UNITED STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM 10-Q
[X]
|
QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the quarterly
period ended September 30, 2012
[ ]
|
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: 0-49936
ST JOSEPH,
INC.
(Exact name of registrant as specified in its
charter)
Colorado
|
|
47-0844532
|
(State or other jurisdiction of incorporation
or organization)
|
|
(IRS Employer Identification No.)
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|
|
|
4870 S. Lewis, Suite 250 Tulsa, OK
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|
74105
|
Address of Principal Executive Offices)
|
|
(Zip Code)
|
Registrant’s telephone number, including
area code:
(918) 742-1888
Indicate by checkmark 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.
[X] Yes [ ] No
Indicate by check mark whether the registrant has submitted electronically
and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).
[X] 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
|
[ ]
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|
Accelerated filer
|
[ ]
|
|
|
|
|
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Non-accelerated filer
|
[ ]
|
(Do not check if a smaller reporting company)
|
Smaller reporting company
|
[X]
|
Indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
[ ] Yes [X] No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution
of securities under a plan confirmed by a court.
[ ] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer’s
classes of common stock, as of the latest practicable date: 11,679,802 shares as of November 14, 2012.
ST. JOSEPH,
INC.
Form 10-Q
Table of Contents
PART I – FINANCIAL INFORMATION
|
|
F-1
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|
ITEM 1.
|
CONDENSED
FINANCIAL
STATEMENTS
|
|
F-1
|
|
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
|
3
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|
ITEM 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
|
|
10
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|
ITEM 4.
|
CONTROLS AND PROCEDURES
|
|
10
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|
ITEM 4T.
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CONTROLS AND PROCEDURES
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11
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PART II - OTHER INFORMATION
|
|
11
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ITEM 1.
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LEGAL PROCEEDINGS
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11
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|
ITEM 1A.
|
RISK FACTORS
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11
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ITEM 2.
|
UNREGISTERED SALES OF EQUITY SECURITIES
AND USE OF PROCEEDS
|
|
11
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|
ITEM 3.
|
DEFAULTS UPON SENIOR SECURITIES
|
|
12
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|
ITEM 4.
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MINE SAFETY DISCLOSURES
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12
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ITEM 5.
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OTHER INFORMATION
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12
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|
ITEM 6.
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EXHIBITS
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12
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SIGNATURES
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13
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PART I – FINANCIAL INFORMATION
ITEM 1. CONDENSED FINANCIAL STATEMENTS
ST.
JOSEPH, INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
September 30, 2012
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|
|
December 31, 2011
|
|
|
|
(Unaudited)
|
|
|
(Derived from
audited financial
statements)
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|
ASSETS
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
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CURRENT ASSETS:
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
4,531
|
|
|
$
|
2,809
|
|
Accounts receivable, net of allowance for doubtful accounts of $2,208 (unaudited) and $2,208, respectively
|
|
|
49,576
|
|
|
|
81,441
|
|
Total current assets
|
|
|
54,107
|
|
|
|
84,250
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net of accumulated depreciation of $153,915 (unaudited) and $153,053, respectively
|
|
|
211
|
|
|
|
1,073
|
|
Deposits
|
|
|
1,230
|
|
|
|
1,230
|
|
|
|
|
|
|
|
|
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|
Total Assets
|
|
$
|
55,548
|
|
|
$
|
86,553
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|
|
|
|
|
|
|
|
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LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
|
|
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|
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|
|
|
|
|
|
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|
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|
CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
Accounts payable
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|
$
|
279,638
|
|
|
$
|
253,451
|
|
Accrued liabilities
|
|
|
98,701
|
|
|
|
17,418
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|
Accrued preferred dividend
|
|
|
42,047
|
|
|
|
42,047
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|
Bank loan and notes payable:
|
|
|
|
|
|
|
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Bank loan, current maturities
|
|
|
140,319
|
|
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|
25,908
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|
Advance from officer
|
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|
20,200
|
|
|
|
16,700
|
|
Loan from officer
|
|
|
45,000
|
|
|
|
21,000
|
|
Total current liabilities
|
|
|
625,905
|
|
|
|
376,524
|
|
|
|
|
|
|
|
|
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LONG-TERM DEBT:
|
|
|
|
|
|
|
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|
Bank loan, less current maturities
|
|
|
-
|
|
|
|
129,112
|
|
Total liabilities
|
|
|
625,905
|
|
|
|
505,636
|
|
|
|
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|
|
|
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STOCKHOLDERS’ DEFICIT:
|
|
|
|
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|
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|
Preferred stock, Series A; $0.001 par value, $3.00 face value; 25,000,000 shares authorized; 5,708 (unaudited) and 5,708 shares issued and outstanding, respectively
|
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|
6
|
|
|
|
6
|
|
Common stock, $0.001 par value; 100,000,000 shares authorized, 11,679,802 (unaudited) and 11,612,302 issued and outstanding, Respectively
|
|
|
11,680
|
|
|
|
11,612
|
|
Additional paid-in capital
|
|
|
2,819,501
|
|
|
|
2,681,693
|
|
Retained deficit
|
|
|
(3,401,544
|
)
|
|
|
(3,112,394
|
)
|
Total stockholders’ deficit
|
|
|
(570,357
|
)
|
|
|
(419,083
|
)
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders’ Deficit
|
|
$
|
55,548
|
|
|
$
|
86,553
|
|
The accompanying footnotes are an integral part of these unaudited
