MASTERMIND, INC. - Quarter Report: 2019 June (Form 10-Q)

mmnd20190630_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, 2019

☐ 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:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, $0.001 par value per share	MMND	OTCQB

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, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and smaller reporting 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 19, 2019, there were 33,870,520 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, 2019 and September 30, 2018	3
	Condensed Consolidated Statements of Operations for the three and nine months ended June 30, 2019 and 2018	4
	Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended June 30, 2019 and 2018	5
	Condensed Consolidated Statements of Cash Flows for the nine months ended June 30, 2019 and 2018	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11
Item 3	Quantitative and Qualitative Disclosures About Market Risk	15
Item 4	Controls and Procedures	15

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	16

Signatures		17

Part I. Financial Information

Item 1. Condensed Consolidated Financial Statements (unaudited)

Mastermind, Inc.

Condensed Consolidated Balance Sheets

(unaudited)

	June 30, 2019		September 30, 2018
ASSETS
Current assets:
Cash and cash equivalents	$	432,268	$	861,371
Accounts receivable		1,468,515		1,146,312
Unbilled receivables		303,478		-
Advance to related party		-		6,589
Prepaid expenses and other current assets		129,672		23,611
Total current assets		2,333,933		2,037,883
Property and equipment, net		84,850		92,685
Total assets	$	2,418,783	$	2,130,568

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	74,991	$	123,862
Unearned revenues		-		109,363
Deferred tax liabilities		180,990		109,724
Total current liabilities		255,981		342,949
Total liabilities		255,981		342,949

Stockholders’ Equity:
Series B Preferred stock, $0.001 par value; 1,000,000 shares authorized; no shares issued and outstanding as of June 30, 2019 and September 31, 2018, respectively		-		-
Common stock, $0.001 par value, 125,000,000 shares authorized, 33,870,520 shares issued and outstanding as of June 30, 2019 and September 30, 2018		33,871		33,871
Retained earnings		2,128,931		1,753,748
Total stockholders’ equity		2,162,802		1,787,619
Total liabilities and stockholders’ equity	$	2,418,783	$	2,130,568

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,
	2019		2018			2019		2018

Revenues	$	1,257,119	$	1,460,050		$	3,949,398	$	3,670,474
Cost of revenues		198,719		296,610			544,136		532,030
Gross profit		1,058,400		1,163,440			3,405,262		3,138,444

Operating Expenses:
General and administrative		962,229		792,494			2,893,321		2,458,222
Total operating expenses		962,229		792,494			2,893,321		2,458,222
Income from operations		96,171		370,946			511,941		680,222

Other Income (Expense), Net:
Merger costs		-		-			-		(50,000	)
Interest (expense) to related party, net of interest income		451		(22,007	)		2,008		(30,606	)
Total other income (expense)		451		(22,007	)		2,008		(80,606	)
Net income before provision for income taxes		96,622		348,939			513,949		599,616
Provision for income taxes		30,860		68,980			138,766		117,736
Net income	$	65,762	$	279,959		$	375,183	$	481,880

Net income per common share:
Basic	$	0.00	$	0.01		$	0.01	$	0.02
Diluted	$	0.00	$	0.01		$	0.01	$	0.02

Weighted average common shares outstanding:
Basic		33,870,520		31,579,672			33,870,520		30,388,799
Diluted		33,870,520		33,870,520			33,870,520		31,553,640

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

Mastermind, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

For the Three and Nine Months Ended June 30, 2019 and 2018

	Common Stock
	Shares		Amount		Additional Paid-in Capital		Retained Earnings		Total Equity
Balance at September 30, 2018		33,870,520	$	33,871	$	-	$	1,753,748	$	1,787,619
Net income								65,473		65,473
Balance at December 31, 2018		33,870,520		33,871		-		1,819,221		1,853,092
Net income								243,948		243,948
Balance at March 31, 2019		33,870,520		33,871		-		2,063,169		2,097,040
Net income								65,762		65,762
Balance at June 30, 2019		33,870,520	$	33,871	$	-	$	2,128,931	$	2,162,802

