UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
| [X] | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2012
OR
| [ ] | 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 Small Business Issuer as specified in its charter)
| COLORADO | CH 90-0197648 | |
| (State or other jurisdiction | (IRS Employer Identification No.) | |
| of incorporation or organization) |
| 4870 S. Lewis, Suite 250, Tulsa, OK | 74105 | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (918) 742-1888
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act: Common Stock, par value $0.001 per share
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [X]
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes [ ] No [X]
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 [X] 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). Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]
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. (Check one):
| Large accelerated filer [ ] | Accelerated filer [ ] |
| Non-accelerated filer [ ] | Smaller reporting company [X] |
(Do not check if a smaller reporting company) |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
Based on the closing sale price of $0.53 of the registrant’s common stock on the last business day of our most recently second fiscal quarter, June 30, 2012, the aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant computed by reference to the price at which the common stock was last sold was $4,839,390.
As of March 18, 2013 there were 11,900,802 shares of the registrant’s Common Stock issued and outstanding.
ST. JOSEPH, INC.
Form 10-K
For the Fiscal Year Ended December 31, 2012
TABLE OF CONTENTS
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FORWARD LOOKING STATEMENTS
This Form 10-K, the other reports, statements, and information that we have previously filed or that we may subsequently file with the Securities and Exchange Commission and public announcements that we have previously made or may subsequently make include, may include, incorporate by reference or may incorporate by reference certain statements that may be deemed to be “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements relate to such matters as, among other things, our anticipated financial performance, business prospects, technological developments, new products, future distribution or license rights, international expansion, possible strategic alternatives, new business concepts, capital expenditures, consumer trends and similar matters.
Forward looking statements necessarily involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance, or achievement expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “intend,” “expect,” “anticipate,” “assume”, “hope”, “plan,” “believe,” “seek,” “estimate,” “predict,” “approximate,” “potential,” “continue”, or the negative of such terms. Statements including these words and variations of such words, and other similar expressions, are forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable based upon our knowledge of our business, we cannot absolutely predict or guarantee our future results, levels of activity, performance, or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of such statements.
We note that a variety of factors could cause our actual results and experience to differ materially from the anticipated results or other expectations expressed in our forward-looking statements. The risks and uncertainties that may affect the operations, performance, development and results of our business include, but are not limited to, the following: changes in consumer spending patterns; changes in consumer preferences and overall economic conditions; the impact of competition and pricing; the financial condition of the suppliers and manufacturers from whom we source our merchandise; economic and political instability in foreign countries or restrictive actions by the governments of foreign countries in which suppliers and manufacturers from whom we source products are located or in which we may actually conduct or intend to expand our business; changes in tax laws, or the laws and regulations governing direct or network marketing organizations; our ability to hire, train and retain a consistent supply of reliable and effective participants in our direct or network marketing operation; general economic, business and social conditions in the United States and in countries from which we may source products, supplies or customers; the costs of complying with changes in applicable labor laws or requirements, including without limitation with respect to health care; changes in the costs of interest rates, insurance, shipping and postage, energy, fuel and other business utilities; the reliability, longevity and performance of our licensors and others from whom we derive intellectual property or distribution rights in our business; the risk of non-payment by, and/or insolvency or bankruptcy of, customers and others owing indebtedness to us; threats or acts of terrorism or war; and strikes, work stoppages or slowdowns by unions affecting businesses which have an impact on our ability to conduct our own business operations.
Forward-looking statements that we make, or that are made by others on our behalf with our knowledge and express permission, are based on knowledge of our business and the environment in which we operate, but because of the factors listed above, actual results may differ from those in the forward-looking statements. Consequently, these cautionary statements qualify all of the forward-looking statements we make herein. We cannot assure the reader that the results or developments anticipated by us will be realized or, even if substantially realized, that those results or developments will result in the expected consequences for us or affect us, our business or our operations in the way we expect. We caution readers not to place undue reliance on these forward-looking statements, which speak only as of their dates, or on any subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. We do not undertake any obligation to release publicly any revisions to such forward-looking statements to reflect events or circumstances after the date hereof or thereof or to reflect the occurrence of unanticipated events.
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Our Background and Business Development
St. Joseph, Inc. (“us,” “we,” “our” or the “Company”) was organized under the laws of the State of Colorado on March 19, 1999, as Pottery Connection, Inc. Our Company was originally organized to produce and sell pottery of all forms, as well as arts and crafts.
On March 19, 2001, we changed our corporate name to St. Joseph Energy, Inc. in anticipation of changing our business purpose to the exploration and development of oil and gas properties. However, after unsuccessful investing in two oil wells located in the State of Louisiana, we elected to abandon that endeavor and return to our original business purpose.
On November 6, 2003, we changed our corporate name to St. Joseph, Inc. We acquired Staf*Tek Services, Inc. (“Staf*Tek”) as a wholly owned subsidiary on January 2, 2004. We presently conduct all of our business through Staf*Tek.
Staf*Tek Services, Inc.
Staf*Tek was organized under the laws of the State of Oklahoma on January 2, 1997. On December 2, 2003, we acquired all of the issued and outstanding shares of common stock of Staf*Tek stock in exchange for (1) 380,500 shares of our Series A Preferred Shares (“Series A Shares”); (2) 219,500 shares of our common stock; and (3) $200,000 in cash. The acquisition closed on January 2, 2004, at which time Staf*Tek became a wholly owned subsidiary of St. Joseph.
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.
Staf*Tek was founded on the premise that there is an increasing demand for high quality outsourced professional services. Staf*Tek’s business premise combines client service orientation and commitment to quality. Staf*Tek is positioned to take advantage of what we believe are two converging trends in the outsourced professional services industry — increasing demand for outsourced professional services by corporate clients and increasing the supply of professionals interested in working on an outsourced basis. Staf*Tek believes that its business premise allows it to offer challenging yet flexible career opportunities, attract highly qualified, experienced professionals and, in turn, attract clients with varying professional needs.
Staf*Tek is primarily a regional professional service firm that provides experienced and highly qualified personnel who can demonstrate diversity, and flexibility in the work force. Staf*Tek has determined that its market is primarily in the Tulsa, Oklahoma area.
Supply of Professionals
Concurrent with the growth in the demand for outsourced services, Staf*Tek is of the belief, based on discussions with its associates that the number of professionals seeking work on a project and non-project basis has increased due to a desire for:
| ● | More flexible hours and work arrangements, coupled with competitive wages and benefits; and |
| ● | Challenging engagements that advance careers, develop skills, and add to experience. |
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Staf*Tek maintains its own database of approximately 20,000 trained independent contract professionals. Once a professional is placed, he or she either becomes an employee of our Company or the client’s employee.
Marketing and Recruiting
Staf*Tek markets its temporary and permanent staffing services to business clients as well as employment candidates. Marketing and recruiting directed to business clients and employment candidates consists primarily of yellow pages advertisements, classified advertisements, websites, internet job sites, trade shows and website promotion on the Internet.
We and our subsidiaries have registered the following domain names: getsmartonline.com, staftek.com, confidentialsearch.com and stjosephinc.com.
Management of the Staf*Tek’s temporary and permanent staffing operations is coordinated from our headquarters in Tulsa, Oklahoma. Our headquarters provides support and centralized services related to administrative, marketing, public relations, accounting and training.
Competition
Staf*Tek’s temporary and permanent staffing services face competition in attracting clients as well as high-quality specialized employment candidates. The temporary and permanent placement businesses are highly competitive, with a number of firms offering services similar to those provided by Staf*Tek on a national, regional or local basis. In many areas the local companies are the most successful competitors. The most significant competitive factors in the temporary and permanent placement businesses are price and the reliability of service, both of which are often a function of the availability and quality of professional personnel. We believe that Staf*Tek derives a competitive advantage from its extensive experience and commitment to the specialized employment market, temporary employees placed by it are, in fact, Staf*Tek’s employees for all purposes while they are working on assignments. Once a professional is permanently placed, he or she either becomes an employee of Staf*Tek or of Staf*Tek’s client. During the temporary phase, Staf*Tek pays the related costs of employment, such as workers’ compensation insurance, state and federal unemployment taxes, social security and certain fringe benefits. Staf*Tek provides access to voluntary health insurance coverage to interested employees.
Major Clients
We are dependent on a small number of clients for all of our revenues and on one client for a significant percentage of our revenues. During our year ended December 31, 2012, approximately 80% of our revenues were derived from our largest client and all of our revenues were derived from a total of three clients.
Employees and Revenue Generating
We currently have four paid employees, and no part-time employees.
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.
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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.
Reports to Security Holders
We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and in accordance with the Exchange Act we file reports, proxy statements and other information with the Securities and Exchange Commission (the “Commission”). Our security holders or any member of the public may inspect and copy the reports, proxy statements and other information filed by us with the Commission at the public reference facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, as well as the Commission’s Regional Offices. Our security holder or any member of the public may also call the Commission at 1-800-SEC-0330 for more information about the public reference room, how to obtain copies of documents by mail or how to access documents electronically on the Commission’s Web site at (http://www.sec.gov).
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Our business prospects are subject to various risks and uncertainties that impact our business. The most important of these risks and uncertainties are as follows:
Our auditor has expressed substantial doubt as to our ability to continue as a going concern. An inability to continue as a going concern would likely lead to a loss of your entire investment.
Our independent certified public accountant’s report on our financial statements for the fiscal years ended December 31, 2012 and 2011 contains an explanatory paragraph indicating that we have incurred recurring losses, and as of December 31, 2012, had negative working capital and a net capital deficiency. These factors raise substantial doubt about our ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Our revenues and our total assets have declined precipitously over the last several years while our stockholder’s deficit has increased, creating doubt as to our ability to continue our operations or achieve profitability.
During our 2012 fiscal year, we had revenues of $427,376, down from $467,907 in our 2011 fiscal year, and down from $534,001 in our 2010 fiscal year. As of December 31, 2012 we had total assets of $37,545, down from $86,553 on December 31, 2011 and down from $102,134 on December 31, 2010. Over this period of time, our total stockholders’ deficit increased to $645,798 as of December 31, 2012, as compared to $419,083 as of December 31, 2011 and $374,571 as of December 31, 2010. These declines in our revenues and asset value, combined with our growing stockholders’ deficit create doubt that we will be able to remain in operation or achieve profitability. We have been relying primarily on funds raised from the sale of our shares in private placements and on our secured line of credit for operating capital. However, our declining business operations may increase the difficulty of raising additional funds. If we are unable to reverse these trends, we may go out of business, and our stockholders may lose their entire investment.
We may engage in a “reverse merger” acquisition, resulting in severe dilution to existing stockholders.
In the event we engage in a merger or acquisition, it is likely that the transaction will be structured as a” reverse merger” that would result in severe dilution to existing stockholders. In connection with any such reverse merger, our stock may be subject to a reverse stock split, and the value of our stockholder’s shares may be negatively impacted. We can provide no assurance that we will engage in any reverse merger, or any other merger or acquisition transaction.
If we default on our secured bank loan, the bank may foreclose on substantially all of our assets, putting us out of business.
