Attached files
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EX-31.1 - ST JOSEPH INC | v166722_ex31-1.htm |
EX-32.2 - ST JOSEPH INC | v166722_ex32-2.htm |
EX-31.2 - ST JOSEPH INC | v166722_ex31-2.htm |
EX-32.1 - ST JOSEPH INC | v166722_ex32-1.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
x QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the
quarterly period ended September 30, 2009
o TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the
transition period from _____ to _____.
Commission
file number: 0-49936
ST.
JOSEPH, INC.
(Exact
name of registrant as specified in its charter)
Colorado
|
CH
47-0844532
|
|
(State
or other jurisdiction of incorporation or organization)
|
(IRS
Employer Identification No.)
|
|
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
Indicate
by checkmark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90
days. x
Yes o No
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
x Yes
o No
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
Large accelerated filer o | Accelerated filer o |
Non-accelerated filer o (Do not check if a smaller reporting company) | Smaller reporting company x |
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange
Act). o
Yes x
No
APPLICABLE
ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS
DURING THE PRECEDING FIVE YEARS
Indicate
by check mark whether the registrant has filed all documents and reports
required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act
of 1934 subsequent to the distribution of securities under a plan confirmed by a
court.
o Yes
o No
APPLICABLE
ONLY TO CORPORATE ISSUERS
Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date: 10,787,302 shares as of
October 20, 2009.
Form
10-Q
Table
of Contents
PART I – FINANCIAL
INFORMATION
|
2
|
|
ITEM 1.
|
FINANCIAL STATEMENTS
|
2
|
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
|
11
|
ITEM 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
|
18
|
ITEM 4.
|
CONTROLS AND PROCEDURES
|
18
|
ITEM 4T.
|
CONTROLS AND PROCEDURES
|
19
|
PART II - OTHER
INFORMATION
|
19
|
|
ITEM 1.
|
LEGAL PROCEEDINGS
|
19
|
ITEM 1A.
|
RISK FACTORS
|
19
|
ITEM 2.
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
|
19
|
ITEM 3.
|
DEFAULTS UPON SENIOR
SECURITIES
|
19
|
ITEM 4.
|
SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
|
19
|
ITEM 5.
|
OTHER INFORMATION
|
20
|
ITEM 6.
|
EXHIBITS
|
20
|
- 2
-
PART
I – FINANCIAL INFORMATION
ITEM
1.
|
FINANCIAL
STATEMENTS
|
ST.
JOSEPH, INC.
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
ASSETS
|
||||||||
UNAUDITED
|
AUDITED
|
|||||||
September
30,
|
December
31,
|
|||||||
2009
|
2008
|
|||||||
CURRENT
ASSETS:
|
||||||||
Cash
|
$ | 193,239 | $ | 221,992 | ||||
Accounts
receivable, net of allowance
|
||||||||
for
doubtful accounts of $2,208
|
69,084 | 212,821 | ||||||
Total
current assets
|
262,323 | 434,813 | ||||||
Property
and equipment, net of accumulated depreciation of $150,468
|
||||||||
and
$179,606, respectively
|
3,658 | 2,978 | ||||||
Deposits
|
1,230 | 1,230 | ||||||
$ | 267,211 | $ | 439,021 | |||||
LIABILITIES
AND STOCKHOLDERS' DEFICIT
|
||||||||
CURRENT
LIABILITIES:
|
||||||||
Accounts
payable
|
$ | 193,320 | $ | 264,206 | ||||
Accrued
liabilities
|
7,502 | 18,168 | ||||||
Accrued
preferred dividend
|
90,431 | 117,311 | ||||||
Loan
from officer
|
5,000 | 25,000 | ||||||
Notes
payable - related party (Note 4)
|
15,000 | 5,000 | ||||||
Line
of Credit (Note 3)
|
180,000 | 180,000 | ||||||
Due
from Former Officer (Note 2)
|
- | 48,120 | ||||||
Total
current liabilities
|
491,253 | 657,805 | ||||||
STOCKHOLDERS'
DEFICIT (Note 7):
|
||||||||
Preferred
stock, Series A, $.001 par value, $3.00 face value; 25,000,000
shares
|
||||||||
authorized,
56,208 shares issued and outstanding
|
56 | 386 | ||||||
Common
stock, $.001 par value; 100,000,000 shares authorized,
|
||||||||
10,736,802
(9/30/09) and 7,406,802 (12/31/08) issued and outstanding
|
10,737 | 7,407 | ||||||
Additional
paid-in capital
|
2,097,201 | 1,950,201 | ||||||
Retained
deficit
|
(2,332,036 | ) | (2,176,778 | ) | ||||
Total
Stockholders' Deficit
|
(224,042 | ) | (218,784 | ) | ||||
$ | 267,211 | $ | 439,021 |
See accompanying notes to condensed consolidated
financial statements
- 3
-
ST.