	Common Stock
	Shares		Amount		Additional Paid-in Capital		Retained Earnings			Total Equity
Balance at September 30, 2017		29,236,759	$	29,237	$	-	$	943,457		$	972,694
Distributions								(100,000	)		(100,000	)
Net income								73,352			73,352
Balance at December 31, 2017		29,236,759		29,237		-		916,809			946,046
Effect of merger transaction		4,633,761		4,634				(18,902	)		(14,268	)
Net income								142,836			142,836
Balance at March 31, 2018		33,870,520		33,871		-		1,040,743			1,074,614
Net income								279,959			279,959
Balance at June 30, 2018		33,870,520	$	33,871	$	-	$	1,320,702		$	1,354,573

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

	Nine Months Ended June 30,
	2019			2018
Cash flows from operating activities:
Net income (loss)	$	375,183		$	481,880
Adjustments to reconcile net income (loss) to net cash flows provided by operating activities
Depreciation		21,974			21,556
Changes in assets and liabilities:
Accounts receivable		(322,203	)		(179,489	)
Unbilled receivables		(303,478	)		-
Prepaid expenses and other current assets		(106,061	)		20,421
Accounts payable and accrued expenses		(48,871	)		(40,098	)
Unearned revenues		(109,363	)		46,065
Deferred tax liabilities		71,266			-
Net cash flows (used in) provided by operating activities		(421,553	)		350,335

Cash flows from investing activities:
Purchase of equipment		(14,139	)		(14,540	)
Net cash flows used in investing activities		(14,139	)		(14,540	)

Cash flows from financing activities:
Repayment of related party note		-			(212,290	)
Collection (repayment) of related party advance		6,589			(13,487	)
Distributions		-			(100,000	)
Net cash flows provided by (used in) financing activities		6,589			(325,777	)
Net change in cash and cash equivalents		(429,103	)		10,018
Cash and cash equivalents at beginning of period		861,371			545,904
Cash and cash equivalents at end of period	$	432,268		$	555,922

Supplemental disclosure of cash flow information:
Income taxes paid	$	-		$	101,250
Interest paid to related party	$	-		$	30,606

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

Mastermind, Inc.

Notes to Condensed 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.

On February 14, 2018, we consummated a transactions pursuant to a Joint Venture Interest Contribution Agreement (the “Contribution Agreement”) made and entered into as of February 14, 2018 by and among (i) us, (ii) Mastermind Involvement Marketing, a Georgia joint venture (“MIM”), and (iii) Mastermind Marketing, Inc, a Georgia Corporation (“MM Inc.”), Digital Advize, LLC, a Georgia limited liability company (“Advize”), and Villanta Corporation, a Georgia Corporation (“Villanta”, together with Advize and MM Inc., the “Sellers” or “Majority Stockholders”).

Pursuant to the Contribution Agreement the Sellers contributed, transferred, assigned and conveyed to us all right, title and interest in and to one hundred percent (100%) of such joint venture interest in MIM (the “Contributed Joint Venture Interest”), together with any and all rights, privileges, benefits, obligations and liabilities appertaining thereto, reserving unto such Seller no rights or interests therein whatsoever, and (ii) we accepted the contribution of the Contributed Joint Venture Interest, and in consideration for such contribution the Sellers collectively were entitled to receive from us 29,236,759 of our common stock, $.001 par value (the “Common Stock”) representing 85% of our total outstanding Common Stock after the issuance of the Contribution Consideration (the “Contribution Consideration”) with each Seller receiving for its respective percentage of Contributed Joint Venture Interest that same percentage of the Contribution Consideration (such transaction, the “Business Combination”). As a result of the Business Combination, the Sellers became our controlling shareholders of and we became a wholly-owned subsidiary. The Business Combination was treated as a “reverse acquisition” for accounting purposes, whereby MIM is considered the acquirer for accounting purposes, and our historical financial statements before the Business Combination will be replaced with the historical financial statements of MIM and its consolidated entities before the Business Combination in all future filings.

On April 19, 2018, our Board of Directors took action by written consent to approve an amendment to our certificate of incorporation (the “Amended Certificate”) to change of our name from CoConnect, Inc. to Mastermind, Inc. (the “Name Change”), subject to stockholder approval. On April 27, 2018, in lieu of a meeting of our stockholders, and pursuant to Section 78.320 of the Nevada Revised Statutes of the State of Nevada, the Majority Stockholders, who represent 85% of our voting securities, approved the Amended Certificate, by written consent. On May 24, 2018, we filed the Certificate of Amendment with the Secretary of State of the State of Nevada to change our name to Mastermind, Inc.