We have an outstanding bank loan that is secured by substantially all of our assets. As of December 31, 2012, the outstanding balance on this loan was $131,997. The loan carries interest in the amount of 6.5% per annum. We must make monthly payments of principal and interest in the amount of $2,698 per month with a balloon payment in the amount of $117,937 coming due on August 31, 2013. In the event we default on this loan, the bank may foreclose on our assets. If any such foreclosure were to occur, we would not be able to continue operating.
We operate solely through our subsidiary, Staf*Tek Services, Inc.; our revenues are dependent on the performance of our subsidiary.
We operate and generate revenues solely through our subsidiary, Staf*Tek. St. Joseph, Inc. has not generated any revenues since its inception and does not expect to generate any revenues in the future. Our success depends on the success of Staf*Tek and there is no assurance that we can achieve profitability through Staf*Tek in the future. Our performance will depend on our ability to manage this anticipated growth effectively by hiring key management personnel, implementing and maintaining operational, administrative, marketing and control systems on a timely basis, building and maintaining our network infrastructure, conducting successful marketing and sales programs, attracting and retaining qualified employees and having access to working capital to support the growth in inventory, receivables, capital requirements and operating costs necessitated by the assumed increased sales.
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From time to time, we may need additional capital to meet the objectives of our business plan, and there is no assurance that we will be able to raise such capital or that such financing will be on terms that are favorable or acceptable to us.
The placement of temporary employees requires substantial additional capital to fund our working capital needs. When an employee is placed on a temporary basis, an invoice is generated for the placement fee, which may not be paid for a number of weeks while the employment costs are immediately incurred. Thus, even though, in the long run, our success in placing temporary employees will enhance our revenues; in the short term, our increasing placement of temporary employees is decreasing our liquidity. Accordingly, to remain viable, we must substantially increase our revenues, raise additional capital, increase our credit facilities, and/or reduce our operations. In the event that our plans or assumptions change or prove to be inaccurate, or if delays increase the payment of our placement fees, we may be required to raise additional funds through the issuance of equity securities, in which case the percentage ownership of our current stockholders will be diluted. Such equity securities may also have rights, preferences or privileges senior to common stock. Furthermore, there can be no assurance that additional financing will be available when needed on terms favorable to us or at all. If we are unable to raise more money, our growth could be impeded, and our business could be materially adversely affected.
Our failure to effectively manage growth could have a material adverse effect on our business and operations.
If we are able to grow our business, such growth could occur rapidly at an uneven pace. Such growth will place a significant strain on our management systems and resources. We will need to continue to improve our operational and financial systems and managerial controls and procedures, and we will need to continue to expand, train and manage our workforce. We will have to maintain close coordination among our technical, accounting, finance, marketing and sales personnel.
If we lose key personnel or fail to integrate replacement personnel successfully, our ability to manage our business could be impaired.
Our future success depends upon the continued service of our key management and other critical personnel such as John Blackmon. Whether we are able to execute our business strategy effectively will depend in large part on how well key management and other personnel perform in their positions and are integrated within our company. There is no assurance that we will be able to retain these key management and personnel. The loss of any key employee could result in significant disruptions to our operations, the successful implementation and completion of company initiatives and the results of our operations. In addition, the integration of replacement personnel could be time consuming, may cause additional disruptions to our operations and may be unsuccessful.
Factors outside of our control may adversely affect our operations and operating results.
The demand for our temporary and permanent staffing services is highly dependent upon the state of the economy and upon the staffing needs of our clients. Any variation in the economic condition or unemployment levels in the United States or in the economic condition of the region where our clients are located, or in any specific industry may severely reduce the demand for our services and thereby significantly decrease our revenues and profits. Furthermore, our temporary and permanent staffing services business consists of the placement of individuals seeking temporary and permanent employment. There can be no assurance that qualified candidates for employment will continue to seek employment through Staf*Tek. Qualified candidates generally seek temporary or permanent positions through multiple sources, including Staf*Tek and its competitors. Any shortage of qualified candidates could materially adversely affect our revenues.
Our market is competitive, and our financial results and financial condition could be adversely affected if we are unable to anticipate or react to this competition.
The market for temporary and permanent staffing services is highly competitive and, because it is a service business, the barriers to entry are quite low. There are many competitors, some of which have greater resources than us, and new competitors are constantly entering the market. In addition, long-term contracts form a negligible portion of our revenues. Therefore, there can be no assurance that we will be able to retain clients or market share in the future. Nor can there be any assurance that we will, in light of competitive pressures, be able to remain profitable or maintain our current profit margins. If we fail to compete successfully in this highly competitive market, our business, financial condition, and results of operations will be materially and adversely affected.
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We depend on attracting and retaining qualified candidates; during periods of economic growth, our costs to do so increases and it becomes more difficult to attract and retain people.
The success of our staffing services depends on our ability to attract and retain qualified employees for placement with our customers. Our ability to attract and retain qualified personnel could be impaired by rapid improvement in economic conditions resulting in lower unemployment and increases in compensation. During periods of economic growth, we face growing competition for retaining and recruiting qualified personnel, which in turn leads to greater advertising and recruiting costs and increased salary expenses. If we cannot attract and retain qualified employees, the quality of our services may deteriorate and our reputation and results of operations could be adversely affected.
Our inability to attract and retain qualified employees could have a material adverse effect on our business, financial condition and results of operations.
Our business involves the delivery of professional services and is very labor intensive. Our success depends in large part upon our ability to attract, develop, motivate and retain highly skilled technical employees. We can experience high turnover of our personnel and are often required to recruit and train replacement personnel as a result of a changing and expanding work force. Accordingly, we may experience increased compensation costs that may not be offset through either increased productivity or higher customer pricing. Furthermore, the market for IT services change rapidly because of technological innovation, new product introductions, changes in customer requirements, evolving industry standards and many other factors. New products and new technology often render existing information services or technology infrastructure obsolete, excessively costly or otherwise unmarketable. As a result, our success depends on our ability to attract and retain qualified employee candidates who are knowledgeable and familiar with these new products and technologies. We cannot guarantee that we will be successful in recruiting and retaining sufficient numbers of qualified employee candidates in the future, especially when we need to expand our services in a short time period. Our inability to attract and retain qualified personnel, or increases in wages or other costs of attracting, training or retaining qualified personnel, could have a material adverse effect on our business, financial condition and results of operations.
80% of our revenues come from one client.
During our year ended December 31, 2012, approximately 80% of our revenues were derived from our largest client. The loss of this client or the decline in business from this client would have a material adverse effect on our revenues and profits. Accordingly, any events that create an adverse affect on this client’s operations or financial performance may also create a material adverse effect on our revenues and profits.
Our revenues are generated by only two clients.
At the present time, our revenues come from only two clients. The loss of any of these clients or the decline in business from any of these clients will have a material adverse effect on our revenues and profits.
Our common stock is subject to the SEC’s Penny Stock Regulations which may affect the liquidity for our stock, the ability of our stockholders to resell their shares through a broker-dealer, and their ability to obtain accurate price quotations.
Our common stock is subject to the SEC’s “penny stock” rules. These regulations define a “penny stock” to be any equity security that has a market price (as defined) of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, these rules require the delivery, prior to the transaction, of a disclosure schedule prepared by the SEC relating to the penny stock market. The broker-dealer also must disclose the commissions payable to the broker-dealer and the registered underwriter, current quotations for the securities, information on the limited market in penny stocks and, if the broker-dealer is the sole market-maker, the broker-dealer must disclose this fact and the broker-dealers’ presumed control over the market. In addition, the broker-dealer must obtain a written statement from the customer that such disclosure information was provided and must retain such acknowledgment for at least three years. Further, monthly statements must be sent disclosing current price information for the penny stock held in the account. The penny stock rules also require that broker-dealers engaging in a transaction in a penny stock make a special suitability determination for the purchaser and receive the purchaser’s written consent to the transaction prior to the purchase. The foregoing rules may materially and adversely affect the liquidity for the market of our common stock, if any such public market develops. Such rules may also affect the ability of broker-dealers to sell our common stock in any such public market, the ability of holders of such securities to obtain accurate price quotations and may therefore impede the ability of holders of our common stock to sell such securities in the secondary market.
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ITEM 1B. UNRESOLVED STAFF COMMENTS
Not Applicable.
We lease approximately 2,286 square feet of office space from a non-affiliated third party at 4870 South Lewis, Suite 250, Tulsa, OK 74105. Our monthly lease payment is $2,715. We currently lease this office on a month-to-month basis.
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 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock is traded on the OTC Bulletin Board under the symbol STJO.
The following table shows the high and low bid information for our common stock for each quarter during 2011 - 2012.
| QUARTER | LOW BID | HIGH BID | ||||||
| Quarter ending December 31, 2012 | $ | 0.70 | $ | 1.20 | ||||
| Quarter ending September 30, 2012 | $ | 0.51 | $ | 1.48 | ||||
| Quarter ending June 30, 2012 | $ | 0.51 | $ | 0.80 | ||||
| Quarter ending March 31, 2012 | $ | 0.45 | $ | 0.86 | ||||
| Quarter ending December 31, 2011 | $ | 0.57 | $ | 1.00 | ||||
| Quarter ending September 30, 2011 | $ | 0.62 | $ | 1.08 | ||||
| Quarter ending June 30, 2011 | $ | 0.27 | $ | 0.63 | ||||
| Quarter ending March 31, 2011 | $ | 0.45 | $ | 0.62 | ||||
The above information was obtained from the NASD. Because these are over-the-counter market quotations, these quotations reflect inter-dealer prices, without retail mark-up, markdown or commissions and may not represent actual transactions. There is currently no public trading market for our preferred stock.
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As of December 31, 2012, representing the last trading day of our most recently completed fiscal quarter, there were 11,809,802 shares of common stock issued and outstanding, held by approximately 292 shareholders of record. Within the holders of record of our common stock are depositories, such as Cede & Co., that hold shares of stock for several brokerage firms which, in turn, hold shares of stock for a multitude of additional beneficial owners. Accordingly, it is impossible for us to determine exactly how many beneficial stockholders we actually have. As of December 31, 2012, there were 5,708 shares of our Series A Convertible Preferred Stock issued and outstanding, held by one shareholder of record.
As of December 31, 2012, there were 452,500 outstanding options or warrants to purchase shares of common stock and 5,708 outstanding shares of Series A Preferred Stock convertible into shares of the Company’s Common Stock. The options may be converted into common shares at a weighted average exercise price of $1.05 per share and the preferred shares may be converted into common shares on a one for one basis.
Dividend Policy
We have never paid a cash dividend on our common stock nor do we anticipate paying cash dividends on our common stock in the near future. It is our present policy to not to pay cash dividends on our common stock but to retain earnings, if any, to fund growth and expansion. Any payment of cash dividends of the common stock in the future will be dependent upon our financial condition, results of operations, current and anticipated cash requirements, plans for expansion, as well as other factors the Board of Directors deems relevant.