financial statements
ST. JOSEPH, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
Three Months Ended
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|
|
Nine Months Ended
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|
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|
September 30,
|
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|
September 30,
|
|
|
|
2012
|
|
|
2011
|
|
|
2012
|
|
|
2011
|
|
REVENUES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract
|
|
$
|
121,047
|
|
|
$
|
90,559
|
|
|
$
|
343,273
|
|
|
$
|
310,520
|
|
COST OF REVENUES
|
|
|
77,942
|
|
|
|
65,956
|
|
|
|
227,644
|
|
|
|
229,883
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Margin
|
|
|
43,105
|
|
|
|
24,603
|
|
|
|
115,629
|
|
|
|
80,637
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
COSTS AND EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and Administrative Expenses
|
|
|
174,940
|
|
|
|
240,914
|
|
|
|
386,641
|
|
|
|
439,186
|
|
Depreciation and Amortization
|
|
|
287
|
|
|
|
287
|
|
|
|
862
|
|
|
|
862
|
|
Total Costs and Expenses
|
|
|
175,227
|
|
|
|
241,201
|
|
|
|
387,503
|
|
|
|
440,048
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income (Loss)
|
|
|
(132,122
|
)
|
|
|
(216,598
|
)
|
|
|
(271,874
|
)
|
|
|
(359,411
|
)
|
OTHER INCOME AND (EXPENSE):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income (Expense)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
75
|
|
Interest Expense
|
|
|
(3,670
|
)
|
|
|
(5,906
|
)
|
|
|
(17,276
|
)
|
|
|
(17,581
|
)
|
Net Other Expense
|
|
|
(3,670
|
)
|
|
|
(5,906
|
)
|
|
|
(289,150
|
)
|
|
|
(17,506
|
)
|
Loss before provision for income taxes
|
|
|
(135,792
|
)
|
|
|
(222,504
|
)
|
|
|
(289,150
|
)
|
|
|
(376,917
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Net Loss
|
|
$
|
(135,792
|
)
|
|
$
|
(222,504
|
)
|
|
$
|
(289,150
|
)
|
|
$
|
(376,917
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss applicable to common stockholders
|
|
$
|
(135,792
|
)
|
|
$
|
(222,504
|
)
|
|
$
|
(289,150
|
)
|
|
$
|
(376,917
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted loss per common share
|
|
$
|
(0.01
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
(0.03
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
11,674,802
|
|
|
|
11,414,476
|
|
|
|
11,632,135
|
|
|
|
11,298,236
|
|
The accompanying footnotes are an integral part of these unaudited
financial statements
ST. JOSEPH, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’
DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Stock
|
|
|
|
|
|
|
Preferred Stock-Series A
|
|
|
Common Stock
|
|
|
Paid-in
|
|
|
Retained
|
|
|
Subscription
|
|
|
|
|
|
|
Shares
|
|
|
Par value
|
|
|
Shares
|
|
|
Par value
|
|
|
Capital
|
|
|
Deficit
|
|
|
Receivable
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2011
|
|
|
5,708
|
|
|
$
|
6
|
|
|
|
11,612,302
|
|
|
$
|
11,612
|
|
|
$
|
2,681,693
|
|
|
$
|
(3,112,394
|
)
|
|
$
|
-
|
|
|
$
|
(419,083
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of common stock @ $0.50 per share
|
|
|
-
|
|
|
|
-
|
|
|
|
60,000
|
|
|
|
60
|
|
|
|
29,940
|
|
|
|
-
|
|
|
|
-
|
|
|
|
30,000
|
|
Sale of common stock @ $1.05 per share
|
|
|
-
|
|
|
|
-
|
|
|
|
7,500
|
|
|
|
8
|
|
|
|
7,867
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7,875
|
|
Modification of stock options
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
100,001
|
|
|
|
-
|
|
|
|
-
|
|
|
|
100,001
|
|
Net loss for the nine months ended
September 30, 2012
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(289,150
|
)
|
|
|
-
|
|
|
|
(289,150
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance September 30, 2012
|
|
|
5,708
|
|
|
$
|
6
|
|
|
|
11,679,802
|
|
|
$
|
11,680
|
|
|
$
|
2,819,501
|
|
|
$
|
(3,401,544
|
)
|
|
$
|
-
|
|
|
$
|
(570,357
|
)
|
The accompanying footnotes are an integral part of these unaudited
financial statements
ST. JOSEPH, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
|
2012
|
|
|
2011
|
|
OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(289,150
|
)
|
|
$
|
(376,917
|
)
|
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
862
|
|
|
|
862
|
|
Share-based compensation
|
|
|
100,001
|
|
|
|
156,067
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
(Increase)/decrease in accounts receivable
|
|
|
31,865
|
|
|
|
40,712
|
|
Increase/(decrease) in accounts payable
|
|
|
26,187
|
|
|
|
40,835
|
|
Increase/(decrease) in accrued liabilities
|
|
|
81,283
|
|
|
|
(3,131
|
)
|
Net cash provided by (used in) operating activities
|
|
|
(48,952
|
)
|
|
|
(141,572
|
)
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Repayment on bank loan
|
|
|
(14,701
|
)
|
|
|
(12,225
|
)
|
Receipt of stock subscription receivable
|
|
|
-
|
|
|
|
25,000
|
|
Proceeds from officer advance
|
|
|
3,500
|
|
|
|
6,200
|
|
Proceeds from officer loan
|
|
|
24,000
|
|
|
|
5,000
|
|
Payments on preferred stock dividends
|
|
|
-
|
|
|
|
(13,440
|
)
|
Proceeds from sale of common stock
|
|
|
37,875
|
|
|
|
125,000
|
|
Net cash provided by (used in) financing activities
|
|
|
50,674
|
|
|
|
135,535
|
|
|
|
|
|
|
|
|
|
|
INCREASE (DECREASE) IN CASH
|
|
|
1,722
|
|
|
|
(6,037
|
)
|
|
|
|
|
|
|
|
|
|
CASH AT BEGINNING OF PERIOD
|
|
|
2,809
|
|
|
|
8,406
|
|
|
|
|
|
|
|
|
|
|
CASH AT END OF PERIOD
|
|
$
|
4,531
|
|
|
$
|
2,369
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL INFORMATION:
|
|
|
|
|
|
|
|
|
Cash paid for income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
Cash paid for interest
|
|
$
|
17,271
|
|
|
$
|
17,581
|
|
The accompanying footnotes are an integral part of these unaudited
financial statements
ST. JOSEPH, INC.
Notes to Condensed Consolidated Financial
Statements
(Unaudited)
|
(1)
|
Basis of
Presentation
|
The condensed balance sheet at December 31,
2011 has been derived from financial statements included in the Form 10-K. The accompanying unaudited financial statements at September
30, 2012 presented herein have been prepared by St. Joseph, Inc. (the “Company”) in conformity with accounting principles
generally accepted in the United States of America (“U.S. GAAP”) pursuant to the rules and regulations of the Securities
and Exchange Commission (“SEC”). These financial statements should be read in conjunction with the audited financial
statements and notes thereto contained in the Company’s annual report on Form 10-K for the year ended December 31, 2011.
The accompanying unaudited interim financial
statements have been prepared in accordance with generally accepted accounting principles for interim financial information and
with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management,
the accompanying condensed consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments)
which are necessary to provide a fair presentation of operating results for the interim periods presented. The preparation of financial
statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported
in the financial statements and accompanying notes. The results of operations presented for the nine months ended September 30,
2012 are not necessarily indicative of the results to be expected for the full year ending December 31, 2012.
There is no provision for dividends for the
quarter to which this quarterly report relates.
Financial data presented herein are unaudited.