2.	Interim Financial Statements and Basis of Presentation

The accompanying unaudited condensed 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 condensed 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 condensed 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, 2019 may not necessarily be indicative of results that may be expected for any succeeding period or for the entire fiscal year. These condensed 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, 2018 and 2017 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 condensed 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.

We adopted the Accounting Standard Codification (“ASC”) 606, “Revenue from Contracts with Customers” as of October 1, 2018, using the modified retrospective method, and concluded that, consistent with prior reporting, our revenues are primarily generated from our involvement marketing services and contracts which are typically billed based on time and materials or at a fixed price. If billed at a fixed price, revenue is recognized on a proportional performance basis as the services specified in the arrangement are performed. The determination of proportional performance revenue recognition is dependent on the nature of the services specified in the arrangement. Advanced payments on services and contracts are deferred and recorded as unearned revenues on our balance sheet until the earnings process has been completed and revenue is then recognized. In all cases, we evaluate involvement marketing contracts to determine that the time and amount of services reflects the consideration expected to be received for the performance obligations that have been provided in accordance with the five-step process to recognize revenues as defined in ASC 606. ASC 606 defines contracts as written, oral and through customary business practice. Under this definition, we consider contracts to be created at the time that an order to provide services is agreed upon regardless of whether or not there is a written contract. Results for reporting periods after January 1, 2018 are presented under ASC 606.

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. During the three and nine months ended June 30, 2019 and 2018, and as of June 30, 2019 and September 30, 2018, 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 $30,000 during the three months ended June 30, 2019 and 2018, respectively, and $90,000 and $90,000 during the nine months ended June 30, 2019 and 2018, respectively.

On December 12, 2016, we executed a promissory note (the “Note”), in the principal amount of $500,000, with Mastermind Marketing, Inc. The principal of the Note, including all accrued interest, was due and payable on December 12, 2018. During the term of the Note, interest is payable monthly at a rate equal to the greater of 3.75% per annum or the prime rate published in the Wall Street Journal on the last day of the month plus one-half percent (1/2%), however the interest rate will not exceed 5.5% per annum. As of September 30, 2018 the obligation to pay all principal and accrued interest was satisfied and there were no further borrowings during the nine months ended June 30, 2019 or balances due as of June 30, 2019. During the three and nine months ended June 30, 2018, we recorded interest expense of $22,007 and $30,606.

During the three months ended June 30, 2019 and 2018, 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 $250,225 and $227,810, respectively. During the nine months ended June 30, 2019 and 2018, we made payments to our three majority stockholders for services rendered to us in the aggregate amount of $750,675 and $583,430, respectively. As of June 30, 2019 and September 30, 2018, we had no obligations payable to our three majority stockholders for consulting services.

4.	Property and Equipment

Property and equipment consist of the following:

	June 30,			September 30,
	2019			2018
Furniture, fixtures, and office equipment	$	145,626		$	131,487
Leasehold improvements		73,795			73,795
Total property and equipment		219,421			205,282
Less: accumulated depreciation		(134,571	)		(112,597	)
Property and equipment, net		84,850			92,685

Depreciation expense for the three months ended June 30, 2019 and 2018 was $7,169 and $7,288, respectively. Depreciation expense for the nine months ended June 30, 2019 and 2018 was $21,974 and $21,556, respectively.

5.	Income Taxes

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

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

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.

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

On December 22, 2017, Staff Accounting Bulletin No. 118 ("SAB 118") was issued to address the application of US GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Act. The deferred tax expense recorded in connection with the remeasurement of deferred tax assets is a provisional amount and a reasonable estimate at December 31, 2017 based upon the best information currently available. The ultimate impact may differ from these provisional amounts, possibly materially, due to, among other things, additional analysis, changes in interpretations and assumptions the Company has made, additional regulatory guidance that may be issued, and actions the Company may take as a result of the Tax Act. Any subsequent adjustment to these amounts will be recorded to current tax expense in the quarter of 2019 when the analysis is complete.

6.	Stockholders’ Equity

Our current authorized capital stock consists of one hundred twenty-six million (126,000,000) shares of stock consisting of (i) one hundred twenty-five million (125,000,000) shares of common stock, par value $0.001 per share (the “Common Stock”); and (ii) one million (1,000,000) shares of preferred stock (the “Preferred Stock”). 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.