Penny Stock
Our common stock is subject to the provisions of Section 15(g) and Rule 15g-9 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), commonly referred to as the “penny stock rule.” Section 15(g) sets forth certain requirements for transactions in penny stocks, and Rule 15g-9(d) (1) incorporates the definition of “penny stock” that is found in Rule 3a51-1 of the Exchange Act. The Securities and Exchange Commission (“SEC”) generally defines “penny stock” to be any equity security that has a market price less than $5.00 per share, subject to certain exceptions. If our Common Stock is deemed to be a penny stock, trading in the shares will be subject to additional sales practice requirements on broker-dealers who sell penny stocks to persons other than established customers and accredited investors. “Accredited investors” are persons with assets in excess of $1,000,000 or annual income exceeding $200,000, or $300,000 together with their spouse. For transactions covered by these rules, broker-dealers must make a special suitability determination for the purchase of such security and must have the purchaser’s written consent to the transaction prior to the purchase. Additionally, for any transaction involving a penny stock, unless exempt, the rules require the delivery, prior to the first transaction, of a risk disclosure document, prepared by the SEC, relating to the penny stock market. A broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative, and current quotations for the securities. Finally, monthly statements must be sent disclosing recent price information for the penny stocks held in an account and information on the limited market in penny stocks. Consequently, these rules may restrict the ability of broker-dealers to trade and/or maintain a market in our Common Stock and may affect the ability of our shareholders to sell their shares.
Recent Sales of Unregistered Securities
Set forth below is information regarding the sale of equity securities during the year ended December 31, 2012 that were not registered under the Securities Act of 1933, as amended (the “Securities Act”), and which were not previously disclosed either in a quarterly report on Form 10-Q or on a current report on Form 8-K:
In a private placement during the year ended December 31, 2012, the Company sold 190,000 shares of common stock to accredited investors at a price of $0.50 per share for gross proceeds totaling $95,000. 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 year ended December 31, 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 conducted subsequent to December 31, 2012, the Company sold 91,000 shares of common stock to accredited investors at a price of $0.50 per share for gross proceeds totaling $45,500. 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.
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ITEM 6. SELECTED FINANCIAL DATA
As a smaller reporting company, we are not required to provide the information required by this Item.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The following discussion should be read in conjunction with our audited Consolidated Financial Statements and accompanying Notes, included herein. 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 the results anticipated in these statements as a result of a variety of factors, including those discussed in our filings with the Securities and Exchange Commission and as discussed in the sections under the heading “Risk Factors” in this Report.
Any reference to “we,” “us” and “our” herein shall mean St. Joseph, Inc., together with its consolidated subsidiary, Staf*Tek Services, Inc.
Overview
For the year ended December 31, 2012, we generated revenues of $427,376, down from $467,907 for the year ended December 31, 2011. The decrease is primarily due to the decrease in revenues from the loss in Staf*Tek’s contracted employees whom either fulfilled their contracts or were laid off. For the year ending December 31, 2012, Staf*Tek’s total service revenues decreased by $40,531, when compared to the total service revenues for 2011.
Our ability to continue as a going concern is contingent upon the successful completion of additional financing arrangements, and the development of operational solutions to achieve and maintain profitable operations. We currently do not have adequate resources to fund our operations and we will need to raise funds and/or increase our revenues in order to sustain our operations. Management plans to finance our operating and capital requirements through business alliances, such as strategic or financial transactions with third parties, the sale of securities, or other financing arrangements. Amounts raised will be used for working capital purposes, to further develop our services, and to provide financing for marketing and promotion of our business. While our Management is expending its best efforts to achieve the above plans, there is no assurance that any such activity will generate funds that will be available for operations.
These conditions raise substantial doubt about our ability to continue as a going concern. Our financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that may be necessary should the Company be unable to continue in existence. (See “Risk Factors” and “Financial Statements Footnote 1.”)
Since inception Staf*Tek business has been the recruiting and the placement of professional technical personnel on a temporary and permanent basis in the Tulsa, Oklahoma area. Staf*Tek assists their clients with projects that require specialized expertise ranging from multiple platform systems integration to end-user support, including specialists in programming, networking, systems integration, database design and help desk support, as well as providing qualified candidates in senior and entry level finance and accounting.
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Results of Operations for the Twelve Months Ended December 31, 2012 and 2011
| Change | Change | |||||||||||||||||||||||
| December 31, 2012 | December 31, 2011 | $ | % | |||||||||||||||||||||
| Net Revenues | $ | 427,376 | 100.0 | % | $ | 467,907 | 100.0 | % | $ | (40,531 | ) | -8.66 | % | |||||||||||
| Cost of Revenues | 289,236 | 67.68 | % | 342,470 | 73.19 | % | (53,234 | ) | -15.54 | % | ||||||||||||||
| Gross Margin (loss) | 138,140 | 32.32 | % | 125,437 | 26.81 | % | 12,703 | 10.13 | % | |||||||||||||||
| Operating Expenses: | ||||||||||||||||||||||||
| Selling, General and | ||||||||||||||||||||||||
| Administrative Expenses | 627,726 | 146.88 | % | 544,240 | 116.31 | % | 83,486 | 15.34 | % | |||||||||||||||
| Depreciation and Amortization | 1,073 | 0.25 | % | 1,149 | 0.25 | % | (76 | ) | -6.61 | % | ||||||||||||||
| Total Operating Expenses | 628,799 | 147.13 | % | 545,389 | 116.56 | % | 83,410 | 15.29 | % | |||||||||||||||
| Income (Loss) from Operations | (490,659 | ) | -114.81 | % | (419,952 | ) | -89.75 | % | (70,707 | ) | 16.84 | % | ||||||||||||
| OTHER INCOME AND (EXPENSE): | ||||||||||||||||||||||||
| Other Income (expense) | 867 | 0.20 | % | 75 | 0.02 | % | 792 | 1056.00 | % | |||||||||||||||
| Interest Expense | (29,361 | ) | -6.87 | % | (25,701 | ) | -5.49 | % | (3,660 | ) | 14.24 | % | ||||||||||||
| Net Other Expense | (28,494 | ) | -6.67 | % | (25,626 | ) | -5.48 | % | (2,868 | ) | 11.19 | % | ||||||||||||
| Loss before provision for income taxes | (519,153 | ) | -121.47 | % | (445,578 | ) | -95.23 | % | (73,575 | ) | 16.51 | % | ||||||||||||
| Provision for Income Taxes | - | 0.00 | % | - | 0.00 | % | - | 0.00 | % | |||||||||||||||
| Net Income (Loss) | (519,153 | ) | -121.47 | % | (445,578 | ) | -95.23 | % | (73,575 | ) | 16.51 | % | ||||||||||||
| Benefit from tax loss carryforward | - | 0.00 | % | - | 0.00 | % | - | 0.00 | % | |||||||||||||||
| Net Income (Loss) | $ | (519,153 | ) | -121.47 | % | $ | (445,578 | ) | -95.23 | % | $ | (73,575 | ) | 16.51 | % | |||||||||
Net Revenues
Net Revenues for the twelve months ended December 31, 2012 decreased to $427,376 from $467,907 for the twelve months ended December 31, 2011. The decrease in net revenues of 40,531 or approximately 9%, below the 2011 period is due primarily to decreased revenues generated by the loss of contracted employees and a decrease in hiring due to economic conditions since the prior period.
Cost of Revenues
Cost of Revenues for the twelve months ended December 31, 2012 decreased to $289,236 from $342,470 for the twelve months ended December 31, 2011. The overall decrease in cost of revenues of $53,234, or approximately 16%, below the 2011 period is directly attributable to the cost associated with the decrease in number of newly contracted employees described above.
Gross Margin
The overall gross margin for the twelve months ended December 31, 2012 increased to $138,140 from $125,437 for the twelve months ended December 31, 2011. The overall increase in gross margin of $12,703 or approximately 10% over the 2011 period is directly attributable to reduced costs in hiring and retaining our newly contracted employees.
Operating Expenses
Total operating expenses for the twelve months ended December 31, 2012 increased to $628,799 from $545,389 for the twelve months ended December 31, 2011. Reasons for the overall increase in operating expenses of $83,410 or approximately 13%, above the 2011 period is covered below in our discussions of General and Administrative Expenses and Stock-Based Compensation.
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General and Administrative Expenses
General and administrative expenses for the twelve months ended December 31, 2012 increased to $627,726 from $544,240 for the twelve months ended December 31, 2011. The increase in general and administrative expenses of $83,486 or approximately 13% above the 2011 period is due primarily to an increase in stock modification expenses.
Stock-Based Compensation – Modification of Common Stock Options
On August 10, 2011 the Company’s board of directors extended the deadline from August 24, 2011 to August 24, 2012 for the exercise of the 460,000 options set at $1.05 per share, previously granted to officers, directors and key personnel. 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 stock-based compensation totaling $156,067.
The Company further extended the deadline to December 31, 2012 in a board of directors meeting on August 23, 2012; and most recently extended the deadline to June 30, 2013 in a board meeting on December 12, 2012. The extensions were considered a modification of the original stock options. Accordingly, the Company revalued the stock options, which resulted in charges to share-based compensation totaling $214,563 for the year ended December 31, 2012.
Total Operating Income and Losses
Total operating losses for the twelve months ended December 31, 2012 increased to $490,659 from operating losses of $419,952 for the twelve months ended December 31, 2011. The overall increase in operating losses of $70,707 or approximately 14% above the 2011 period is primarily due to the increase in the charges for modification of stock options.
Net Other Expenses
Net other expenses for the twelve months ended December 31, 2012 increased to $28,494 from $25,626 for the twelve months ended December 31, 2011. The overall increase in our other expenses of $2,868, or approximately 11% over the 2011 period is primarily due to an increase in interest expense.
Interest Expense
Interest expense for the twelve months ended December 31, 2012 increased to $29,361 from $25,701 for the twelve months ended December 31, 2011. The overall increase in our interest expense of $3,660 or approximately 14% over the 2011 period is due primarily to the increase of interest bearing debts.
Net Loss
Net Loss for the twelve months ended December 31, 2012 increased to $519,153 from $445,578 for the twelve months ended December 31, 2011. This increase in net loss of $73,575 or approximately 14% above the 2011 period is due primarily to the increase in charges resulting from the modifications of stock options.
Liquidity and Capital Resources
| December 31, 2012 | December 31, 2011 | |||||||
| Net cash used in operating activities | $ | (82,546 | ) | $ | (236,955 | ) | ||
| Net cash provided by investing activities | $ | - | $ | - | ||||
| Net cash provided by financing activities | $ | 86,352 | $ | 231,358 | ||||
General
For the twelve months ended December 31, 2012, we had positive cash flows resulting from $82,546 of cash used in our operating activities and $86,352 of cash provided by our financing activities. However, for the twelve months ended December 31, 2012, our funds from operations were not sufficient to cover our daily operations as further explained below.
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Cash Flows from Operating Activities
Net cash used in our operating activities of $82,546 for the twelve months ended December 31, 2012 was primarily attributable to the net loss and offset by depreciation and stock-based compensation expenses, decreases in accounts receivable, and increases in accounts payable and accrued liabilities.
Cash Flows from Investing Activities
Net cash used in our investing activities of $0 for the twelve months ended December 31, 2012.
Cash Flows from Financing Activities
Net cash provided by our financing activities of $86,352 for the twelve months ended December 31, 2012 primarily from proceeds of common stock sales and related party loans.
Internal Sources of Liquidity
For the twelve months ended December 31, 2012, the revenues generated from our operations were insufficient to fund our daily operations. Gross profit for fiscal year 2012 was $138,140, which was insufficient to meet our operating expenses of $628,799 for the same period. There is no assurance that funds from our future operations will meet the requirements of our daily operations in the future. In the event that funds from our operations will be insufficient to meet our operating requirements, we will need to seek other sources of financing to maintain liquidity.
