a registration statement or prospectus for purposes of Section 18sections 11 or 12 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, exceptis deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as expressly set forth by specific reference in such filing.amended, and otherwise is not subject to liability under these sections.

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.