Going Concern
The accompanying financial statements have
been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal
course of business. As shown in the accompanying financial statements, the Company has incurred recurring losses and has negative
working capital and a net capital deficiency at September 30, 2012 and December 31, 2011. These factors, among others, may indicate
that the Company will be unable to continue as a going concern.
The financial statements do not include any
adjustments relating to the recoverability of assets and classification of liabilities that might be necessary should the Company
be unable to continue as a going concern. The Company’s continuation as a going concern is dependent upon its ability to
generate sufficient cash flow to meet its obligations on a timely basis and ultimately to attain profitability. The Company plans
to generate the necessary cash flows with increased sales revenue and a reduction of general and administrative expenses over the
next 12 months. However, should the Company’s operations not provide sufficient cash flow; the Company has plans to raise
additional working capital through debt and/or equity financings. Insiders have loaned working capital to the Company on an as-needed
basis over the past two years; however, there are no formal committed financing arrangements to provide the Company with working
capital. There is no assurance the Company will be successful in producing increased sales revenues, attaining profitability, or
obtaining additional funding through debt and equity financings.
|
(2)
|
Related Party Transactions
|
COLEMC Investments, LTD., a Canadian company
owned by Gerry McIlhargey, President and Director of the Company, advanced the Company a total of $45,000 for working capital in
exchange for three promissory notes. The notes matured on December 31, 2011 and December 2010 and did not bear any interest. The
notes have been extended until December 31, 2012.
During the nine months ended September 30,
2012 and year ended December 31, 2011, an officer advanced the Company $3,500 and $16,700, respectively, for working capital in
exchange for two promissory notes. The notes matured on December 31, 2011 and did not bear any interest. The notes have been extended
until December 31, 2012.
On June 30, 2011, the Company borrowed $5,800
from an employee under the terms of a promissory note. The terms of the note required that the entire amount be repaid by July
30, 2011 with no interest. The note was subsequently repaid in full on July 5, 2011.
During the three months ended September 30,
2012, a Director of the Company exercised 7,500 shares of its common stock at a strike price of $1.05 per share (see Note 7) for
total consideration of $7,875.
During the year ended December 31, 2011, the
Company sold 20,000 shares of its common stock in a private placement for $0.50 per share to an officer of the Company’s
subsidiary for total consideration of $10,000.
During the year ended December 31, 2010, the
Company sold 10,000 shares of its common stock in a private placement for $0.50 per share to an officer of the Company’s
subsidiary for total consideration of $5,000.
The Company originally had a $200,000 line
of credit of with the bank. In August 2010, the Company converted its line of credit with the bank to a bank loan which is collateralized
by all of assets of the Company’s subsidiary company, Staf*Tek, including all receivables and property and equipment. The
bank loan agreement included the following provisions 1) an agreement to provide insurance coverage for the collateralized assets
in the amount of $180,000; 2) covenants to provide certain financial documents to the bank on a monthly and annual basis. The interest
rate on the loan is 6.5 % and the monthly principal and interest payment is $2,698. A final balloon payment in the amount of equal
to the unpaid principal and accrued and unpaid interest shall be due on the maturity date of August 31, 2013.
As at September 30, 2012 and December 31, 2011,
$143,904 and $155,020 respectively was owed to the bank, repayable as follows:
|
|
September 30, 2012
|
|
|
December 31, 2011
|
|
|
|
|
|
|
|
|
2012
|
|
$
|
8,275
|
|
|
$
|
25,908
|
|
2013
|
|
|
132,044
|
|
|
|
129,112
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
140,319
|
|
|
$
|
155,020
|
|
Interest expense on the Company’s bank
borrowing was $7,265 and $8,294, during the nine months ended September 30, 2012 and 2011, respectively.
(4)
|
Shareholders’
Deficit
|
Preferred Stock
The Board of Directors is authorized to issue
shares of Series A Convertible Preferred Stock and to fix the number of shares in such series as well as the designation, relative
rights, powers, preferences, restrictions, and limitations of all such series. In December 2003, the Company issued 386,208 shares
of Series A Convertible Preferred Stock and 5,708 have not been converted to common stock at September 30, 2012. During the nine
months ended September 30, 2012, the Company did not issue any Series A Convertible Preferred Stock. Series A Convertible Preferred
Stock is convertible to one share of common stock and has a yield of 6.75% dividend per annum, which was paid quarterly on a calendar
basis for a period of 5 years. The Company is currently delinquent in making dividend payments pursuant to the terms of a settlement
agreement, as disclosed in an 8-K released on May 9, 2009. The accrued balance due on Series A Convertible Preferred Stock dividends
total $42,047 and $42,047 as of September 30, 2012 and December 31, 2011, respectively. The Company will commence dividend
payments pursuant to the terms of a settlement agreement as funds are available.
Common Stock
In a private placement during the nine months
ended September 30, 2012, the Company sold 60,000 shares of common stock to accredited investors at a price of $0.50 per share
for gross proceeds totaling $30,000. No underwriters were used and no underwriting discounts or commissions were payable. The shares
have been offered and sold by the Company in reliance upon the exemption from registration provided by Regulation D promulgated
under the Securities Act of 1933, as amended. The shares were offered and sold only to accredited investors; as such term is defined
by Rule 501 of Regulation D. All of the shares sold in the private placement are restricted securities pursuant to Rule 144.
During the three months ended September 30,
2012, a Director of the Company exercised 7,500 shares of its common stock at a strike price of $1.05 per share (see Note 7) for
total consideration of $7,875.
In a private placement during the year ended
December 31, 2011, the Company sold 440,000 shares of common stock to accredited investors at a price of $0.50 per share for gross
proceeds totaling $220,000. No underwriters were used and no underwriting discounts or commissions were payable. The shares have
been offered and sold by the Company in reliance upon the exemption from registration provided by Regulation D promulgated under
the Securities Act of 1933, as amended. The shares were offered and sold only to accredited investors; as such term is defined
by Rule 501 of Regulation D. All of the shares sold in the private placement are restricted securities pursuant to Rule 144. Of
these shares sold in 2011, a total of 30,000 were sold to an officer of the Company’s subsidiary and 10% to a director of
the Company’s subsidiary.