External Sources of Liquidity
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 its 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 of December 31, 2012, we have debt in the total aggregate amount of $201,197, as summarized in Notes 2 and 4 to the financial statements. This debt was incurred to pay our operating costs, compliance costs and legal fees. Of this debt, as of December 31, 2012, $131,997 represented the balance of a bank loan which is secured by all of our assets. This bank loan carries interest of 6.5% per annum and requires monthly payment of $2,698 per month with a balloon payment in the amount of $117,937 coming due on August 31, 2013. In the event we default on this loan, the bank may foreclose on our assets.
In a private placement during the year ended December 31, 2012, the Company sold 190,000 shares of common stock to accredited investors at a price of $0.50 per share for gross proceeds totaling $95,000. 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 year ended December 31, 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.
Our business plan involves, in part, increasing the number of employees placed both on a temporary and permanent basis. Such increased placement is expected to result in increased profit to us, although it also results in increased short- term cash needs. We have utilized net revenues, the proceeds from a number of private sales of our equity securities, the exercise of options, the issuance of promissory notes and our line of credit to meet our working capital requirements. We are reluctant to incur further debt and intend to rely upon net revenues and private sales of equity securities to meet our liquidity needs for the next 12 months.
Our liquidity and capital resources, as well as business prospects, are all subject to the risks disclosed in Item 1A, among others.
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Preferred A Stock Dividends
Our Series A Shares have a stated value of $3.00 per share. Each holder of Series A Shares is entitled to receive a dividend equal 6.75% of the stated value of the Series A Shares payable on each anniversary of the date of issuance of such shares. 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 December 31, 2012 and 2011, respectively. The Company will commence dividend payments pursuant to the terms of a settlement agreement as funds are available.
The preferred A stock may be converted to the Company’s common stock at the rate of one share of e preferred A stock for one share of common stock at any time by the shareholder. The convertible preferred A stock can be called for redemption by the Company no sooner than two (2) years after the date of issuance, and only if the Company’s 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, the stock has not traded at that amount. In September 2009, the three largest holders of the Series A shares converted 380,500 shares of Series A shares to common stock on a one-to-one basis. Following this conversion, only 5,708 shares of Series A stock remain outstanding.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Our Financial Statements and supplementary data are included beginning immediately following the signature page to this Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Not applicable.
ITEM 9A(T). CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures.
The Company’s Chief Executive Officer and the Company’s Chief Financial Officer evaluated the effectiveness of the Company’s disclosure controls and procedures as of December 31, 2012 and had concluded that the Company’s disclosure controls and procedures are effective. There have been no changes in our internal control over financial reporting during the year ended December 31, 2012, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
The term disclosure controls and procedures means controls and other procedures that are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
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Changes in Internal Control over Financial Reporting.
There have been no changes in our internal control over financial reporting during the year ended December 31, 2012, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Management’s Evaluation of Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) of the Exchange Act. This system is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the consolidated financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that: (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions and disposition of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated 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 (3) 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 consolidated financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. The scope of management’s assessment of the effectiveness of internal control over financial reporting includes all of our Company’s subsidiaries.
Our management performed an assessment as of December 31, 2012 of the effectiveness of our internal controls over financial reporting based upon the framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and concluded that our internal control over financial reporting was effective as of December 31, 2012.
None.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
The following information sets forth the names of the directors, executive officers, promoters control persons of the Company, their present positions with the Company, and their biographical information.
| Name | Age | Position(s) Held | Date Service Began | |||||
| Gerald McIlhargey | 65 | President, Chief Executive Officer and Director | March 2004 | |||||
| Kenneth L. Johnson | 53 | Secretary, Treasurer and Director | April 2000 | |||||
| Bruce Schreiner | 58 | Director | October 2003 | |||||
| Donal Ford | 57 | Director | August 2006 | |||||
| Maureen O’Brien | 64 | Director | August 2006 | |||||
| John Blackmon | 57 | President of Staf*Tek Services Inc. | June 2004 |
Gerald McIlhargey – Mr. McIlhargey has been a Director of St. Joseph since March of 2004. Mr. McIlhargey has spent over 26 years in management consulting for public companies. In his various management roles, Mr. McIlhargey has extensive experience in Marketing and Manufacturing as well as the Financing of Public Companies. Mr. McIlhargey has had a key role with several public companies, including International Corona Resources, Collingwood Energy, Sense Technologies Inc. and Maple Leaf Petroleum. Mr. McIlhargey received a Bachelor of Education degree from Simon Fraser University in British Columbia, Canada in 1972.
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Kenneth L. Johnson – Mr. Johnson has been a Director and Secretary/Treasurer of the Company since April of 2000. Mr. Johnson has been the Secretary/Treasurer and Director of Staf*Tek from December of 2003, to the present. For the past nine years, Mr. Johnson has been employed as a senior support representative with College Bookstore Management Systems (CMBS), a division of Nebraska Book Co., Inc. A provider of point of sale and inventory control computer software for the college bookstore industry. Mr. Johnson is involved in product development, customer support and training. Mr. Johnson graduated from Hastings College in 1985, earning a Bachelor of Arts Degree in Business Administration.
Bruce E. Schreiner, CPA – Mr. Schreiner, CPA, has been a Director of the Company since October of 2003. Mr. Schreiner has also been a Director of Staf*Tek Services, Inc. since October, 2003, to the present. Mr. Schreiner is a partner in the accounting firm of Schroeder & Schreiner, P.C. He served as an Agent with the Internal Revenue Service for over five years, culminating in an appointment to the Technical and Review Staff of Omaha, Nebraska, for the Nebraska District. Mr. Schreiner is a member of the American Institute and Nebraska Society of Certified Public Accountants and the Grand Island Area Chamber of Commerce. Mr. Schreiner is currently on the Board of Directors of Sense Technologies, Inc., a public company. Mr. Schreiner graduated magna cum laude from Hastings College in 1975 earning a Bachelor of Arts Degree in both Economics and Business Administration with emphasis in accounting.
Donal Kent Ford – Mr. Ford has been a Director of the Company since August 24, 2006. For the past ten years Mr. Ford has been President of Pinnacle Financial Services, Inc., a Third Party Administrator for Pension and Profit Sharing Plans located in Lantana, FL. Mr. Ford is a Credentialed Member of the American Society of Pension Actuaries and is actively involved in the South Florida Benefits Council. Mr. Ford has a Bachelor of Science in Business Administration from the University of Florida and a Doctor of Chiropractic from Life University. He is also a Certified Pension Consultant with the American Society of Pension Professionals and Actuaries.
Maureen O’Brien – Ms. O’Brien has been a Director of the Company since August 24, 2006. For the past seven years Ms. O’Brien has worked as Executive Assistant to David Core, CEO of Pinnacle Financial Services, Inc. For seven years prior to that Ms. O’Brien specialized in startup ventures with Real Applications, Inc. which included integrating an acquired programming services company.
John Blackmon – Mr. Blackmon has been Staf*Tek’s President since August 24, 2006. Recently he has expanded staffing services to include senior and entry-level finance and accounting services. Before joining Staf*Tek, Mr. Blackmon was a Senior Manager of IT with MCI/WorldCom. Mr. Blackmon joined MCI/WorldCom, now Verizon, in 1997 in the Operations organization and was quickly moved to the IT organization where his responsibilities included operations management, management of both technical and support organizations, and progressing to lead the development and implementation of all E*Commerce application solutions for the Wholesale division of WorldCom.
Term of Office
Our directors are elected for a one-year term to hold office until the next annual general meeting of our shareholders, or until removed from office in accordance with our bylaws and applicable law. Our officers are appointed by our Board of Directors and hold office until removed by the Board.
Family Relationships
There are no family relationships among the officers and directors, nor are there any arrangements or understanding between any of the directors or officers of our Company or any other person pursuant to which any Officer or Director was or is to be selected as an officer or director.
Involvement in Certain Legal Proceedings
During the last ten years, none of our Directors, persons nominated to become Directors, or executive officer were subject to any of the following events material to an evaluation of the ability or integrity of any such person:
| ● | A petition under the Federal bankruptcy laws or any state insolvency law was filed by or against, or a receiver, fiscal agent or similar officer was appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing; |
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| ● | Such person was convicted in a criminal proceeding or is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses); |
| ● | Such person was the subject of any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from, or otherwise limiting, the following activities: |
| ● | Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity; |
| ● | Engaging in any type of business practice; or |
| ● | Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of Federal or State securities laws or Federal commodities laws; |
| ● | Such person was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any Federal or State authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described in paragraph (f)(3)(i) Item 401 of Regulation S-K, or to be associated with persons engaged in any such activity; |
| ● | Such person was found by a court of competent jurisdiction in a civil action or by the Securities and Exchange Commission (the “Commission”) to have violated any Federal or State securities law, and the judgment in such civil action or finding by the Commission has not been subsequently reversed, suspended, or vacated; |
| ● | Such person was found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated; |
| ● | Such person was the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of: |
| ● | Any Federal or State securities or commodities law or regulation; or |
| ● | Any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or |
| ● | Any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or |
| ● | Such person was the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member. |
Committees of the Board of Directors; Meetings
During the year ended December 31, 2012, the Board met seven times during fiscal year 2012, no director attended fewer than 75% of the aggregate number of meetings of the Board and committees on which such director served.
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The Board has two standing committees, the Audit Committee and the Compensation Committee. The Board does not have a separate Nominating Committee and performs all of the functions of that committee.
The Audit Committee
The Audit Committee has as its primary responsibilities the appointment of the independent auditor for the Company, the pre-approval of all audit and non-audit services, and assistance to the Board in monitoring the integrity of our financial statements, the independent auditor’s qualifications, independence and performance and our compliance with legal requirements. The Audit Committee has adopted a written charter, which was mailed to its shareholders in 2006. During the year ended December 31, 2012, the Audit Committee met one time. Bruce Schreiner, Donal Ford, and Maureen O’Brien are the current members of the Audit Committee.
Since we are not a “listed” company, we are not subject to rules requiring the members of our Audit Committee to be independent; however we use the rules of The NASDAQ Stock Market in determining whether directors are independent for disclosure purposes. Based on its review of the applicable rules of The NASDAQ Stock Market governing audit committee membership, the Board believes that all members of the Audit Committee are “independent” within the meaning of such rules.
The Securities and Exchange Commission (“SEC”) requires a company to disclose whether it has an “Audit Committee Financial Expert” serving on its audit committee. Based on its review of the criteria of an Audit Committee Financial Expert under the rule adopted by the SEC, the Board believes that one member of the Audit Committee, Mr. Schreiner, qualifies as an Audit Committee Financial Expert. Each of the other current members have made significant contributions and provided valuable service to St. Joseph and its stockholders as members of the Audit Committee and the Board believes that each of them has demonstrated that he is capable of (i) understanding generally accepted accounting principles (“GAAP”) and financial statements, (ii) assessing the general application of GAAP principles in connection with the accounting for estimates, accruals and reserves, (iii) analyzing and evaluating our financial statements, (iv) understanding internal controls and procedures for financial reporting, and (v) understanding audit committee functions, all of which are attributes of an Audit Committee Financial Expert under the rule adopted by the SEC. Given the business experience and acumen of these individuals and their service as members of the Audit Committee, the Board believes that each of them is qualified to carry out all duties and responsibilities of the Audit Committee.