JOSEPH, INC.
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
UNAUDITED
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
September
30,
|
September
30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
REVENUES:
|
||||||||||||||||
Contract
|
$ | 135,092 | $ | 614,264 | $ | 685,343 | $ | 1,898,545 | ||||||||
COST
OF REVENUES
|
105,055 | 477,241 | 534,112 | 1,463,476 | ||||||||||||
Gross
Margin
|
30,037 | 137,023 | 151,231 | 435,069 | ||||||||||||
COSTS
AND EXPENSES:
|
||||||||||||||||
General
and Administrative Expenses
|
89,757 | 134,641 | 315,978 | 397,258 | ||||||||||||
Depreciation
and Amortization
|
288 | 287 | 862 | 835 | ||||||||||||
Total
Costs and Expenses
|
90,045 | 134,928 | 316,840 | 398,093 | ||||||||||||
Operating
Income (Loss)
|
(60,008 | ) | 2,095 | (165,609 | ) | 36,976 | ||||||||||
OTHER
INCOME AND (EXPENSE):
|
||||||||||||||||
Other
Income (expense)
|
- | - | 25,926 | (100 | ) | |||||||||||
Interest
Expense
|
(3,646 | ) | (5,204 | ) | (15,575 | ) | (21,638 | ) | ||||||||
Net
Other Expense
|
(3,646 | ) | (5,204 | ) | 10,351 | (21,738 | ) | |||||||||
Loss
before provision for income taxes
|
(63,654 | ) | (3,109 | ) | (155,258 | ) | 15,238 | |||||||||
PROVISION
FOR INCOME TAXES:
|
||||||||||||||||
Provision
for Federal income tax
|
- | 2,999 | - | 2,286 | ||||||||||||
Provision
for State income tax
|
- | 1,200 | - | 914 | ||||||||||||
Total
provision for income taxes
|
- | 4,199 | - | 3,200 | ||||||||||||
Loss
before benefit from tax loss carryforward
|
(63,654 | ) | (7,308 | ) | (155,258 | ) | 12,038 | |||||||||
Benefit
from tax loss carryforward
|
- | 4,199 | - | 3,200 | ||||||||||||
Net
Loss
|
(63,654 | ) | (3,109 | ) | (155,258 | ) | 15,238 | |||||||||
Preferred
stock dividend requirements
|
- | (19,552 | ) | - | (58,656 | ) | ||||||||||
Loss
applicable to common stockholders
|
$ | (63,654 | ) | $ | (22,661 | ) | $ | (155,258 | ) | $ | (43,418 | ) | ||||
Basic
and diluted loss per common share
|
$ | (0.01 | ) | $ | (0.00 | ) | $ | (0.02 | ) | $ | (0.01 | ) | ||||
Weighted
average common shares outstanding
|
10,156,802 | 7,406,802 | 9,573,469 | 7,406,802 |
See
accompanying notes to condensed consolidated financial statements
- 4
-
ST.
JOSEPH, INC.
|
CONDENSED
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS'
DEFICIT
|
UNAUDITED
|
Additional
|
||||||||||||||||||||||||||||
Preferred
Stock-Series A
|
Common
Stock
|
Paid-in
|
Retained
|
|||||||||||||||||||||||||
Shares
|
Par value
|
Shares
|
Par value
|
Capital
|
Deficit
|
Total
|
||||||||||||||||||||||
Balance
December 31, 2008
|
386,208 | $ | 386 | 7,406,802 | $ | 7,407 | $ | 1,950,201 | $ | (2,176,778 | ) | $ | (218,784 | ) | ||||||||||||||
Sale
of common stock @ $0.05 per share
|
- | - | 2,900,000 | 2,900 | 142,100 | - | 145,000 | |||||||||||||||||||||
Conversion
of notes payable @$0.05 per share
|
||||||||||||||||||||||||||||
to
common stock
|
- | - | 100,000 | 100 | 4,900 | - | 5,000 | |||||||||||||||||||||
Conversion
of preferred to common
|
||||||||||||||||||||||||||||
@$0.001
per share
|
(330,000 | ) | (330 | ) | 330,000 | 330 | - | - | - | |||||||||||||||||||
Net
loss for the nine months ended September 30, 2009
|
- | - | - | - | - | (155,258 | ) | (155,258 | ) | |||||||||||||||||||
Balance
September 30, 2009
|
56,208 | 56 | 10,736,802 | 10,737 | 2,097,201 | (2,332,036 | ) | (224,042 | ) |
See
accompanying notes to condensed consolidated financial statements
- 5
-
ST.