Equity Awards Granted to Employees
The following schedule summarizes the changes
in the Company’s equity awards for the nine months ended September 30, 2012.
|
|
|
|
|
|
|
|
Weighted
|
|
|
Weighted
|
|
|
|
|
|
|
Awards
|
|
|
|
|
|
Average
|
|
|
Average
|
|
|
|
|
|
|
Outstanding
|
|
|
Exercise
|
|
|
Exercise
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
and
|
|
|
Price
|
|
|
Price
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
|
Exercisable
|
|
|
Per Share
|
|
|
Per Share
|
|
|
Life
|
|
|
Value
|
|
Outstanding at January 1, 2012
|
|
|
460,000
|
|
|
$
|
1.05
|
|
|
$
|
1.05
|
|
|
|
0.65 yrs.
|
|
|
$
|
-
|
|
Granted
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(7,500
|
)
|
|
$
|
1.05
|
|
|
$
|
1.05
|
|
|
|
|
|
|
|
|
|
Cancelled/Expired
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
Outstanding and exercisable at September 30, 2012
|
|
|
452,500
|
|
|
$
|
1.05
|
|
|
$
|
1.05
|
|
|
|
0.25 yrs.
|
|
|
$
|
-
|
|
On August 10, 2011 the Company’s board
of directors extended the deadline for the exercise of the 460,000 options by one year from August 24, 2011 to August 24, 2012
and further extended the deadline to December 31, 2012 in a board of directors meeting on August 23, 2012. The extension was considered
a modification of the original stock options. Accordingly, the Company re-valued the stock options, which resulted in a charge
to share-based compensation totaling $100,001 for the three months ended September 30, 2012. The options expired in December 2012.
All issued stock options were fully vested
as of December 31, 2011 and 2010. Aggregate intrinsic value is calculated by determining the amount by which the market price of
the stock exceeds the exercise price of the options on September 30, 2012, and then multiplying that amount by the number of options.
The exercise price exceeds the market value of the stock on September 30, 2012; therefore the aggregate intrinsic value is zero.
Upon the exercise of stock options, the Company
issues new shares that are authorized and not issued or outstanding. The Company does not plan to repurchase shares to meet stock
option requirements.
The Black-Scholes options valuation model was
developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable.
In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility.
Because the Company’s stock options have characteristics significantly different from those of traded options, and because
changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing
models do not necessarily provide a reliable single measure of the fair value of its stock options.
The Company records its income taxes in accordance
with ASC 740 Income Taxes. The Company incurred net operating losses during all periods presented resulting in a deferred tax asset,
which has been fully allowed for; therefore, the net benefit and expense resulted in no income taxes.
The Company’s policy is to record estimated
interest and penalties related to the underpayment of income taxes as income tax expense in the consolidated statements of operations.
There has been $435 paid in interest or penalties during the nine months ended September 30, 2012.
(6)
|
Concentration of Credit Risk
|
The Company conducts a significant portion
of its operations with one customer. During the nine months ended September 30, 2012 and 2011, approximately 78% and 86%, respectively
of the Company’s service revenues were conducted with this one customer.
On or about January 24, 2012, our subsidiary,
Staf*Tek Services, Inc. was served notice that Danny McGowan, a former employee hired and assigned to work for Staf*Tek’s
client as a contractor, filed a lawsuit against Staf*Tek Services, Inc. and it’s client in the district court in Tulsa
County, Oklahoma, Case No. CJ-2011-7039, in connection with a wrongful termination complaint. Mr. McGowan alleges that
he was terminated after one month of employment, but feels he had a guaranteed contract for six months. The wording
in his employment agreement that he identifies as guaranteeing his employment for six months was inserted at the request
of Staf*Tek’s client.
Staf*Tek’s client
terminated Mr. McGowan for performance issues after one month of employment. Mr. McGowan filed a lawsuit against Staf*Tek and the
client and subsequently filed a motion for default judgment, which was granted by the judge. On March 9, 2012, Stat*Tek filed a
motion to vacate the default judgment and requested a new trial. Staf*Tek has engaged counsel and intends to vigorously defend
this action. As of this date the client that terminated Mr. McGowan has been dismissed from the lawsuit by the judge because they
had not been served within a 6 months of the original filing of the lawsuit by Mr. McGowan’s counsel. Mr. McGowan and his
attorney were three weeks late responding to our request for discovery and we requested dismissal. However, the judge did not grant
dismissal. Mr. McGowan is seeking damages against Staf*Tek in an amount in excess of $75,000. Management deems the suit to be without
merit, however, the costs of defending against the complaint could be substantial.
The Company leases office space in Tulsa, Oklahoma
under operating lease which expired in April 2012, the company is currently leasing the office space on a month to month basis.
Rent expense during the nine months ended September
30, 2012 and 2011 were $26,992 and $26,924, respectively.
The Company has evaluated subsequent events
through November 14, 2012. Other than those described below, there have been no subsequent events after September 30, 2012 for
which disclosure is required.
On August 8, 2012, St. Joseph, Inc. filed an
8-K current report in connection with the signing of a nonbinding Letter of Intent with Karavos Holdings Limited, for the arrangement
of an acquisition of 100% of a holding company which owns 50% interest in a domestic telecommunications operating company. The
8-K current report can be viewed at the SEC’s website; http://www.sec.gov/Archives/edgar/data/1177135/000149315212000866/form8k.htm.
ITEM
2.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OR PLAN OF OPERATION ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
|
The following
presentation of Management’s Discussion and Analysis has been prepared by internal management and should be read in conjunction
with the financial statements and notes thereto included in Item 1 of this Quarterly Report on Form 10-Q. Except for the historical
information contained herein, the discussion in this report contains certain forward-looking statements that involve risks and
uncertainties, such as statements of our business plans, objectives, expectations and intentions as of the date of this filing.
The cautionary statements about reliance on forward-looking statements made earlier in this document should be given serious consideration
with respect to all forward-looking statements wherever they appear in this report, notwithstanding that the “safe harbor”
protections available to some publicly reporting companies under applicable federal securities law do not apply to us as an issuer
of penny stocks. Our actual results could differ materially from those discussed here.
General
St. Joseph, Inc. (“us,” “we,”
“our” or the “Company”) currently conducts all of our business through our wholly-owned subsidiary, Staf*Tek
Services, Inc. We also hope to acquire other operating companies as subsidiaries and are pursuing suitable candidates for future
acquisition that could potentially create value for our existing shareholders. Acquisition targets may be in sectors other than
our current sector of providing employment agency services. Although it is not our goal, we would also consider a reverse merger
opportunity, if it were seen to be a growth opportunity for our existing shareholders.
To date, we have not consummated any acquisition
and cannot provide any assurance that we will be successful in this endeavor. Any acquisition may be structured as a share exchange
and may result in significant dilution to our existing shareholders.
Proposed Reverse Acquisition
On August 7, 2012, we entered into a nonbinding
Letter of Intent with Karavos Holdings Limited, for the arrangement of an acquisition of 100% of an affiliated holding company
which owns 50% voting interest in a domestic telecommunications company that operates telecommunication services to retail customers
and to the wholesale market, including to resellers, competitive local exchange carriers (CLECs) and facilities-based carriers.