Compensation Committee
The Compensation Committee recommends to the Board annual salaries for senior management and reviews all company benefit plans. During the year ended December 31, 2012, the Compensation Committee met one time and reviewed the compensation of all St. Joseph employees. The current members of the Compensation Committee are Bruce Schreiner, Kenneth Johnson, and Donal Ford.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 (the “34 Act”) requires our officers and directors and persons owning more than 10% of our Common Stock to file initial reports of ownership and changes in ownership with the Securities and Exchange Commission (“SEC”). Officers, directors and persons who are the beneficial owners of more than 10% of the common stock of the Company are required by SEC regulation to furnish us with copies of all Section 16(a) forms they file. Based solely upon review of the copies of such reports furnished to us during, and with respect to, the fiscal year ended December 31, 2012 or any written representations we received from a director, officer, or beneficial owner of more than 10% of our common stock that no other reports were required during that period, we believe that, for the fiscal year ended December 31, 2012, all Section 16(a) filing requirements applicable to our reporting persons were met.
Code of Ethics
We have adopted a code of ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, and persons performing similar functions. The code of ethics can be viewed on our website: www.stjosephinc.com.
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ITEM 11. EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth information concerning the compensation of our named executive officers during 2010, 2011 and 2012:
Summary Compensation Table
| Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($) | Option Awards ($) | Non- Equity Incentive Plan Compensation ($) | Non-Qualified Deferred Compensation Earnings ($) | All other Compensation ($) | Total ($) | |||||||||||||||||||||||||||
| (a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) | |||||||||||||||||||||||||||
| Gerald McIlhargey | 2010 | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||
| President, CEO and Director | 2011 | - | - | - | $ | 33,928 | - | - | - | $ | 33,928 | |||||||||||||||||||||||||
| 2012 | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||
| Kenneth L. Johnson, | 2010 | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||
| Secretary, Treasurer and Director | 2011 | - | - | - | $ | 8,482 | - | - | - | $ | 8,482 | |||||||||||||||||||||||||
| 2012 | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||
| John Blackmon, | 2010 | $ | 77,000 | - | - | - | - | - | - | $ | 77,000 | |||||||||||||||||||||||||
| President of Staf*Tek Services, Inc. | 2011 | $ | 77,000 | - | - | $ | 16,964 | - | - | - | $ | 93,964 | ||||||||||||||||||||||||
| 2012 | $ | 77,000 | - | - | - | - | - | - | $ | 77,000 | ||||||||||||||||||||||||||
Compensation Summary
Gerald McIlhargey. Mr. McIlhargey was appointed President and Chief Executive Officer of our Company on May 17, 2006. Mr. McIlhargey has served as a Director of our Company since March of 2004. We do not have an employment agreement with Mr. McIlhargey and he is not receiving any compensation for serving as our Acting President. On August 24, 2006, he received options to purchase 100,000 shares of our common stock for agreeing to serve as a Director on our Board. The options have an exercise price of $1.05 per share and expire on June 30, 2013.
Kenneth L. Johnson. We do not have an employment agreement with Mr. Johnson and he is not receiving any compensation for serving as our Secretary and Treasurer. On August 24, 2006, he received options to purchase 50,000 shares of our common stock for agreeing to serve as a Director on our Board. In December 2009 Mr. Johnson exercised 25,000 options. His remaining 25,000 options have an exercise price of $1.05 per share and expire on June 30, 2013.
John Blackmon. Mr. Blackmon is the President of our wholly-owned subsidiary, Staf*Tek Services, Inc. We do not have an employment agreement with Mr. Blackmon. He receives an annual salary of $77,000 as compensation for serving as Staf*Tek Services, Inc.’s President. On August 24, 2006, he received options to purchase 50,000 shares of our common stock for agreeing to serve as President of Staf*Tek Services, Inc. The options have an exercise price of $1.05 per share and expire on June 30, 2013.
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OUTSTANDING EQUITY AWARDS AT FISCAL-END
The following table provides information concerning equity awards as of our 2012 fiscal year end, December 31, 2012, held by each of our named executive officers.
| OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END | ||||||||||||||||||||||||||||||||||
| Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||
| Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares of Units of Stock That Have Not Vested (#) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | |||||||||||||||||||||||||
| (a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) | |||||||||||||||||||||||||
| Gerry McIlhargey | 100,000 | - | - | $ | 1.05 | June 30, 2013 | - | - | - | - | ||||||||||||||||||||||||
| Kenneth L. Johnson | 25,000 | - | - | $ | 1.05 | June 30, 2013 | - | - | - | - | ||||||||||||||||||||||||
| John Blackmon | 50,000 | - | - | $ | 1.05 | June 30, 2013 | - | - | - | - | ||||||||||||||||||||||||
Director Compensation
The directors receive no annual compensation other than the options they received for serving on the board of directors of St. Joseph; however, they are reimbursed for out-of-pocket expenses incurred in connection with the Company’s business.
On August 24, 2006 each of the directors listed below received fully vested options to purchase up to 50,000 shares of our common stock for agreeing to serve as our Directors. The options have an exercise price of $1.05 and expire on June 30, 2013. 452,000 of these options remained outstanding and unexercised as of December 31, 2012.
As shown by the following table, none of our directors who are not executive officers received any compensation during our fiscal year ended December 31, 2012:
| 22 |
| Name | Fees ($) | Stock ($) | Option ($) | Non-equity ($) | Nonqualified ($) | All other ($) | Total ($) | |||||||||||||||||||||
| (a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | |||||||||||||||||||||
| Bruce Schreiner | - | - | - | - | - | - | - | |||||||||||||||||||||
| Donal Ford | - | - | - | - | - | - | - | |||||||||||||||||||||
| Maureen O’Brien | - | - | - | - | - | - | - |
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
Equity Compensation Plans
Information regarding securities authorized for issuance under equity compensation plans is disclosed in Item 5 under “Equity Compensation Plans.”
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information as of March 29, 2013 based on information obtained from the persons named below, with respect to the beneficial ownership of our common and preferred stock by (i) each person (including groups) known to us to be the beneficial owner of more than 5 percent of our common stock, and (ii) each Director and Officer, and (iii) all Directors and Officers of the Company, as a group. Except as otherwise indicated, all stockholders have sole voting and investment power with respect to the shares listed as beneficially owned by them, subject to the rights of spouses under applicable community property laws.
| Name of Beneficial Owner (1) |
Number
of |
Percent | Number of of Series A Preferred |
Percent | ||||||||||||
| Gerald McIlhargey, President, Chief Executive Officer and Director | 889,923 | (3) | 7.47 | % | 0 | 0 | % | |||||||||
| Kenneth L. Johnson, Secretary, Treasurer and Director | 150,000 | (4) | 1.26 | % | 0 | 0 | % | |||||||||
| Bruce Schreiner, Director | 50,000 | (5) | 0.42 | % | 0 | 0 | % | |||||||||
| Maureen O’Brien, Director | 75,000 | (6) | 0.63 | % | 0 | 0 | % | |||||||||
| Donal Ford, Director | 75,000 | (5) | 0.63 | % | 0 | 0 | % | |||||||||
| John Blackmon, President of Staf*Tek Services, Inc. | 89,954 | (5) | 0.76 | % | 0 | 0 | % | |||||||||
| All Executive Officers and Directors as a Group (5 individuals) | 1,319,877 | 11.09 | % | 0 | 0 | % | ||||||||||
| Hong Kong Base, Ltd. | 1,450,000 | (7) | 12.18 | % | 0 | 0 | ||||||||||
| 0 | 0 | |||||||||||||||
| Camille Quinn | 8,994 | (8) | 0.03 | % | 5,708 | 100 | % |
| (1) | The address for Messrs. McIlhargey, Johnson, Schreiner, Ford, and Ms. O’Brien is: c/o St. Joseph, Inc., 4870 S. Lewis, Suite 250, Tulsa, Oklahoma 74105. The address for Hong Kong Base, Ltd. is Unit C, 26th Floor, CNT Tower, 338 Hennessey Road, Wanchai, Hong Kong, China. The address for Ms. Bell is Route 1 Box 650, Haskell, Oklahoma 74436. The address for Ms. Quinn is 5800 E. Skelly Drive, Suite 1230, Tulsa, OK 7413. Except as indicated by footnote, and subject to applicable community property laws, the persons named in the table have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them. |
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| (2) | Based upon 11,900,802 shares of common stock and 5,702 shares of Series A Preferred Stock issued and outstanding on March 18, 2013. Percentages are rounded to the nearest one hundredth of a percent. As required by Item 403 of Regulation S-B, calculated on the basis of the amount of outstanding securities plus, for each person or group, any securities that person or group has the right to acquire within 60 days pursuant to options, warrants, conversion privileges or other rights. The percentage of the person holding such option or warrant but are not deemed outstanding for computing the percentage of any other person. |
| (3) | Includes fully vested options to purchase 100,000 shares of our common stock at an exercise price of $1.05 per share. |
| (4) | Includes fully vested options to purchase 25,000 shares of our common stock at an exercise price of $1.05 per share. |
| (5) | Includes fully vested options to purchase 50,000 shares of our common stock at an exercise price of $1.05 per share. |
| (6) | Includes fully vested options to purchase 42,500 shares of our common stock at an exercise price of $1.05 per share. |
| (7) | Hong Kong Base Ltd is a corporation organized under the laws of Hong Kong and is beneficially owned by Yvonne Chun Siu Fun. |
| (8) | Includes 5,708 shares of common stock, which would be issuable on conversion of the 5,702 shares of Series A Preferred Stock held by Ms. Quinn. |
Equity Compensation Plans
The following table sets forth information as of December 31, 2012 with respect to compensation plans under which we are authorized to issue shares of our common stock, aggregated as follows:
| ● | all compensation plans previously approved by security holders; and |
| ● | all compensation plans not previously approved by security holders. |
| Equity Compensation Plan Information | ||||||||||||
| Plan category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | |||||||||
| (a) | (b) | (c) | ||||||||||
| Equity compensation plans approved by security holders | 452,500 | (1) | $ | 1.05 | 640,000 | |||||||
| Equity compensation plans not approved by security holders | 0 | 0 | 0 | |||||||||
| Total | 452,500 | $ | 1.05 | 640,000 | ||||||||
| (1) | On August 24, 2006, we adopted our 2006 Stock Option Plan, which reserved 1,125,000 shares of our common stock for issuance pursuant to the plan. On August 24, 2006, our Board of Directors granted stock options to our officers, directors and employees pursuant to the plan to purchase 410,000 share of our common stock at an exercise price of $1.05 per share and a term that ends on August 24, 2012. On December 1, 2010, there were 75,000 options granted which will expire on June 30, 2013. |
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Other than disclosed below, none of the directors or executive officers of the Company nor any person who beneficially owns, directly or indirectly, shares carrying more than 10% of the voting rights attached to all outstanding shares of the Company, nor any promoter of the Company, nor any relative or spouse of any of the foregoing persons has any material interest, direct or indirect, in any transaction since the beginning of the Company’s 2012 fiscal year or in any presently proposed transaction which, in either case, has or will exceed one percent of the average of the Company’s total assets at year end for the last two completed fiscal years. The Company has not entered into transactions with any member of the immediate families of the foregoing persons, nor is any such transaction proposed
Gerald McIlhargey
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, 2013.