JOSEPH, INC.
|
|||||||||||
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOW
|
|||||||||||
UNDAUDITED
|
Nine
Months Ended
|
||||||||
September
30,
|
||||||||
OPERATING
ACTIVITIES
|
2009
|
2008
|
||||||
Net
income (loss)
|
$ | (155,258 | ) | $ | 15,238 | |||
Adjustments
to reconcile net loss to net cash
|
||||||||
provided
by (used in) operating activities:
|
||||||||
Depreciation
and amortization
|
862 | 835 | ||||||
Gain
on settlement of note payable due to
|
||||||||
related
party and related accrued interest
|
(25,526 | ) | - | |||||
Changes
in operating assets and liabilities:
|
||||||||
(Increase)/decrease
in accounts receivable
|
143,737 | (99,211 | ) | |||||
Increase/(decrease)
in accounts payable
|
(70,886 | ) | (18,317 | ) | ||||
Increase/(decrease)
in accrued liabilities
|
(19,012 | ) | 32,051 | |||||
Net
cash provided by (used in) operating activities
|
(126,083 | ) | (69,404 | ) | ||||
INVESTING
ACTIVITIES
|
||||||||
Equipment
acquisitions
|
(1,542 | ) | (1,627 | ) | ||||
Net
cash used in investing activities
|
(1,542 | ) | (1,627 | ) | ||||
FINANCING
ACTIVITIES
|
||||||||
Payments
on line of credit
|
- | (12,500 |
)
|
|||||
Settlement
of notes payable to related parties
|
(50,000 | ) | - | |||||
Proceeds
from officer loan and notes payable
|
20,000 | - | ||||||
Payments
on preferred stock dividends
|
(16,128 | ) | - | |||||
Proceeds
from sale of common stock
|
145,000 | - | ||||||
Proceeds
from sale of preferred stock
|
- | - | ||||||
Net
cash provided by (used in) financing activities
|
98,872 | (12,500 | ) | |||||
INCREASE
(DECREASE) IN CASH
|
(28,753 | ) | (83,531 | ) | ||||
CASH
AT BEGINNING OF PERIOD
|
221,992 | 204,135 | ||||||
CASH
AT END OF PERIOD
|
$ | 193,239 | $ | 120,604 | ||||
SUPPLEMENTAL
NON-CASH INVESTING AND
|
||||||||
FINANCING
INFORMATION:
|
||||||||
Conversion
of preferred stock into common stock
|
$ | 330 | $ | - | ||||
Conversion
of notes payable into common stock
|
$ | 5,000 | $ | - | ||||
SUPPLEMENTAL
INFORMATION:
|
||||||||
Cash
paid during the period for:
|
||||||||
Interest
|
$ | 15,575 | $ | 26,656 | ||||
Income
taxes
|
$ | - | $ | - |
See
accompanying notes to condensed consolidated financial
statements
- 6
-
ST.
JOSEPH, INC.
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
(1)
|
Basis
of Presentation
|
The
condensed financial statements presented herein have been prepared by St.
Joseph, Inc. (the “Company”) in accordance with the instructions for Form 10-Q
and the accounting policies described in its Form 10-K for the year ended
December 31, 2008, and should be read in conjunction with the notes
thereto.
In the
opinion of management, the accompanying condensed financial statements contain
all adjustments (consisting only of normal recurring adjustments) which are
necessary to provide a fair presentation of operating results for the interim
periods presented. The results of operations presented for the nine
months ended September 30, 2009 are not necessarily indicative of the results to
be expected for the year.
ASC105
superseded FASB 168 “The FASB Accounting Standards Codification and the
Hierarchy of Generally Accepted Accounting Principles – A Replacement of FASB
Statement No. 162” , which was issued in June 2009. Statement 168
establishes the FASB Accounting Standards Codification TM (Codification) as the
single source of authoritative U.S. GAAP recognized by the FASB to be applied by
nongovernmental entities. Rules and interpretive releases of the SEC under
authority of federal securities laws are also sources of authoritative U.S. GAAP
for SEC registrants. FASB Codification is effective for financial statements
issued for interim and annual periods ending after September 15,
2009.