The Letter of Intent contemplates the transaction
being structured as a reverse acquisition with St. Joseph, Inc. purchasing the holding company that owns the 50% voting interest
in the telecommunications company in return for the issuance to Karavos Holdings Limited of (i) such number of shares of common
stock that will be equal to not less than 80% of the total issued and outstanding shares of St. Joseph, Inc. on a fully diluted
and converted basis, or (ii) preferred stock convertible into such number of common stock.
The Letter of Intent contemplates that if the
parties proceed with the transaction, on its consummation, St Joseph’s board of directors and executive officers will be
replaced by nominees to be named by the existing equity holders of the company.
The Letter of Intent is nonbinding as to the
consummation of the proposed acquisition transaction, with any obligation to proceed with such a transaction to be included in
a definitive agreement to be negotiated between the parties.
However, certain terms are binding on both
parties, most notably, a requirement that we will not solicit other parties, or negotiate with other parties, regarding the entry
into any merger, acquisition or business combination until the earlier to occur of (i) the mutual termination of negotiations under
the Letter of Intent, (ii) the signing of a definitive agreement contemplated by the Letter of Intent, or (iii) the date 6 months
from the date of acceptance of the Letter of Intent. Additionally, the Letter of Intent requires that without the prior written
consent of Karavos Holdings we shall:
|
●
|
not
enter into or amend any existing agreements and contracts (otherwise than in the ordinary course of business) including but
not limited to, agreements with our directors or officers or employees;
|
|
●
|
enter
into any new transaction or arrangement other than in the ordinary course of business;
|
|
●
|
issue
or agree to issue any shares, warrants or other securities or loan capital or grant or agree to grant any option over or right
to acquire or convertible into any share or loan capital or otherwise take any action which may result in Karavos Holdings
Limited acquiring a percentage interest in the Company (on a fully diluted basis) lower than that contemplated in this Letter
of Intent or the Company reducing its interest in any subsidiary;
|
|
●
|
declare,
pay or make any dividends or other distributions; or
|
|
●
|
become
and remain as the sole legal and beneficial owner of all registrable and non-registrable intellectual and other intangible
property rights (including but not limited to domain names) created, developed, used or adapted by the business or operation
of the Company.
|
The execution of a definitive agreement is
conditional on St. Joseph and Karavos Holdings Limited satisfactorily completing their respective due diligence reviews.
The Letter of Intent states that as a condition
to the signing of a definitive agreement for the proposed acquisition, we are required to raise $14,000,000 in net proceeds through
the sale of stock. Our management contemplates that these funds will be raised via a private placement to approved accredited investors.
The funds from this private placement are to be held in escrow pending the completion of the proposed acquisition. We can provide
no assurance that we will be able to raise these funds, and in the event we are unable to raise the funds the acquisition may be
abandoned.
The proposed transaction may be subject to
the approval of our shareholders and the approval of Karavos Holdings Limited owners. The approvals needed will depend on the transaction
structure contained in any definitive agreement that may be entered into. We cannot provide any assurance that the required approvals
will be granted, and in the event they are not, we will not be able to proceed with the transaction.
Any consummation of the proposed transaction
will need to be performed in compliance with applicable securities laws and regulations, and may require the filing of comprehensive
disclosure documents which may add to the expense and time needed for the completion of the transaction. Depending on the final
transaction structure we may need to register as an Investment Company under the Investment Company Act of 1940 or obtain an exemption
from such registration. In such event, we may have to abandon the transaction of we not able to register as an Investment Company
or not able to obtain an exemption.
Our management cautions investors against making
investment decisions based on any expectation that the proposed transaction will be consummated, or that the proposed transaction
will result in any increase in share value, because, in its view, such expectations are speculative.
Staf*Tek Services, Inc.
Staf*Tek Services, Inc. (“Staf*Tek”)
was organized as an Oklahoma corporation on January 2, 1997. On January 2, 2004, we closed our acquisition of Staf*Tek pursuant
to an agreement by which we acquired 100% percent of the issued and outstanding shares of Staf*Tek’s common stock in exchange
for (i) 386,208 shares of our $0.001 par value Series A convertible preferred stock; (ii) 219,500 shares of our $0.001 par value
common stock; and (ii) $200,000 in cash. Our Series A convertible preferred stock has a face value of $3.00 per share with a yield
of 6.75% dividend per annum, payable on a quarterly basis out of funds legally available therefore, for a period of five years.
The Company is currently delinquent in making dividend payments pursuant to the terms of a settlement agreement, as disclosed in
an 8-K released on May 9, 2009. The accrued balance due on Series A Convertible Preferred Stock dividends and will commence dividend
payments pursuant to the terms of a settlement agreement as funds are available. There is an accrued amount of Series A Convertible
Preferred Stock dividends in the amount of $42,047 as of September 30, 2012 ($42,047 at December 31, 2011).
The Series A convertible preferred stock may
be converted into our common stock at the rate of one share of convertible preferred stock for one share of common stock at any
time by the shareholder. We may call the Series A convertible preferred stock for redemption no sooner than two years after the
date of issuance, and only if our common stock is trading on a recognized United States stock exchange for a period of no less
than thirty consecutive trading days at a market value of $5.00 or more per share. However, as of this date, our common stock has
not traded at that amount.
Staf*Tek specializes in the recruiting and
placement of professional technical personnel, as well as finance and accounting personnel on a temporary and permanent basis.
Staf*Tek provides its customers with employee candidates with information technology (“IT”) skills in areas ranging
from multiple platform systems integration to end-user support, including specialists in programming, networking, systems integration,
database design, help desk support, including senior and entry level finance and accounting candidates. Staf*Tek’s
candidate databases contain information on the candidates experience, skills, and performance and are continually being updated
to include information on new referrals and to update information on existing candidates. Staf*Tek responds to a broad range
of assignments from technical one-person assignments to major projects including, without limitation, Internet/Intranet development,
desktop applications development, project management, enterprise systems development, SAP implementation and legacy mainframe projects.
Staf*Tek also provides employee candidates computer training, online assessments, certification and the opportunity to be tested
and certified in over 50 skill sets.