Preferred Stock

Our amended and restated articles of incorporation provide that our board of directors has the authority, without action by the stockholders, to designate and issue shares of preferred stock in one or more classes or series, and the number of shares constituting any such class or series, and to fix the voting powers, designations, preferences, limitations, restrictions and relative rights of each class or series of preferred stock, including, without limitation, dividend rights, dividend rates, conversion rights, exchange rights, voting rights, rights and terms of redemption, dissolution preferences, and treatment in the case of a merger, business combination transaction, or sale of the Company’s assets substantially in their entirety, which rights may be greater than the rights of the holders of the common stock.

There are no shares of Preferred Stock issued or outstanding.

Common Stock

Pursuant to the Contribution Agreement, we issued 29,236,759 shares of our Common Stock, in the aggregate, to Mastermind Marketing, Inc, a Georgia Corporation, Digital Advize, LLC, a Georgia limited liability company, and Villanta Corporation, a Georgia Corporation. These three entities are controlled by Daniel A. Dodson, Ricardo Rios, and Michael Gelfond; respectively. Messrs, Dodson, Rios and Gelfond were appointed as our executive officers upon the consummation of the Business Consummation.

Common Stock Options

As of June 30, 2019 and September 30, 2018, 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, 2019 and 2018.

7.	Concentration of Credit Risk and Major Customers

For the nine months ended June 30, 2019, one customer represented approximately 15% of our total revenues. For the nine months ended June 30, 2018, two customers represented approximately 22% and 25%, respectively, of our total revenues.

As of June 30, 2019 and September 30, 2018, we had accounts receivable of $898,343, or 61%, due from three customers; and $507,031, or 62%, due from four customers, respectively.

8.	Subsequent Events

We evaluated all events or transactions that occurred after the balance sheet date through the date when these financial statements were available to be issued and we determined that we did not have any material recognizable or disclosable subsequent events.

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, 2018.

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.

Andrew Golubock, VP Group Account Director, has been with Mastermind over 2 years. Andrew is a marketing communications leader with client-side and agency experience in digital marketing, traditional & interactive advertising, social media, new media, user experience, business development, direct marketing, client service, advertising strategy, broadcast, video, marketing plan development, project management, video & film production, lead generation, brand content.

As Senior Director of Mother Nature Network (MNN – a leading source for environmental news, advice on sustainable living, conversation and social responsibility), Andrew oversaw all aspects of corporate sponsorships on MNN.com – the world’s largest environmental news website, led creative team in development, production, execution and distribution of brand content campaigns (videos, microsites, infographics, articles, etc.) both onsite and on social media and developed and maintained executive/senior-level relationships with clients such as: AT&T, Mercedes, SC Johnson, Aflac, Georgia-Pacific and NAPA.

Andrew has also worked at Lbi where he led online marketing efforts across five brands for the largest agency retainer client. At Lbi, Andrew developed strategy, presentations and materials for business pitches and RFPs, provided project management and client service for creative communications. At Grey Worldwide, Andrew helped agency pitches and cultivated new business opportunities, wrote and implemented marketing plans and strategy. Managed team of advertising professionals.

Kellie Streat, Account Director, has been with Mastermind over a year and is a client services leader. She is an award-winning advertising and marketing communications professional with accomplishments on both client and agency sides. As Director of National Advertising for AT&T Entertainment Group, Kellie has developed marketing strategies, brand communications plans and integrated advertising campaigns including television, digital and social platforms. In previous roles, she spearheaded product launches, local and sponsorship advertising. Kellie's work on the agency side included account management roles at both BBDO and Fletcher Martin Ewing. She is a graduate of Emory University's Goizueta Business School. She enjoys the strategic, analytic and relationship challenges of marketing, and was named to the 2017 Top 40 under 40 list by Brand Innovators.

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, 2018 and 2017. 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, 2019 vs. June 30, 2018

Revenues

Revenues for the three months ended June 30, 2019 were $1,257,119 as compared with $1,460,050 for the comparable prior year period, a decrease of $202,931 or 13.9%. The decrease is attributable to actual work accomplished and revenue recognized on projects from certain significant existing customers during the three months ended June 30, 2019 as compared to the comparable prior year period. 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, 2019 was $1,058,400 or 84.2% of revenues, compared with $1,163,440 or 79.7% of revenues, for the comparable prior year period. The decrease in gross profit dollars is primarily due to fluctuations in project revenue flow for our business, and the increase in gross profit as a percentage of revenues is primarily due to certain types of projects that were completed that required lower outside expenses to be incurred. Thus, the current period projects contain less contractually agreed upon outside costs as a percentage of projects in the aggregate thereby having a favorable effect on our gross profit.