The
Codification will supersede all existing non-SEC accounting and reporting
standards. All other non-grandfathered non-SEC accounting literature not
included in the Codification will become non-authoritative. FASB will not issue
new standards in the form of Statements, FASB Staff Positions, or Emerging
Issues Task Force Abstracts. Instead, the FASB will issue Accounting Standards
Updates, which will serve only to: (a) update the Codification; (b) provide
background information about the guidance; and (c) provide the bases for
conclusions on the change(s) in the Codification. The Company does not expect
the adoption of ASC105 to have a material impact on the Company’s financial
statements.
ASC 855
superseded FASB 165 “Subsequent Events,” which was issued in May 2009. ASC 855
establishes general standards of accounting for and disclosures of events that
occur after the balance sheet date but before the financial statements are
issued or are available to be issued. It requires the disclosure of the date
through which an entity has evaluated subsequent events. ASC 855 is effective
for interim and annual reporting periods ending after September 15, 2009. We
adopted the new disclosure requirements in our June 30, 2009 condensed financial
statements. The adoption of ASC855 will not have a material effect on our
September 30, 2009 financial statements or related disclosures.
Financial
data presented herein are unaudited.
(2)
|
Related
Party Transactions
|
During
the quarter ended June 30, 2009, as disclosed in a 8-K released on May 9, 2009,
we settled a lawsuit between the Company and a former President, CEO and
director, John H. Simmons by executing a settlement agreement. In the agreement
the Company and Mr. Simmons released all claims against each other. The
settlement agreement required the Company to pay Mr. Simmons a sum of
$50,000. The Company booked a one-time credit in the amount of
$48,120 in principal and $2,406 in accrued interest to its balance sheet for the
cancellation of a note due to Mr. Simmons. The Company also booked an additional
one-time credit in the amount of $25,000 to its balance sheet for the
cancellation of a note which was due to Mr. Simmons for the cancellation of
250,000 options which had been previously exercised.
- 7
-
(3)
|
Line
of Credit
|
The
Company has a $200,000 line of credit. At September 30, 2009, the
Company has an unpaid and outstanding balance of $180,000. Interest
payments are due monthly. The Company paid $3,646 in interest
payments during the nine months ended September 30, 2009. The line
matures on January 7, 2010. Discussions are ongoing regarding the future amount
of the line of credit and there cannot be any assurance that the amount will not
be reduced.
(4)
|
Note
Payable
|
During
the quarter ended September 30, 2009, Kenneth Johnson, Officer and Director of
the Company, advanced $15,000 for working capital in exchange for a non-interest
bearing promissory note. The note matures on July 24, 2010.
During
the quarter ended September 30, 2009, Gerry McIlhargey, President and Director
of the Company, advanced $5,000 for working capital in exchange for a
non-interest bearing promissory note. The note matures on September 17,
2010.
(5)
|
Shareholders’
Equity
|
Preferred
Stock
During
the nine months ended September 30, 2009, the Company did not issue any Series A
Convertible 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 a balance of 56,208 remains outstanding at September 30,
2009. Each share of Series A Convertible Preferred Stock is
convertible to one share of common stock and has a yield of 6.75% dividend per
annum, payable on a quarterly basis out of funds legally available therefore,
for a period of 5 years or until December 31, 2008. There is an
accrued amount of Series A Convertible Preferred Stock dividends in the amount
of $90,431 as of September 30, 2009. This amount was lowered by
$10,752 in the three months ended September 30, 2009. The Company is currently
making dividend payments pursuant to the terms of a settlement agreement, as
disclosed in an 8-K released on May 9, 2009.
Common
Stock
During
the nine months ended September 30, 2009, the Company issued 3,230,000 shares of
common stock, as further described below.
In a
private placement completed in the quarter ended June 30, 2009, the
Company sold 2,900,000 shares of common stock to 11 accredited investors at
a price of $0.05 per share for gross proceeds of $145,000, of which $20,000 was
received by the Company in the quarter ended June 30, 2009. No
underwriters were used and no underwriting discounts or commissions were
payable.
During
the quarter ended June 30, 2009 a $5,000 note payable issued during fiscal year
ended December 31, 2008 was converted to common stock at a rate of $0.05 per
share resulting in a grant of 100,000 common shares.