During the years ended December 31, 2012 and 2011, our officer advanced the Company $7,500 and $16,700, respectively, for working capital in exchange for two promissory notes. The notes matured on December 31, 2012 and 2011, and did not bear any interest. The notes have been extended until December 31, 2013.
DIRECTOR INDEPENDENCE
Although we are not “listed” by any exchange with established criteria for determining director independence, we use the criteria established by The NASDAQ Stock Market governing audit committee membership for making such determination for disclosure purposes. Based on its review of the applicable rules of The NASDAQ Stock Market governing audit committee membership, the Board believes that Bruce Schreiner, Donal Ford, and Maureen O’Brien would be deemed “independent” within the meaning of such rules.
As Bruce Schreiner, Donal Ford, and Maureen O’Brien are the only directors on our audit and compensation committees, such committees have no directors who are not independent.
Because we do not have a nominating committee, our entire Board acts in such capacity, including our two directors who are not independent, Gerald McIlhargey and Kenneth L. Johnson.
| 25 |
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
Our financial statements for the fiscal years ended December 31, 2012 and December 31, 2011, along with the related statements of operations, stockholders’ equity and cash flows have been audited by BF Borgers PC and Borgers & Cutler CPA’s PLLC both CPA’s of Denver, Colorado, independent registered public accounting firms, to the extent and for the period set forth in their report, and are set forth in reliance upon such report given upon the authority of them as experts in auditing and accounting.
Audit Fees
Our independent auditor, BF Borgers CPA PC, billed an aggregate of $22,500 for the year ended December 31, 2012 audit. Our previous auditors, Borgers and Cutler CPA PLLC billed $22,500 for the December 31, 2011 audit and an aggregate of $12,500 in connection with the reviews of the Company’s unaudited quarterly financial statements for the period ended December 31, 2012.
Audit Fees and Audit Related Fees consist of fees billed for professional services rendered for auditing our Financial Statements, reviews of interim Financial Statements included in quarterly reports, services performed in connection with other filings with the Securities & Exchange Commission and related comfort letters and other services that are normally provided by our independent auditors in connection with statutory and regulatory filings or engagements.
Tax Fees
| 2012 | 2011 | |||||
| $ | 0.00 | $ | 0.00 | |||
Tax Fees consists of fees billed for professional services for tax compliance, tax advice and tax planning. These services include assistance regarding federal, state and local tax compliance and consultation in connection with various transactions and acquisitions.
All Other Fees
| 2012 | 2011 | |||||
| $ | 0.00 | $ | 0.00 | |||
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
| EXHIBIT NO. | DESCRIPTION OF DOCUMENT | |
| 2.1 (5) | Agreement of Share Exchange and Purchase and Sale dated January 2, 2004 between St. Joseph, Inc. and Phyllis L. Bell, and Paul D. Aelmore and Staf-Tek Services, Inc. | |
| 3.1 (1) | Articles of Incorporation of Pottery Connection, Inc. | |
| 3.2 (1) | Articles of Amendment to Articles of Incorporation as filed with the Colorado Secretary of State on January 19, 2001. | |
| 3.3 (5) | Articles of Amendment to Articles of Incorporation as filed with the Colorado Secretary of State on November 6, 2003. | |
| 3.4 (6) | Articles of Amendment to Articles of Incorporation as filed with the Colorado Secretary of State on September 29, 2006. | |
| 3.5 (7) | Articles of Amendment to the Articles of Incorporation filed with the Colorado Secretary of State on May 18, 2007. | |
| 3.6 (7) | Articles of Amendment to the Articles of Incorporation filed with the Colorado Secretary of State on May 23, 2007. | |
| 3.5 (3) | Bylaws of St. Joseph, Inc. (formerly known as Pottery Connection, Inc.) |
| 26 |
| 4.1 (1) | Specimen form of St. Joseph’s stock certificate for shares of its common stock. | |
| 4.2 (10) | 2006 Stock Option Plan. | |
| 10.1 (3) | Exclusive Agreement between St. Joseph Energy, Inc. and David Johnson. | |
| 10.2 (2) | Form of User Agreement for St. Joseph, Inc. | |
| 10.3 (9) | Promissory Note dated June 16, 2005 for $96,000 issued by St. Joseph, Inc. to John H. Simmons. | |
| 10.4 (9) | Promissory Note dated December 28, 2006 for $25,000 issued by Staf*Tek Services, Inc. to Gerry McIlhargey. | |
| 10.5 (8) | Form of Letter Agreement for conversion of Series B Stock to common stock on December 31, 2007. | |
| 10.6 (8) | Form of Letter Agreement for conversion of promissory notes to common stock on December 31, 2007. | |
| 14.1 (9) | Code of Ethics. | |
| 21.1 (9) | Subsidiaries of St. Joseph, Inc. | |
| 31.1* | Principal Executive Officer Certification under Section 302 of the Sarbanes-Oxley Act of 2002. | |
| 31.2* | Principal Financial Officer Certification under Section 302 of the Sarbanes-Oxley Act of 2002. | |
| 32.1* | Principal Executive Officer Certification under Section 906 of the Sarbanes-Oxley Act of 2002. | |
| 32.2* | Principal Financial Officer Certification under Section 906 of the Sarbanes-Oxley Act of 2002. |
| 101.INS* | XBRL Instance Document | |
| 101.SCH* | XBRL Taxonomy Extension Schema Document | |
| 101.CAL* | XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF* | XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB* | XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE* | XBRL Taxonomy Extension Presentation Linkbase Document |
* Filed herewith
| (1) | Filed on July 23, 2002 as an exhibit to St. Joseph’s registration statement on Form 10SB and incorporated herein by reference. |
| (2) | Filed on April 15, 2003 as an exhibit to St. Joseph’s annual report on Form 10-KSB for the fiscal year ended December 31, 2002 and incorporated herein by reference. |
| (3) | Filed on June 3, 2003 as an exhibit to St. Joseph’s amendment to registration statement on Form 10SB12G/A and incorporated herein by reference. |
| (4) | Filed on April 15, 2004 as an exhibit to St. Joseph’s annual report on Form 10-KSB for the fiscal year ended December 31, 2003 and incorporated herein by reference. |
| (5) | Filed on May 5, 2004 as an exhibit to St. Joseph’s report on Form 8-K dated April 30, 2004 and incorporated herein by reference. |
| (6) | Filed on November 20, 2006 as an exhibit to St. Joseph’s quarterly report on Form 10-QSB for the quarterly period ended September 30, 2006 and incorporated herein by reference. |
| (7) | Filed on May 23, 2007 as an exhibit to St. Joseph’s report on Form 8-K dated May 18, 2007 and incorporated herein by reference. |
| (8) | Filed on January 28, 2008 as an exhibit to St. Joseph’s report on Form 8-K dated December 31, 2007 and incorporated herein by reference. |
| (9) | Filed on April 20, 2007 as an exhibit to St. Joseph’s amendment 1 to annual report on Form 10-KSB for the fiscal year ended December 31, 2006 and incorporated herein by reference. |
| (10) | Filed on August 3, 2006 as an exhibit to St. Joseph’s proxy statement on Schedule and incorporated herein by reference. |
| 27 |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
St. Joseph, Inc.
| By: | /s/ Gerry McIlhargey |
Gerry McIlhargey,
President and Chief Executive Officer
| /s/ Kenneth L. Johnson |
Kenneth L. Johnson,
Secretary-Treasurer and Director
Dated: April 1, 2013
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| Signature and Title | Date | ||
| /s/ Gerry McIlhargey | April 1, 2013 | ||
| Gerry McIlhargey, | |||
| President, Chief Executive Officer and Director | |||
| /s/ Kenneth L. Johnson | April 1, 2013 | ||
| Kenneth L. Johnson, | |||
| Secretary-Treasurer and Director | |||
| /s/ Bruce Schreiner | April 1, 2013 | ||
| Bruce Schreiner, | |||
| Director | |||
| /s/ Donal Ford | April 1, 2013 | ||
| Donal Ford, | |||
| Director | |||
| /s/ Maureen O’Brien |
|
April 1, 2013 | |
| Maureen O’Brien, | |||
| Director |
| 28 |
ST. JOSEPH, INC.
Index to Consolidated Financial Statements
| F-1 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of St. Joseph, Inc.:
We have audited the accompanying balance sheets of St. Joseph, Inc. (“the Company”) as of December 31, 2011 and the related statements of operations, stockholders’ equity (deficit) and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of St. Joseph, Inc., as of December 31, 2011, and the results of its operations and its cash flows for the years then ended, in conformity with generally accepted accounting principles in the United States of America.
The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company’s significant operating losses raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
| /s/ Borgers & Cutler CPA’s PLLC | |
| Borgers & Cutler CPA’s PLLC | |
| Denver, CO | |
| March 29, 2013 |
| F-2 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of St. Joseph, Inc.:
We have audited the accompanying balance sheets of St. Joseph, Inc. (“the Company”) as of December 31, 2012 and the related statements of operations, stockholders’ equity (deficit) and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of St. Joseph, Inc., as of December 31, 2012, and the results of its operations and its cash flows for the years then ended, in conformity with generally accepted accounting principles in the United States of America.
