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 anyone, 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.
13
Table of Contents
Mastermind has worked with some of the most 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.
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. 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, 2022 vs. June 30, 2021
Revenues
Revenues for the three months ended June 30, 2022 were $1,456,013 as compared
with $895,175 for the comparable prior year period, an increase of $560,838 or
62.7%. The increase is attributable to increased work from clients and also 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 June 30, 2022 was $1,063,395 or 73% of
revenues, compared with $596,056 or 66.6% of revenues, for the comparable prior
year period. The increase in gross profit dollars was a result of higher
revenues, including higher gross margins in the current period. The increase in
gross margin percentage is primarily a result of the Company having more
projects with lower direct expenses in the three months ended June 30, 2022,
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 June 30, 2022
were $615,599 as compared with $496,797 for the comparable prior year period, an
increase of $118,802 or 23.9%. The increase was primarily a result of increases
in management consulting fees of $124,500, professional fees (including public
company expenses) of $56,208 and other general and administrative costs of
$2,000, partially offset by decreases in freelance subcontract expenses of
$64,655.
Other Income and Expense
Other income, net for the three months ended June 30, 2022, was $930 as compared
to $302,132 for the comparable prior year period, which includes a gain on PPP
loan forgiveness of $301,750.
Provision for Income Tax
Provision for income tax for the three months ended June 30, 2022, was $114,839
as compared to $26,508 for the comparable prior year period. The increase is
primarily due to an increase in net income from operations of $348,537 as
compared to the same prior year period. Provision for income tax is estimated
quarterly applying both federal and state tax rates.
14
Table of Contents
Nine Months Ended June 30, 2022 vs. June 30, 2021
Revenues
Revenues for the nine months ended June 30, 2022, were $3,391,045 as compared
with $2,905,087 for the comparable prior year period, an increase of $485,958 or
16.7%. The increase is attributable to the volume and timing of project work
being completed, increased work from clients, 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 nine months ended June 30, 2022, was $2,273,732 or 67% of
revenues, compared with $1,736,766 or 60% of revenues, for the comparable prior
year period. The increase in gross profit dollars was a result of higher margins
in the current period. The increase in gross margin percentage is primarily a
result of the Company having more projects and lower direct expenses on those
projects in the nine months ended June 30, 2022, 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 nine months ended June 30, 2022,
were $1,707,590 as compared with $1,582,092 for the comparable prior year
period, an increase of $125,498 or 7.9%. The increase was primarily as a result
of increases on management consulting fees of $226,000 and professional fees
(including public company expenses) of $77,927, partially offset by decreases in
freelance subcontract expenses, and other general and administrative costs of
$178,658.
Other Income and Expense
Other income, net for the nine months ended June 30, 2022, was $2,239 as
compared to $302,720 for the comparable prior year period, which includes a gain
on PPP loan forgiveness of $301,750.
Provision for Income Tax
Provision for income tax for the nine months ended June 30, 2022, was $118,814
as compared to $41,649 for the comparable prior year period. The increase is
primarily due to an increase in net income from operations of $411,468 as
compared to the same prior year period. Provision for income tax is estimated
quarterly applying both federal and state tax rates.
Liquidity and Capital Resources
As of June 30, 2022, we had cash of $1,973,504, an increase of $898,316, or 84%
when compared with a balance of $1,075,188 as of September 30, 2021.
During the nine months ended June 30, 2022, $906,836 was provided by operating
activities as compared with net cash used in operating activities of $156,348
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 $308,052.
During the nine months ended June 30, 2021, we used $156,348 in operating
activities, which 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 $393,096.
During the nine months ended June 30, 2022, and 2021, net cash used in investing
activities were $8,520 and $8,980, respectively, and were a result of the
purchase of computers and office equipment.
During the nine months ended June 30, 2022, the Company did not have any cash
flow activity from financing activities and June 30, 2021, we received $478,538
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, 2022, 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.
15
Table of Contents
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 ongoing pandemic related issues from 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 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 June 30, 2022, 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.
© Edgar Online, source Glimpses
MASTERMIND, INC. 