- 8
-
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's largest shareholder of series A convertible preferred stock converted
their preferred shares to common shares. The Company issued 330,000 shares of
common stock and retired 330,000 shares of Series A preferred stock. Accrued
dividends on the Series A preferred stock will continue to be paid by the
Company to the shareholder pursuant to the terms of the settlement agreement
previously entered into by the parties.
Common
Stock Options
The
following schedule summarizes the changes in the Company’s equity awards for the
nine months ended September 30, 2009:
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, 2009
|
560,000 | $ | 0.10 - $1.05 | $ | 0.80 |
2.6
years
|
- | |||||||||||||
Granted
|
- | $ | - | $ | - | - | - | |||||||||||||
Exercised
|
- | $ | - | $ | - | - | - | |||||||||||||
Cancelled/Expired
|
(150,000 | ) | $ | 0.10 | $ | - | - | - | ||||||||||||
Outstanding
at September 30, 2009
|
410,000 | $ | 1.05 | $ | 1.05 |
1.9
years
|
$ | - |
(6)
|
Income
Taxes
|
The
Company records its income taxes in accordance with ASC 740, “Accounting for
Income Taxes”. The Company incurred net operating losses during all
periods presented resulting in a deferred tax asset, which has been fully
allowed for; therefore, the net benefit and expense resulted in no income
taxes.
(7)
|
Concentration
of Credit Risk
|
The
Company conducts a significant portion of its operations with one customer.
During the nine months ended September 30, 2009, approximately 50% of the
Company's service revenues were conducted with this one
customer.
- 9
-
(8)
|
Legal
Proceedings
|
As
disclosed in an 8-K released on May 9, 2009, we settled a lawsuit between us and
a former President, CEO and director, John H. Simmons by executing a settlement
agreement.
On
October 11, 2007, the Company had filed a lawsuit against Mr. Simmons in the
United States District Court, Northern District of Texas, Dallas Division, Civil
Action No. 307CV1718-R alleging, among other things, that Mr. Simmons breached
his fiduciary duties by diverting Company funds for personal and recreational
use and acquiring shares of our common stock without adequate consideration. We
sought damages against Mr. Simmons of not less than $75,000, attorneys’ fees,
costs of litigation, interest and tremble damages
On
October 3, 2007, Mr. Simmons filed a lawsuit in United States District Court,
Dallas County, Civil Action No. DC-07-11801 against the Company, its officers,
and other individuals. The complaint alleged, among other things, that the
Mr. Simmons 1,900,000 options were converted and that the Company failed to
repay a $96,000 promissory note and breached a duty to indemnify Mr. Simmons in
relation to previously filed litigation. The complaint also made a variety of
accusations against Company’s officers and other individuals, including
accusations that these individuals breached fiduciary duties with regard to Mr.
Simmons, engaged in fraud and conspiracy to commit fraud, and converted shares
and options owned by him. Mr. Simmons sought unspecified damages, both
actual and exemplary, against the Company and the other defendants. During
the quarter ended March 31, 2008, Gerald McIlhargey, Maureen O’Brien, Donal Ford
and Bruce Schreiner, and David Core were all released from the suit as
defendants.
Pursuant
to the settlement agreement, the Company and Mr. Simmons released all claims
against each other. The settlement agreement required the Company to pay Mr.
Simmons a sum of $50,000. In addition, two shareholders of the
Company agreed to effect the purchase of Mr. Simmons’s remaining 60,000 shares
of Company common stock for an aggregate price of $30,000 ($0.50 per
share).
In
connection with the settlement, the Company booked a one-time credit in the
amount of $48,120 in principal and $2,406 in accrued interest to its balance
sheet for the cancellation of a note due to Mr. Simmons. The Company also booked
an additional one-time credit in the amount of $25,000 to its balance sheet for
the cancellation of a note, which was due to Mr. Simmons for the cancellation of
250,000 options which had been previously exercised.
As
previously disclosed in a quarterly report on Form 10-QSB, filed with the SEC on
November 20, 2006, on July 28, 2006, Zachary Karo, a former employee, filed a
lawsuit against the Company and its subsidiary Staf*Tek Services, Inc. in the
district court in Tulsa County, Oklahoma, Case No. CJ 2006 04713, in connection
with stock options allegedly granted to Mr. Karo. Mr. Karo alleges that he was
granted an option to purchase up to 25,000 shares of the Company’s common stock
at $0.10 per share but that management refused to issue Mr. Karo such shares
upon his attempt to exercise of the alleged
option. A motion was made by the Company and granted with
prejudice to dismiss the case. Mr. Karo re-filed to
vacate the dismissal, which was subsequently vacated; at this time there is a
pretrial conference set for November 23, 2009. Mr. Karo is seeking damages,
actual and exemplary, against the Company in an amount in excess of $10,000.