The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company’s significant operating losses raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
| /s/ B F Borgers CPA PC | |
| B F Borgers CPA PC | |
| Denver, CO | |
| March 29, 2013 |
| F-3 |
CONSOLIDATED BALANCE SHEETS
| ASSETS | ||||||||
| December 31, 2012 | December 31, 2011 | |||||||
| CURRENT ASSETS: | ||||||||
| Cash | $ | 6,615 | $ | 2,809 | ||||
| Accounts receivable, net of allowance for doubtful accounts of $2,208 and $2,208, respectively | 29,700 | 81,441 | ||||||
| Total current assets | 36,315 | 84,250 | ||||||
| Property and equipment, net of accumulated depreciation of $154,126 and $153,053, respectively | - | 1,073 | ||||||
| Deposits | 1,230 | 1,230 | ||||||
| Total Assets | $ | 37,545 | $ | 86,553 | ||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable | $ | 310,291 | $ | 253,451 | ||||
| Accrued liabilities | 129,808 | 17,418 | ||||||
| Accrued preferred dividend | 42,047 | 42,047 | ||||||
| Notes payable: | ||||||||
| Bank loan, current maturities (Note 4) | 131,997 | 25,908 | ||||||
| Advance from officer (Note 2) | 24,200 | 16,700 | ||||||
| Loan from officer (Note 2) | 45,000 | 21,000 | ||||||
| Total current liabilities | 683,343 | 376,524 | ||||||
| LONG-TERM DEBT: | ||||||||
| Bank loan, less current maturities | - | 129,112 | ||||||
| Total liabilities | 683,343 | 505,636 | ||||||
| STOCKHOLDERS’ DEFICIT (Note 7): | ||||||||
| Stock subscription receivable | 25,000 | - | ||||||
| Preferred stock, Series A, $0.001 par value. 25,000,000 shares authorized, 5,708 shares issued and outstanding | 6 | 6 | ||||||
| Common stock, $0.001 par value; 100,000,000 shares authorized, 2012 - 11,809,802 and 2011 - 11,612,302 issued and outstanding respectively | 11,810 | 11,612 | ||||||
| Additional paid-in capital | 2,998,993 | 2,681,693 | ||||||
| Retained deficit | (3,631,547 | ) | (3,112,394 | ) | ||||
| Total Stockholders’ Deficit | (645,798 | ) | (419,083 | ) | ||||
| Total Liabilities and Stockholders’ Deficit | $ | 37,545 | $ | 86,553 | ||||
The accompanying footnotes are an integral part of these financial statements
| F-4 |
CONSOLIDATED STATEMENTS OF OPERATIONS
| Year ended | ||||||||
| December 31, | ||||||||
| 2012 | 2011 | |||||||
| REVENUES: | $ | 427,376 | $ | 467,907 | ||||
| COST OF REVENUES | 289,236 | 342,470 | ||||||
| Gross Margin | 138,140 | 125,437 | ||||||
| COSTS AND EXPENSES: | ||||||||
| General and Administrative Expenses | 627,726 | 544,240 | ||||||
| Depreciation and Amortization | 1,073 | 1,149 | ||||||
| Total Costs and Expenses | 628,799 | 545,389 | ||||||
| Operating Income (Loss) | (490,659 | ) | (419,952 | ) | ||||
| OTHER INCOME AND (EXPENSE): | ||||||||
| Other Income (expense) | 867 | 75 | ||||||
| Interest Expense | (29,361 | ) | (25,701 | ) | ||||
| Net Other Expense | (28,361 | ) | (25,626 | ) | ||||
| Loss before provision for income taxes | (519,153 | ) | (445,578 | ) | ||||
| PROVISION FOR INCOME TAXES: | ||||||||
| Provision for Federal income tax | - | - | ||||||
| Provision for State income tax | - | - | ||||||
| Total provision for income taxes | - | - | ||||||
| Loss before benefit from tax loss carryforward | (519,153 | ) | (445,578 | ) | ||||
| Benefit from tax loss carryforward | - | - | ||||||
| Net Loss | $ | (519,153 | ) | $ | (445,578 | ) | ||
| Loss applicable to common stockholders | $ | (519,153 | ) | $ | (445,578 | ) | ||
| Basic and diluted loss per common share | $ | (0.045 | ) | $ | (0.039 | ) | ||
| Weighted average common shares outstanding | 11,641,045 | 11,359,918 | ||||||
The accompanying footnotes are an integral part of these financial statements
| F-5 |
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
| Preferred Stock-Series A | Common Stock | Additional | ||||||||||||||||||||||||||||||
| Shares | Par value | Shares | Par value | Paid-in Capital | Retained Deficit | Subscription Receivable | Total | |||||||||||||||||||||||||
| Balance December 31, 2010 | 5,708 | $ | 6 | 11,172,302 | 11,172 | 2,306,066 | (2,666,815 | ) | (25,000 | ) | (374,571 | ) | ||||||||||||||||||||
| Collection of stock subscription receivable | - | - | - | - | - | - | 25,000 | 25,000 | ||||||||||||||||||||||||
| Sale of common stock @ $0.50 per share | - | - | 440,000 | 440 | 219,560 | - | - | 220,000 | ||||||||||||||||||||||||
| Modification of stock options | - | - | - | - | 156,067 | - | - | 156,067 | ||||||||||||||||||||||||
| Net loss for the year ended December 31, 2011 | - | - | - | - | - | (445,578 | ) | - | (445,578 | ) | ||||||||||||||||||||||
| Balance December 31, 2011 | 5,708 | 6 | 11,612,302 | $ | 11,612 | $ | 2,681,693 | $ | (3,112,394 | ) | $ | - | $ | (419,083 | ) | |||||||||||||||||
| Collection of stock subscription receivable | - | - | - | - | - | - | (25,000 | ) | (25,000 | ) | ||||||||||||||||||||||
| Sale of common stock @ $0.50 per share | - | - | 190,000 | 190 | 94,310 | - | - | 95,000 | ||||||||||||||||||||||||
| Exercise of stock options @ $1.05 per share | - | - | 7,500 | 8 | 7,867 | - | - | 7,875 | ||||||||||||||||||||||||
| Modification of stock options | - | - | - | - | 214,563 | - | - | 214,563 | ||||||||||||||||||||||||
| Net loss for the year ended December 31, 2012 | - | - | - | - | - | (519,153 | ) | - | (519,153 | ) | ||||||||||||||||||||||
| Balance December 31, 2012 | 5,708 | $ | 6 | 11,809,802 | $ | 11,810 | $ | 2,998,933 | $ | (3,631,547 | ) | $ | (25,000 | ) | $ | (645,798 | ) | |||||||||||||||
The accompanying footnotes are an integral part of these financial statements
| F-6 |
CONSOLIDATED STATEMENTS OF CASH FLOW
| Years Ended | ||||||||
| December 31, | ||||||||
| 2012 | 2011 | |||||||
| OPERATING ACTIVITIES | ||||||||
| Net income (loss) | $ | (519,153 | ) | $ | (445,578 | ) | ||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||
| Depreciation and amortization | 1,073 | 1,149 | ||||||
| Stock-based compensation | 214,563 | 156,067 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| (Increase)/decrease in accounts receivable | 51,741 | 8,835 | ||||||
| Increase/(decrease) in accounts payable | 56,840 | 39,345 | ||||||
| Increase/(decrease) in accrued liabilities | 112,390 | 3,227 | ||||||
| Net cash provided by (used in) operating activities | (82,546 | ) | (236,955 | ) | ||||
| INVESTING ACTIVITIES | ||||||||
| INVESTING ACTIVITIES | - | - | ||||||
| - | - | |||||||
| FINANCING ACTIVITIES | ||||||||
| Repayment on bank loan | (23,023 | ) | (19,214 | ) | ||||
| (Increase)/decrease of stock subscription receivable | (25,000 | ) | 25,000 | |||||
| Proceeds from related party | 7,500 | 16,700 | ||||||
| Proceeds from officer loan and notes payable | 24,000 | 5,000 | ||||||
| Payments on preferred stock dividends | - | (16,128 | ) | |||||
| Proceeds from sale of common stock | 102,875 | 220,000 | ||||||
| Net cash provided by (used in) financing activities | 86,352 | 231,358 | ||||||
| INCREASE (DECREASE) IN CASH | 3,806 | (5,597 | ) | |||||
| CASH AT BEGINNING OF PERIOD | 2,809 | 8,406 | ||||||
| CASH AT END OF PERIOD | $ | 6,615 | $ | 2,809 | ||||
| SUPPLEMENTAL NON-CASH INVESTING AND FINANCING INFORMATION: | ||||||||
| Conversion of bank line of credit into loan | $ | - | $ | - | ||||
| SUPPLEMENTAL INFORMATION: | ||||||||
| Cash paid for taxes | $ | - | $ | - | ||||
| Cash paid for interest | $ | 29,361 | $ | 10,964 | ||||
The accompanying footnotes are an integral part of these financial statements
| F-7 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Basis of Presentation
St. Joseph, Inc. (the “Company”) was incorporated in Colorado on March 19, 1999 as Pottery Connection, Inc. On March 19, 2001, the Company changed its name to St. Joseph Energy, Inc. and on November 6, 2003, the Company changed its name to St. Joseph, Inc.
The Company, through its wholly-owned subsidiary, specializes in the recruitment and placement of professional data processing and technical personnel for clients on both a permanent and contract basis.
Principles of Consolidation
The consolidated financial statements for the years ended December 31, 2011 and 2010 include the activities of St. Joseph, Inc. and its wholly-owned subsidiary, Staf*Tek Services, Inc. (“Staf*Tek”). All significant intercompany balances and transactions have been eliminated in consolidation.
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 stockholders’ deficiency at December 31, 2012 and 2011. In our financial statements for the fiscal years ended December 31, 2012 and 2011, the Report of the Independent Registered Public Accounting Firm includes an explanatory paragraph that describes substantial doubt about our ability to continue as a going concern. 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.
Cash Equivalents and Fair Value of Financial Instruments
For the purposes of the statements of cash flows, the Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. The Company had no cash equivalents at December 31, 2012 and 2011.
The carrying amounts of cash, receivables and current liabilities approximate fair value due to the short-term maturity of the instruments.
| F-8 |
ST. JOSEPH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. It also requires disclosure about how fair value is determined for assets and liabilities and establishes a hierarchy for which these assets and liabilities must be grouped, based on significant levels of inputs as follows:
| Level 1: | Quoted prices in active markets for identical assets or liabilities. | |
| Level 2: | Quoted prices in active markets for similar assets and liabilities and inputs that are observable for the asset or liability. | |
| Level 3: | Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. |
The determination of where assets and liabilities fall within this hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The valuations of the majority of the assets are considered Level 1 fair value measures under ASC 820.
Accounts Receivable
Accounts receivable consists of amounts due from customers related to the Company’s employee placement services. The Company considers accounts more than 30 days old to be past due. The Company uses the allowance method for recognizing bad debts. When an account is deemed uncollectible, it is written off against the allowance. The Company generally does not require collateral for its accounts receivable.
Property, Equipment and Depreciation
Property and equipment are stated at cost. Property and equipment are depreciated using the straight-line method over the estimated useful lives of the assets as follows:
| Furniture and fixtures | 7 years |
| Office equipment | 5 years |
| Computer equipment | 3 years |
Upon retirement or disposition of an asset, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in operations. Repairs and maintenance are charged to expense as incurred and expenditures for additions and improvements are capitalized.
Impairment and Disposal of Long-lived Assets
The Company evaluates the carrying value of its long-lived assets when indicators of impairment are present. Impairment is assessed when the undiscounted future cash flows estimated to be generated by those assets are less than the assets’ carrying amount. If such assets are impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying value or fair value, less costs to sell. There were no impairments recognized for the years ended December 31, 2012 and 2011.
Revenue Recognition
Staffing service revenues are recognized when the services are rendered by the Company’s contract employees and collection is probable. Permanent placement revenues are recognized when employment candidates accept offers of permanent employment.
Direct Costs of Services
Direct costs of staffing services consist of payroll, payroll taxes, contract labor, and insurance costs for the Company’s contract employees. There are no direct costs associated with permanent placement staffing services.
Advertising Costs
The Company expenses all advertising as incurred. The Company incurred advertising costs totaling $902 and $13,792 for the years ended December 31, 2012 and 2011, respectively.
| F-9 |
ST. JOSEPH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Loss Per Common Share
The Company reports earnings (loss) per share using a dual presentation of basic and diluted earnings per share. Basic loss per share excludes the impact of common stock equivalents. Diluted loss per share utilizes the average market price per share when applying the treasury stock method in determining common stock equivalents. Preferred stock and common stock options outstanding at December 31, 2011 were not included in the diluted loss per share as all 5,708 preferred shares and all 460,000 options were anti-dilutive as the Company incurred losses during the year. Preferred stock and common stock options outstanding at December 31, 2012 were not included in the diluted loss per share as all 5,708 preferred shares and all 452,500 options were anti-dilutive as the Company incurred losses during the year. Therefore, basic and diluted losses per share at December 31, 2012 and 2011 were equal.