General and Administrative Expenses

General and administrative expenses for the three months ended June 30, 2019 were $962,229 as compared with $792,494 for the comparable prior year period, an increase of $169,735 or 21.4%. Our general and administrative expenses increased as a result of increased (i) personnel and overhead costs caused by increases in salaries and overhead costs.

Other Income and Expense

Other income, net for the three months ended June 30, 2019 was $451 as compared with other expense, net of $22,007 for the comparable prior year period, a change of $22,458. The change was due to no longer incurring interest expense on our related party note payable for the quarter ended June 30, 2019.

Nine Months Ended June 30, 2019 vs. June 30, 2018

Revenues

Revenues for the nine months ended June 30, 2019 were $3,949,398 as compared with $3,670,474 for the comparable prior year period, an increase of $278,924 or 7.6%. The increase is attributable to incremental project assignments creating increased project revenues from certain significant existing customers during the nine months ended June 30, 2019 as compared to the comparable prior year period.

Gross Profit

Gross profit for the nine months ended June 30, 2019 were $3,405,262 or 86.2% of revenues, compared with $3,138,444 or 85.5% of revenues, for the comparable prior year period. The increase in gross profit dollars and gross profit as a percentage of revenues is primarily due to certain projects in the prior nine months containing greater contractual out of pocket cost requirements as a percentage of the projects in the aggregate thereby adversely affecting our overall gross profit. The current period projects contain more revenue and less contractually agreed upon out of pocket costs as a percentage of projects in the aggregate thereby having a favorable effect on our gross profit.

General and Administrative Expenses

General and administrative expenses for the nine months ended June 30, 2019 were $2,893,321 as compared with $2,458,222 for the comparable prior year period, an increase of $435,099 or 17.7%. Our general and administrative expenses increased as a result of increased (i) personnel and overhead costs from higher salaries being required to attract and retain high-caliber talent and also in support of the current increase and growth in revenues.

Other Income and Expense

Other income, net for the nine months ended June 30, 2019 was $2,008 as compared with other expense, net of $80,606 for the comparable prior year period, a change of $82,614. The change is primarily due to the fact that there were merger costs included in comparable period and none in the current period in addition to the Company no longer incurring interest expense on its related party note payable for the nine months ended June 30, 2019.

Liquidity and Capital Resources

As of June 30, 2019, we had cash of $432,268, a decrease of $429,103 when compared with a balance of $861,371 as of September 30, 2018.

During the nine months ended June 30, 2019, we had net cash of $421,553 used by operating activities as compared with net cash of $350,335 provided by operating activities 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 decreased by $771,888, as compared to the comparable prior year period, primarily due to an increase in receivables from customers for billed projects during the period and work performed in advance of payment for a customer whose payment terms have changed.

During the nine months ended June 30, 2019, we had net cash of $14,139 used in investing activities as compared with net cash of $14,540 used in investing activities for the comparable prior year period. The net cash outflows during the nine months ended June 30, 2019 are a result of the purchase of computers and office equipment. The net cash outflows during the nine months ended June 30, 2018 are a result of the purchase of computers and office equipment in the amount of $14,540.

During the nine months ended June 30, 2019, we had net cash of $6,589 provided by financing activities as compared to net cash of $325,777 used in financing activities for the comparable prior year period. The net cash change from financing activities of $6,589 and $325,777 during the nine months ended June 30, 2019 and 2018, respectively, is due to net advances or repayments on the related party note payable and related party advance and cash distributions of $100,000 to the members prior to the merger.

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, 2019 our cash position and cash flows from our fiscal 2019 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.

Off-Balance Sheet Arrangements

As of June 30, 2019, 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, 2019 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, 2019, 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

Item 1. Legal Proceedings

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

Item 1A. Risk Factors

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.

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**	XBRL Instance Document
101.SCH**	XBRL Taxonomy Extension Schema
101.CAL**	XBRL Taxonomy Extension Calculation
101.DEF**	XBRL Taxonomy Extension Definitions
101.LAB**	XBRL Taxonomy Extension Label
101.PRE**	XBRL Taxonomy Extension Presentation

* 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 19, 2019

By:

/s/ Daniel A. Dodson

Daniel A. Dodson

Chief Executive Officer

(Principal Executive, Financial and Accounting Officer)