Results of Operations for the Nine months ended
|
|
Nine months ended
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
|
|
|
|
|
|
|
2012
|
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
|
|
% of
|
|
|
|
|
|
% of
|
|
|
Change
|
|
|
Change
|
|
|
|
$
|
|
|
Revenue
|
|
|
$
|
|
|
Revenue
|
|
|
$
|
|
|
%
|
|
REVENUES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract
|
|
$
|
343,273
|
|
|
|
100.00
|
%
|
|
$
|
310,520
|
|
|
|
100.00
|
%
|
|
$
|
32,753
|
|
|
|
9.54
|
%
|
COST OF REVENUES
|
|
|
227,644
|
|
|
|
66.32
|
%
|
|
|
229,883
|
|
|
|
74.03
|
%
|
|
|
(2,239
|
)
|
|
|
-0.98
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Margin
|
|
|
115,629
|
|
|
|
33.68
|
%
|
|
|
80,637
|
|
|
|
25.97
|
%
|
|
|
34,992
|
|
|
|
30.26
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COSTS AND EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and Administrative Expenses
|
|
|
386,641
|
|
|
|
112.63
|
%
|
|
|
439,186
|
|
|
|
141.44
|
%
|
|
|
(52,546
|
)
|
|
|
-13.59
|
%
|
Depreciation and Amortization
|
|
|
862
|
|
|
|
0.25
|
%
|
|
|
862
|
|
|
|
0.28
|
%
|
|
|
-
|
|
|
|
-0.03
|
%
|
Total Costs and Expenses
|
|
|
387,503
|
|
|
|
112.88
|
%
|
|
|
440,048
|
|
|
|
141.71
|
%
|
|
|
(52,546
|
)
|
|
|
-13.56
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income (Loss)
|
|
|
(271,874
|
)
|
|
|
-79.20
|
%
|
|
|
(359,411
|
)
|
|
|
-115.74
|
%
|
|
|
87,538
|
|
|
|
-32.20
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME AND (EXPENSE):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income (expense)
|
|
|
-
|
|
|
|
0.00
|
%
|
|
|
75
|
|
|
|
0.02
|
%
|
|
|
(75
|
)
|
|
|
-100.00
|
%
|
Interest Expense
|
|
|
(17,276
|
)
|
|
|
-5.03
|
%
|
|
|
(17,581
|
)
|
|
|
-5.66
|
%
|
|
|
304
|
|
|
|
-1.76
|
%
|
Net Other Expense
|
|
|
(17,276
|
)
|
|
|
-5.03
|
%
|
|
|
(17,506
|
)
|
|
|
-5.64
|
%
|
|
|
229
|
|
|
|
-1.33
|
%
|
Loss before provision for income taxes
|
|
|
(289,150
|
)
|
|
|
-84.23
|
%
|
|
|
(376,917
|
)
|
|
|
-121.38
|
%
|
|
|
87,767
|
|
|
|
-30.35
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
|
-
|
|
|
|
0.00
|
%
|
|
|
-
|
|
|
|
0.00
|
%
|
|
|
-
|
|
|
|
0.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
$
|
(289,150
|
)
|
|
|
-84.23
|
%
|
|
$
|
(376,917
|
)
|
|
|
-121.38
|
%
|
|
$
|
87,767
|
|
|
|
-30.35
|
%
|
Gross Profit
For the nine months ended September 30, 2012,
we had a gross profit of $115,629 compared to a gross profit of $80,637 for the nine months ended September 30, 2011. This increase
in our gross profitability of $34,992, or approximately 30.3% over the prior period, is due primarily to a decrease in our cost
of revenues.
Revenues for the nine months ended September
30, 2012 increased to $343,273 from $310,520 for the nine months ended September 30, 2011. This increase in net revenues of $32,753,
or approximately 9.5%, over the prior period, is due primarily to a slight increase in the number of contractors working for us.
Cost of revenues for the nine months ended
September 30, 2012 decreased to $227,644 from $229,883 for the nine months ended September 30, 2011. This decrease in cost of revenues
of $2,239, or approximately 1.0%, over the prior period, is due primarily to an increase in margins we earned on the contractors
working for us.
Total Costs and Expenses
Total costs and expenses for the nine months
ended September 30, 2012 decreased to $387,503 from $440,048 for the nine months ended September 30, 2011. This decrease in our
total operating expenses of $52,545 is approximately 13.6% below that of the prior period resulting from a decrease in the charge
for stock-based compensation in connection with the modification and revaluation of our outstanding common stock options.
General and administrative expenses for the
nine months ended September 30, 2012 decreased to $386,641 from $439,186 for the nine months ended September 30, 2011. This decrease
in general and administrative expenses of $52,545 is approximately 13.6% below that of the prior period resulting from a decrease
in the charge for stock-based compensation in connection with the modification and revaluation of our outstanding common stock
options.
Other Income/Expenses
Interest expense for the nine months ended
September 30, 2012 decreased to $17,276 from $17,581 for the nine months ended September 30, 2011. This decrease in interest expense
of $305, or approximately 1.8% under the prior period, is due primarily to the decrease in interest due on legal fees and our bank
borrowings.
Operating and Net Losses
For the nine months ended September 30, 2012,
we incurred an operating loss of $271,874 compared to an operating loss for the nine months ended September 30, 2011 of $359,411.
Net loss for the nine months ended September
30, 2012 decreased to $289,150 from $376,917 for the nine months ended September 30, 2011. This decrease in net losses of $87,767
is approximately 30.4% over that of the prior period resulting from a decrease in the charge for stock-based compensation in connection
with the modification and revaluation of our outstanding common stock options.