Income Taxes
Income taxes are provided for the tax effects of transactions reported in the consolidated financial statements and consist of taxes currently due plus deferred taxes related primarily to differences between the recorded book basis and the tax basis of assets and liabilities for financial and income tax reporting. The deferred tax assets and liabilities represent the deductible when the assets and liabilities are recovered or settled. Deferred taxes are also recognized for operating losses that are available to offset future taxable income and tax credits that are available to offset future federal income taxes.
The Company has analyzed filing positions in all of the federal and state jurisdictions where it is required to file income tax returns, as well as all open tax years in these jurisdictions. The Company has identified its federal tax return and its state tax return in Oklahoma as “major” tax jurisdictions, as defined. The Company believes that its income tax filings positions and deductions will be sustained on audit and does not anticipate any adjustments that will result in a material adverse effect on the Company’s financial conditions, results of operations, or cash flow. Therefore, no reserves for uncertain income tax positions have been recorded pursuant to ASC 740.
Stock-Based Compensation:
The Company recognizes share-based compensation based on the options’ fair value, net of estimated forfeitures on a straight line basis over the requisite service periods, which is generally over the awards’ respective vesting period, or on an accelerated basis over the estimated performance periods for options with performance conditions. The stock option fair value is estimated on the grant date using the Black-Scholes option pricing model based on the underlying common stock closing price as of the date of grant, the expected term, stock price volatility, and risk-free interest rates. The Company modified all 460,000 of its outstanding stock options in August 2011 and recognized an expense of $156,067 (see Note 7) in its 2011 financial statements in respect of this modification. The Company modified the remaining 452,500 outstanding stock options in August 2012 and again in December 2012, which resulted in recognition of additional expenses totaling $387,716 (see Note 7) in its 2012 financial statements.
Use of Estimates
The preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities; disclosure of contingent assets and liabilities at the date of the consolidated financial statements; and the reported amounts of revenues and expenses during the reporting period. Accordingly, actual results could differ from those estimates.
NOTE 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, 2013.
During the years ended December 31, 2012 and 2011, an officer advanced the Company $7,500 and $16,700, respectively, for working capital in exchange for two promissory notes. The notes matured on December 31, 2012 and 2011, and did not bear any interest. The notes have been extended until December 31, 2013.
| F-10 |
ST. JOSEPH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
NOTE 3 – PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at December 31, 2012 and 2011:
| 2012 | 2011 | |||||||
| Furniture and fixtures | $ | 35,447 | $ | 35,447 | ||||
| Office equipment | 61,465 | 61,465 | ||||||
| Computer equipment | 37,629 | 37,629 | ||||||
| Leasehold improvements | 19,585 | 19,585 | ||||||
| Total property and equipment | 154,126 | 154,126 | ||||||
| Less accumulated depreciation | (154,126 | ) | (153,053 | ) | ||||
| Property and equipment, net | $ | $ | 1,073 | |||||
Depreciation expense totaled $1,073 and $1,149, respectively, for the years ended December 31, 2012 and 2011.
NOTE 4 – BANK LOAN
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 December 31, 2012 and December 31, 2011, $131,997 and $155,020 respectively was owed to the bank, repayable as follows:
| December 31, 2012 | December 31, 2011 | ||||||
| 2012 | $ | - | $ | 25,908 | |||
| 2013 | 131,997 | 129,112 | |||||
| $ | 131,997 | $ | 155,020 | ||||
Interest expense on the Company’s bank borrowing was $9,538 and $10,461, during the years ended December 31, 2012 and 2011, respectively.
NOTE 5 – CONCENTRATION OF CREDIT RISK
The Company conducts a significant portion of its operations with one customer. During the year ended December 31, 2012 and 2011 approximately 80% and 88% of the Company’s service revenues were conducted with this one customer, respectively.
| F-11 |
ST. JOSEPH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 – INCOME TAXES
A reconciliation of U.S. statutory federal income tax rate to the effective rate is as follows:
| Years Ended | ||||||||
| December 31, | ||||||||
| 2012 | 2011 | |||||||
| U.S. Federal statutory rate | 34 | % | 34 | % | ||||
| State income tax, net of federal benefit | 4 | % | 4 | % | ||||
| Permanent book-to-tax differences | -0 | % | -0 | % | ||||
| Timing Differences | -0 | % | -0 | % | ||||
| Net operating loss for which no tax benefit is currently available | -38 | % | -38 | % | ||||
| 0 | % | 0 | % | |||||
At December 31, 2012, the Company’s current tax benefit consisted of a net tax asset of $697,818 due to operating loss carryforwards of approximately $2,272,715 which have been fully provided against in the valuation allowance of $697,818. The valuation allowance results in deferred tax expense, which offsets the net deferred tax asset for which there is no assurance of recovery. The changes in the valuation allowance for the years ended December 31, 2012 and 2011 were $153,583 and $169,141, respectively. Net operating loss carry forwards will expire through 2032.
The valuation allowance will be evaluated at the end of each year, considering positive and negative evidence about whether the asset will be realized. At that time, the allowance will either be increased or reduced; reduction could result in the complete elimination of the allowance if positive evidence indicates that the value of the deferred tax asset is no longer impaired and the allowance is no longer required.
Should the Company undergo an ownership change, as defined in the Internal Revenue Code, the Company’s tax net operating loss carry forwards generated prior to the ownership change may be subject to an annual limitation, which could reduce or defer the utilization of those losses.
NOTE 7 – SHAREHOLDERS’ EQUITY
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 December 31, 2012. During the year ended December 31, 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 is 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 December 31, 2012 and 2011, respectively. The Company will commence dividend payments pursuant to the terms of a settlement agreement as funds are available.
| F-12 |
ST. JOSEPH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Common Stock
In a private placement during the year ended December 31, 2012, the Company sold 190,000 shares of common stock to accredited investors at a price of $0.50 per share for gross proceeds totaling $95,000. 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 year ended December 31, 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 year ended December 31, 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 December 31, 2012 | 452,500 | $ | 1.05 | $ | 1.05 | 0.50 yrs | $ | 67,875 | ||||||||||||
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. The Company further extended the deadline to December 31, 2012 in a board of directors meeting on August 23, 2012; and most recently extended the deadline to June 30, 2013 in a board meeting on December 12, 2012. The extensions were considered a modification of the original stock options. Accordingly, the Company revalued the stock options, which resulted in a charge to share-based compensation totaling $214,563 for the year ended December 31, 2012.
All remaining stock options were fully vested as of December 31, 2012 and 2011. 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 December 31, 2012, and then multiplying that amount by the number of options. The market price exceeded the exercise price of the stock on December 31, 2012 by $0.15; resulting in an aggregate intrinsic value of $67,875.
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.
| F-13 |
ST. JOSEPH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 – LETTER OF INTENT
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.
NOTE 9 – 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.
NOTE 10 – COMMITMENT
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 years ended December 31, 2012 and 2011 were $35,990 and $35,907, respectively.
NOTE 11 - SUBSEQUENT EVENT
In a private placement conducted subsequent to December 31, 2012, the Company sold 91,000 shares of common stock to accredited investors at a price of $0.50 per share for gross proceeds totaling $45,500. 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.
The Company has evaluated subsequent events through March 29, 2013. Other than those described above, there have been no subsequent events after December 31, 2012 for which disclosure is required.
| F-14 |
EXHIBIT 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
I, Gerald McIlhargey, certify that:
1. I have reviewed this Annual Report on Form 10-K of St. Joseph, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: April 1, 2013 | /s/ GERALD MCILHARGEY |
| Gerald McIlhargey | |
| President and Chief Executive Officer |
EXHIBIT 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
I, Kenneth L. Johnson, certify that:
1. I have reviewed this Annual Report on Form 10-K of St. Joseph, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: April 1, 2013 | /s/ KENNETH L. JOHNSON |
| Kenneth L. Johnson | |
| Treasurer |
EXHIBIT 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Gerald McIlhargey, Chief Executive Officer of St. Joseph, Inc., certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that this Annual Report on Form 10-K for the fiscal year ended December 31, 2012, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in this Annual Report on Form 10-K for the fiscal year ended December 31, 2012, fairly presents, in all material respects, the financial condition and results of operations of St. Joseph, Inc.
| By: | /s/ GERALD MCILHARGEY | |
| Name: | Gerald McIlhargey | |
| Title: | Chief Executive Officer and President | |
| Date: April 1, 2013 | ||
EXHIBIT 32.2
CERTIFICATION OF TREASURER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Kenneth L. Johnson, Treasurer of St. Joseph, Inc., certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that this Annual Report on Form 10-K for the fiscal year ended December 31, 2012, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in this Annual Report on Form 10-K for the fiscal year ended December 31, 2012, fairly presents, in all material respects, the financial condition and results of operations of St. Joseph, Inc.
| By: | /s/ KENNETH L. JOHNSON | |
| Name: | Kenneth L. Johnson | |
| Title: | Treasurer | |
| Date: April 1, 2013 | ||
|
Commitment (Details Narrative) (USD $)
|
12 Months Ended | |
|---|---|---|
|
Dec. 31, 2012
|
Dec. 31, 2011
|
|
| Commitments and Contingencies Disclosure [Abstract] | ||
| Rent expense | $ 35,990 | $ 35,907 |
|
Income Taxes (Details Narrative) (USD $)
|
12 Months Ended | |
|---|---|---|
|
Dec. 31, 2012
|
Dec. 31, 2011
|
|
| Income Tax Disclosure [Abstract] | ||
| Net tax asset | $ 697,818 | |
| Operating loss carryforwards | 2,272,715 | |
| Valuantion allowance | 697,818 | |
| Change in valuation allowance | $ 153,583 | $ 169,141 |
| Operating loss carryforwards, expiration date | 2032 | |
|
Summary of Significant Accounting Policies (Details Narrative) (USD $)
|
1 Months Ended | 12 Months Ended | |||
|---|---|---|---|---|---|
|
Dec. 31, 2012
|
Aug. 31, 2012
|
Aug. 31, 2011
|
Dec. 31, 2012
|
Dec. 31, 2011
|
|
| Accounting Policies [Abstract] | |||||
| Impairment on long lived assets | $ 0 | $ 0 | |||
| Advertising costs | 902 | 13,792 | |||
| Preferred shares issued | 5,708 | 5,708 | 5,708 | ||
| Option Equity, Shares | 452,500 | 460,000 | |||
| Expenses incurred in modification of stock option | $ 387,716 | $ 214,563 | $ 156,067 | ||
| Modified remaining outstanding stock options | 452,500 | 460,000 | |||
|
Letter of Intent (Details Narrative)
|
Aug. 08, 2012
|
|---|---|
| Letter Of Intent | |
| Acquisition of a holding company | 100.00% |
| Percentage of interest of the holding company | 50.00% |
|
Related Party Transactions
|
12 Months Ended |
|---|---|
|
Dec. 31, 2012
|
|
| Related Party Transactions [Abstract] | |
| Related Party Transactions |
NOTE 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, 2013.
During the years ended December 31, 2012 and 2011, an officer advanced the Company $7,500 and $16,700, respectively, for working capital in exchange for two promissory notes. The notes matured on December 31, 2012 and 2011, and did not bear any interest. The notes have been extended until December 31, 2013.
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. |