Overview
Our company was formed on January 1, 2012 by MM Inc. the Founding Member,
through a contribution of assets. The organization, as governed by the Written
Operating Agreement dated January 1, 2012, was formed for the purpose of
engaging in the business of conceiving, developing, selling, marketing,
implementing and/or otherwise providing services, systems, platforms and
products in the areas of mobile, social, digital and traditional marketing to
and for businesses and organizations, and conducting services and functions
incidental to the operation of such business. Effective January 1, 2017 and
March 1, 2017, we granted a thirty percent (30%) and ten percent (10%) interest
to Villanta and Digital Advize respectively. in consideration of services to be
provided to us.
We are an involvement marketing service agency, whose mission is to become one
of the most well-respected marketing service agencies in the industry capable of
involving people with Fortune 500 brands that designs, creates and develops
branding and marketing campaigns, primarily for large corporate clients with
category-leading brands. We specialize in getting consumers and customers to
take an action that leads to brand awareness, trial, loyalty, and ultimately
advocacy. Our conversion initiatives facilitate the involvement of more of the
"right customers" with the brands of our clients. Our programs can take on
various forms, including creating and managing digital content, designing
campaign websites/landing pages, social media and viral campaigns, mobile
marketing initiatives, brand communications and search engine optimization. We
deliver innovative, result-producing campaigns to meet the business objectives
of each client through any number, or combination thereof, or cutting edge
marketing initiatives.
Our most important assets in delivering the highest-quality involvement
marketing services to our clients are our highly talented and experienced people
made up of technologists, strategists, account service, paid media and creatives
who work together and represent a cross-discipline of experts. We pride
ourselves in a culture of mutually-shared support and teamwork. We ensure that
our team is provided the best-in-class research, equipment, technology and
training in all disciplines within our proven delivery process to deliver
cutting-edge initiatives the get results. We are very competitive and have a
winning culture that is present throughout the work we do for our clients and
their brands.
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Our organization has been structured in a manner to ensure a broad range of
thinking, facilitate work flow, and deliver unparalleled marketing initiatives
and service to our clients. This is proven by strong and long-lasting
relationships with our clients and tenure of our key executives. We have a
proven, five-step cyclical approach to every client engagement that ensures
learning from every campaign execution is used to optimize future campaigns.
After more than 34 years of experience in delivering innovative involvement
marketing campaigns, including more than five years since our formation in
January 2012, we believe our business model is market tested and poised for
growth. While executing on our business strategy, we believe we have assembled a
diverse and experienced team of senior managers, account executives and creative
and analytical directors; developed and executed on involvement marketing
campaigns which we believe have added value to our clients; and created our own
brand-recognition in the marketing service agency industry. Key elements of our
strategy to accelerate revenue growth and continue penetration of the
marketplace include organic growth, strategic partnerships, recruitment of
talented executives, and accretive acquisitions.
We have relationships with what we believe to be some of the industry's most
innovative companies, including Fortune 500 companies, in a diverse spectrum of
industries possessing what we believe to be well-known brands. We believe the
client relationships established within these diverse industries provide us with
a competitive edge over the broader market in the adoption of new strategies and
leading technologies. We generate revenues from project/campaign-based fees
charged to our clients pursuant to client-specific service agreements.
Through the efforts of our business development team, we identify potential
clients having well-known brands as well as leveraging relationships with brands
with whom our team is familiar. In addition to identifying potential clients,
our senior management team is responsible for nurturing and maintaining existing
relationships to ensure customer satisfaction and to promote follow-up campaign
opportunities. Our business development team is composed of industry innovators
in the communications business with deep connections and experience in digital,
social media, technology, promotions, mobile, analytics and campaign
development, implementation and management. Our business development team is led
by award-winning executives who are frequent contributors to all-things digital
on television, radio, conferences and webinars.
Fiscal Year
Our fiscal year ends on September 30. Reference in this annual report on Form
10-K to a fiscal year is reference to the fiscal year ended September 30. For
example, references to "fiscal 2019" or our "2019 fiscal year" refer to the
fiscal year ended September 30, 2019.
Critical Accounting Policies
Our significant accounting policies are summarized in Note 2 to our financial
statements. However, certain of our accounting policies require the application
of significant judgment by our management, and such judgments are reflected in
the amounts reported in our financial statements. In applying these policies,
our management uses its judgment to determine the appropriate assumptions to be
used in the determination of estimates. Those estimates are based on our
historical experience, terms of existing contracts, our observance of market
trends, information provided by our strategic partners and information available
from other outside sources, as appropriate. Actual results may differ
significantly from the estimates contained in our financial statements.