Three months results of operations
Results of Operations for the Three
Months Ended
|
|
Three Months Ended
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
|
|
|
|
|
|
|
2012
|
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
|
|
% of
|
|
|
|
|
|
% of
|
|
|
Change
|
|
|
Change
|
|
|
|
$
|
|
|
Revenue
|
|
|
$
|
|
|
Revenue
|
|
|
$
|
|
|
%
|
|
REVENUES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract
|
|
$
|
121,047
|
|
|
|
100.00
|
%
|
|
$
|
90,559
|
|
|
|
100.00
|
%
|
|
$
|
30,488
|
|
|
|
25.19
|
%
|
COST OF REVENUES
|
|
|
77,942
|
|
|
|
64.39
|
%
|
|
|
65,956
|
|
|
|
72.83
|
%
|
|
|
11,986
|
|
|
|
15.38
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Margin
|
|
|
43,105
|
|
|
|
35.61
|
%
|
|
|
24,603
|
|
|
|
27.17
|
%
|
|
|
18,502
|
|
|
|
42.92
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COSTS AND EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and Administrative Expenses
|
|
|
174,939
|
|
|
|
144.52
|
%
|
|
|
240,914
|
|
|
|
266.03
|
%
|
|
|
(65,975
|
)
|
|
|
-37.71
|
%
|
Depreciation and Amortization
|
|
|
287
|
|
|
|
0.24
|
%
|
|
|
287
|
|
|
|
0.32
|
%
|
|
|
-
|
|
|
|
0.09
|
%
|
Total Costs and Expenses
|
|
|
175,226
|
|
|
|
144.76
|
%
|
|
|
241,201
|
|
|
|
266.35
|
%
|
|
|
(65,975
|
)
|
|
|
-37.65
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income (Loss)
|
|
|
(132,121
|
)
|
|
|
-109.15
|
%
|
|
|
(216,598
|
)
|
|
|
-239.18
|
%
|
|
|
84,477
|
|
|
|
-63.94
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME AND (EXPENSE):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income (expense)
|
|
|
-
|
|
|
|
0.00
|
%
|
|
|
-
|
|
|
|
0.00
|
%
|
|
|
-
|
|
|
|
0.00
|
%
|
Interest Expense
|
|
|
(3,671
|
)
|
|
|
-3.03
|
%
|
|
|
(5,906
|
)
|
|
|
-6.52
|
%
|
|
|
2,235
|
|
|
|
-60.90
|
%
|
Net Other Expense
|
|
|
(3,671
|
)
|
|
|
-3.03
|
%
|
|
|
(5,906
|
)
|
|
|
-6.52
|
%
|
|
|
2,235
|
|
|
|
-60.90
|
%
|
Loss before provision for income taxes
|
|
|
(135,792
|
)
|
|
|
-112.18
|
%
|
|
|
(222,504
|
)
|
|
|
-245.70
|
%
|
|
|
86,712
|
|
|
|
-63.86
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
|
-
|
|
|
|
0.00
|
%
|
|
|
-
|
|
|
|
0.00
|
%
|
|
|
-
|
|
|
|
0.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
$
|
(135,792
|
)
|
|
|
-112.18
|
%
|
|
$
|
(222,504
|
)
|
|
|
-245.70
|
%
|
|
$
|
86,712
|
|
|
|
-63.86
|
%
|
Gross Profit
For the three months ended September 30, 2012,
we had a gross profit of $43,105 compared to a gross profit of $24,603 for the three months ended September 30, 2011. This increase
in our gross profitability of $18,502, or approximately 42.3% over the prior period, is due primarily to a decrease in our cost
of revenues.
Revenues for the three months ended September
30, 2012 increased to $121,047 from $90,559 for the three months ended September 30, 2011. This increase in net revenues of $30,488,
or approximately 25.2%, over the prior period, is due primarily to a slight increase in the number of contractors working for us.
Cost of revenues for the three months ended
September 30, 2012 increased to $77,942 from $65,975 for the three months ended September 30, 2011. This increase in cost of revenues
of $11,986, or approximately 15.4%, over the prior period, is due primarily to an increase in the number of contractors working
for us.
Total Costs and Expenses
Total costs and expenses for the three months
ended September 30, 2012 decreased to $175,226 from $241,201 for the three months ended September 30, 2011. This decrease in our
total operating expenses of $65,975 is approximately 37.7% over that of the prior period resulting from a decrease in the charge
for stock-based compensation in connection with the modification and revaluation of our outstanding common stock options.
General and administrative expenses for the
three months ended September 30, 2012 decreased to $174,939 from $240,914 for the three months ended September 30, 2011. This decrease
in general and administrative expenses of $65,975 is approximately 37.7% over that of the prior period resulting from a decrease
in the charge for stock-based compensation in connection with the modification and revaluation of our outstanding common stock
options.
Other Income/Expenses
Interest expense for the three months ended
September 30, 2012 decreased to $3,671 from $5,906 for the three months ended September 30, 2011. This decrease in interest expense
of $2,235, or approximately 60.9% over the prior period, is due primarily to the decrease in interest due on legal fees and our
bank borrowings.
Operating and Net Losses
For the three months ended September 30, 2012,
we incurred an operating loss of $132,121 compared to an operating loss for the three months ended September 30, 2011 of $222,504.
Net loss for the three months ended September
30, 2012 decreased to $135,792 from $222,504 for the three months ended September 30, 2011. This decrease in net losses of $86,712
is approximately 63.9% over that of the prior period resulting from a decrease in the charge for stock-based compensation in connection
with the modification and revaluation of our outstanding common stock options.
Liquidity and Capital Resources
As of September 30, 2012, we had a cash balance
of $4,531.
During the nine months ended September 30, 2012 and 2011, the Company’s
summarized cash flow activities were as follows:
Cash flow activities
|
|
Nine months ended
|
|
|
|
September 30,
|
|
|
|
2012
|
|
|
2011
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
$
|
(48,952
|
)
|
|
$
|
(141,572
|
)
|
Net cash provided by (used in) financing activities
|
|
|
50,674
|
|
|
|
135,535
|
|
|
|
|
|
|
|
|
|
|
INCREASE (DECREASE) IN CASH
|
|
|
1,722
|
|
|
|
(6,037
|
)
|
|
|
|
|
|
|
|
|
|
CASH AT BEGINNING OF PERIOD
|
|
|
2,809
|
|
|
|
8,406
|
|
|
|
|
|
|
|
|
|
|
CASH AT END OF PERIOD
|
|
$
|
4,531
|
|
|
$
|
2,369
|
|
Net cash used in operating activities during
the nine months ended September 30, 2012 decreased from $141,572 to $48,952, as compared to the prior year. During the nine months
ended September 30, 2012 the company raised $37,875 of new funds from the sale of common stock. We also received funds from related
party borrowings of $27,500, and paid down our bank loan by $14,701.
Internal Sources of Liquidity
For the nine months ended September 30, 2012,
the funds generated from our operations were insufficient to fund our daily operations. For the nine months ended September 30,
2012, we had a gross margin of $115,629, and we were thus unable to meet our operating expenses of $387,503 for the same period
(which includes $100,001 of non-cash share-based compensation). After accounting for our net other expenses (interest expenses)
of $17,276 for this period, we suffered a net loss of $289,150 for the period. We can provide no assurance that funds from our
operations will increase sufficiently to meet the requirements of our daily operations in the future. In the event that funds from
our operations are insufficient to meet our expenses, we will need to seek other sources of financing to maintain liquidity.
External Sources of Liquidity
Because the funds generated from our operations
have been not been sufficient to fully fund our operations, we have been on dependent on debt and equity financing to make up the
shortfall. We actively pursue all potential financing options as we look to secure additional funds to both stabilize and grow
our business operations. Our management will review any financing options at their disposal, and will judge each potential source
of funds on their individual merits. There can be no assurance that we will be able to secure additional funds from debt or equity
financing, as and when we need to, or if we can, that the terms of such financing will be favorable to us or our existing stockholders.
As a result, our independent registered public accounting firm has issued a “going concern” modification to its report
on our audited financial statements for the years ended December 31, 2011 and 2010.
The Company originally had a $200,000 line
of credit of with the bank. In August 2010, the Company converted its line of credit with the bank to a bank loan which is collateralized
by all of assets of the Company’s subsidiary company, Staf*Tek, including all receivables and property and equipment. The
bank loan agreement included the following provisions 1) An agreement to provide insurance coverage for the collateralized assets
in the amount of $180,000; 2) covenants to provide certain financial documents to the bank on a monthly and annual basis. The interest
rate on the loan is 6.5 % and the monthly principal and interest payment is $2,698. A final balloon payment of shall be due on
the maturity date of August 31, 2013 in the amount equal to the then unpaid principal and accrued and unpaid interest.
During the nine months ended September 30,
2012, we had a private offering in which we sold 60,000 shares of common stock to an accredited investor at a price of $0.50 per
share for gross proceeds of $30,000.
During the three months ended September
30, 2012, a Director of the Company exercised 7,500 shares of its common stock at a strike price of $1.05 per share (see Note
7) for total consideration of $7,875.
We also borrowed $27,500 from related parties
during the nine months ended September 30, 2012.
Off Balance Sheet Arrangements
We do not have nor do we maintain any off-balance
sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are
material to our investors.
Risk Factors
As a smaller reporting company, we are not
required to provide the information required by this item.
ITEM 3. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
As a smaller reporting company, we are not
required to provide the information required by this Item.
ITEM 4. CONTROLS AND PROCEDURES
As required by Rule 13a-15(b) under the Securities
Exchange Act of 1934 (the “Exchange Act”), we carried out an evaluation of the effectiveness of the design and operation
of our disclosure controls as of the end of the period covered by this report, September 30, 2012. This evaluation was carried
out under the supervision and with the participation of our Chief Executive Officer, Mr. Gerald McIlhargey, and our Treasurer,
Mr. Kenneth L. Johnson (collectively, the “Certifying Officers”). Based upon that evaluation, our Certifying Officers
concluded that as of the end of the period covered by this report, September 30, 2012, our disclosure controls and procedures are
effective in timely alerting management to material information relating to us and required to be included in our periodic filings
with the Securities and Exchange Commission (the “Commission”).
Disclosure controls and procedures are controls
and procedures that are designed to ensure that information required to be disclosed in our periodic reports under the Exchange
Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms.
Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required
to be disclosed in our periodic reports that we file under the Exchange Act is accumulated and communicated to our management,
including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to
allow timely decisions regarding required disclosure.
Internal Control over Financial Reporting
Further, as required by Rule 13a-15(d) of the
Exchange Act and under the supervision and with the participation of our Certifying Officers, we carried out an evaluation as to
whether there has been any change in our internal control over financial reporting during our fiscal quarter ended September 30,
2012. Based upon this evaluation, our Certifying Officers have concluded that there has not been any change in our internal control
over financial reporting during our fiscal quarter ended September 30, 2012, that has materially affected, or is reasonably likely
to materially affect, our internal control over financial reporting.
Internal control over financial reporting
is a process designed by, or under the supervision of, our principal executive and principal financial officers, or persons performing
similar functions, and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. Internal control over financial reporting includes those policies and procedures that: (i) pertain
to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our
assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements
in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance
with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
ITEM 4T. CONTROLS AND PROCEDURES
Not Applicable.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On or about January 24, 2012, our subsidiary,
Staf*Tek Services, Inc. was served notice that Danny McGowan, a former employee hired and assigned to work for Staf*Tek’s
client as a contractor, filed a lawsuit against Staf*Tek Services, Inc. and it’s client in the district court in Tulsa
County, Oklahoma, Case No. CJ-2011-7039, in connection with a wrongful termination complaint. Mr. McGowan alleges that
he was terminated after one month of employment, but feels he had a guaranteed contract for six months. The wording
in his employment agreement that he identifies as guaranteeing his employment for six months was inserted at the request
of Staf*Tek’s client.
Staf*Tek’s
client terminated Mr. McGowan for performance issues after one month of employment. Mr. McGowan filed a lawsuit against Staf*Tek
and the client and subsequently filed a motion for default judgment, which was granted by the judge. On March 9, 2012, Stat*Tek
filed a motion to vacate the default judgment and requested a new trial. Staf*Tek has engaged counsel and intends to vigorously
defend this action. As of this date the client that terminated Mr. McGowan has been dismissed from the lawsuit by the judge because
they had not been served within a 6 months of the original filing of the lawsuit by Mr. McGowan’s counsel. Mr. McGowan and
his attorney were three weeks late responding to our request for discovery and we requested dismissal. However, the judge did
not grant dismissal. Mr. McGowan is seeking damages against Staf*Tek in an amount in excess of $75,000. Management deems the suit
to be without merit, however, the costs of defending against the complaint could be substantial.
ITEM
1A. RISK FACTORS
As a smaller reporting company, we are not
required to provide the information required by this Item.
ITEM 2. UNREGISTERED SALES OF EQUITY
SECURITIES AND USE OF PROCEEDS
In a private placement during the nine months
ended September 30, 2012, the Company sold 60,000 shares of common stock to accredited investors at a price of $0.50 per share
for gross proceeds totaling $30,000. No underwriters were used and no underwriting discounts or commissions were payable. The shares
have been offered and sold by the Company in reliance upon the exemption from registration provided by Regulation D promulgated
under the Securities Act of 1933, as amended. The shares were offered and sold only to accredited investors; as such term is defined
by Rule 501 of Regulation D. All of the shares sold in the private placement are restricted securities pursuant to Rule 144.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
The Company is currently delinquent in making
dividend payments pursuant to the terms of a settlement agreement, as disclosed in an 8-K released on May 9, 2009. The accrued
balance due on Series A Convertible Preferred Stock dividends and will commence dividend payments pursuant to the terms of a settlement
agreement as funds are available. There is an accrued amount of Series A Convertible Preferred Stock dividends in the amount of
$42,047 as of September 30, 2012 ($42,047 at December 31, 2011).
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
Exhibit
No.
|
|
Description
|
|
|
|
31.1
|
|
Certification of Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (Filed herewith)
|
|
|
|
31.2
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Certification of Chief Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (Filed herewith)
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32.1
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Certification of Chief Executive Officer pursuant to pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Filed herewith)
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32.2
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Certification of Chief Financial Officer pursuant to pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Filed herewith)
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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.
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Date: November 14, 2012
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ST. JOSEPH, INC.
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/s/ GERALD MCILHARGEY
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Gerald McIlhargey, Chief Executive Officer
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