Results of Operations
Fiscal Year Ended September 30, 2019 vs. September 30, 2018
Revenues
Revenues for the fiscal year ended September 30, 2019 were $3,954,089 as
compared with $5,229,465 for the comparable prior year period, a decrease of
$1,275,376 or 24.4%. The decrease is attributable to two major events. One of
our major clients' parent company made a significant acquisition and divested
itself of brands on which Mastermind provided services - thus resulting in a
loss of approximately $800,000 in revenue; the second was the bankruptcy of
another major client that was expected to generate $720,000 in revenue during
the fiscal year ended September 30, 2019 as compared to the comparable prior
year period. It is anticipated that these lost revenues will be largely replaced
in the upcoming year.
Gross Profit
Gross profit for the fiscal year ended September 30, 2019 was $1,806,281 or
42.7% of revenues, compared with $3,152,938 or 60.3% of revenues, for the
comparable prior year period. The decrease in gross profit was driven by
additional employees hired to manage the anticipated increase in revenues with
key customers that were not terminated until after it was determined a merger
would eliminate this revenue source. Additionally, personnel associated with a
customer who was acquired were not terminated until after it was determine that
the Company could not perform services for the acquirer due to a pre-existing
contractual agreement. Personnel costs have been adjusted during the end of
fiscal 2019 and the beginning of fiscal year 2020 to be in line with anticipated
revenues.
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General and Administrative Expenses
General and administrative expenses for the fiscal year ended September 30, 2019
were $2,429,158 as compared with $1,902,710 for the comparable prior year
period, an increase of $526,448 or 27.7%. Our general and administrative
expenses increased as a result of increased personnel hired in anticipation of
additional revenue that was contracted but did not materialize due to the merger
and bankruptcy explained in Revenues above. Additionally, fees associated with
the compliance of being a publicly traded company have increased from fiscal
2018 to fiscal 2019 as the Company engaged with various professional services
firms and had additional costs related to financial reporting than previously
experienced.
Other Income or Expense, Net
Other income, net for the fiscal year ended September 30, 2019 was $5,328 as
compared with other expense, net of $56,829 for the comparable prior year
period. The change is primarily due to the merger costs of $50,000 incurred in
connection with the Business Combination that was consummated on February 14,
2018. Additionally, there was no interest expense in fiscal year 2019 on a
related party note that resulted in $11,566 of interest expense for the fiscal
year ended September 30, 2018.
Liquidity and Capital Resources
As of September 30, 2019, we had cash and cash equivalents of $742,173, a
decrease of $119,198 when compared with a cash and cash equivalents balance of
$861,371 as of September 30, 2018.
During the fiscal year ended September 30, 2019, we had net cash of $110,342
used by operating activities as compared with net cash of $671,767 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
$782,109, as compared to the comparable prior year period, primarily due to a
decrease in net income reported for the fiscal year ended September 30, 2019,
the reasons of which are outlined earlier in our analysis of revenues, gross
profit, and general and administrative expenses. These decreases in net cash
flows from operating activities were partially offset by decreases in accounts
receivable during the fiscal year ended September 30, 2019.
During the fiscal year ended September 30, 2019, we had net cash of $15,445 used
in investing activities as compared with net cash of $23,935 used in investing
activities for the comparable prior year period. The net cash outflows during
the fiscal years ended September 30, 2019 and 2018 are a result of the purchase
of computers and office equipment.
During the fiscal year ended September 30, 2019, we had net cash of $6,589
provided by financing activities as compared to net cash of $332,365 used in
financing activities for the comparable prior year period. The net cash provided
by financing activities during the fiscal years ended September 30, 2019 related
to the repayment of an advance to a related party. The net cash used by
financing activities during the year ended September 30, 2018 related to
dividends paid to our members prior to the Business Combination in the amount of
$100,000 and repayments on the related party note payable, which was fully
repaid during fiscal year 2018
There were no options or warrants exercised during the fiscal years ended
September 30, 2019 and 2018.
The ability to attract additional capital investments 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 product
introductions and enhancements to existing products, and the opportunities to
acquire complimentary businesses that may be made available to us from
time-to-time. We believe that as of September 30, 2019 our cash position and
cash flows from our fiscal 2020 operations will be sufficient to fund our
working capital and planned strategic activities 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.
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Off-Balance Sheet Arrangements
As of September 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.
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