Management denies that Mr. Karo was owed such stock options. The Company has
engaged local counsel and intends to vigorously defend this action on the basis
brought by the plaintiffs. The costs of defending against the complaint could be
substantial; however management is unable to estimate an amount at this
time.
As
disclosed in a 8-K released on May 9, 2009, we settled a lawsuit against us by
two holders of our Series A Preferred Convertible Stock (the “Preferred A”),
Phyllis Bell and Paul Aelmore, by entering into a settlement agreement dated
effective May 9, 2009 and which was signed by the Company May 5,
2009. The settlement agreement provides for us to pay the holders of
the Preferred A an aggregate of $2,700 per month, retroactive to January 1,
2009, until the balance of Series A dividends owed to them of $117,312 is fully
paid. If we make all required payments, we will have paid down this
balance in August 2012. Of the monthly amount to be paid to the
Preferred A holders, Ms. Bell is to receive $2,295 per month and Mr. Aelmore is
to receive $176 per month.
- 10
-
Because
the monthly payments are retroactive to January 1, 2009, we made a one-time
payment of $12,357 to Ms. Bell and Mr. Aelmore to cover the period of
January through May 2009. The monthly payments commenced on June 1,
2009.
Ms. Bell
and Mr. Aelmore filed a lawsuit in United States District Court, Northern
District of Oklahoma, Case No. 08-CF-00470-TCK-SAJ against the Company, and
officers and directors of the Company in September 2008. Their
complaint alleged, among other things, that the Company breached the Share
Purchase Agreement by failing to pay dividends on the Series A Convertible
Preferred Stock. The Company had been accruing the dividends following a
determination by its management that the Company did not have funds legally
available for distribution.
In
consideration of the obligations undertaken by the Company in the settlement
agreement, Ms. Bell and Mr. Aelmore released the Company and its officers and
directors named as defendants from all claims made in the complaint and agreed
to a dismissal of their legal action. Further the settlement
agreement provides that if the Company is barred by Colorado law from making the
required dividend payments, the Company shall not be in default so long as it
promptly remits payment at such time as it may legally do so.
ITEM
2.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OR PLAN OF OPERATION ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF
OPERATIONS
|
The
following presentation of Management’s Discussion and Analysis has been prepared
by internal management and should be read in conjunction with the financial
statements and notes thereto included in Item 1 of this Quarterly Report on Form
10-Q. Except for the historical information contained herein, the discussion in
this report contains certain forward-looking statements that involve risks and
uncertainties, such as statements of our business plans, objectives,
expectations and intentions as of the date of this filing. The
cautionary statements about reliance on forward-looking statements made earlier
in this document should be given serious consideration with respect to all
forward-looking statements wherever they appear in this report, notwithstanding
that the “safe harbor” protections available to some publicly reporting
companies under applicable federal securities law do not apply to us as an
issuer of penny stocks. Our actual results could differ materially
from those discussed here.
General
St.
Joseph, Inc. (“us,” “we,” “our” or the “Company”) currently conducts all of our
business through our wholly-owned subsidiary, Staf*Tek Services, Inc. We also hope to acquire other operating companies as
subsidiaries and are pursuing suitable candidates for future acquisition that
could potentially create value for our existing
shareholders. Acquisition targets may be in sectors other than our
current sector of providing employment agency services. Although it is not our
goal, we would also consider a reverse merger opportunity, if it were seen to be
a growth opportunity for our existing shareholders.
To date,
we have not consummated any acquisition and cannot provide any assurance that we
will be successful in this endeavor. Any acquisition may be structured as a
share exchange and may result in significant dilution to our existing
shareholders.
- 11
-
Staf*Tek
Services, Inc.
Staf*Tek
Services, Inc. (“Staf*Tek”) was organized as an Oklahoma corporation on January
2, 1997. On January 2, 2004, we closed our acquisition of Staf*Tek pursuant to
an agreement by which we acquired 100% percent of the issued and
outstanding shares of Staf*Tek's common stock in exchange for (i) 380,500 shares
of our $.001 par value Series A convertible preferred stock; (ii) 219,500 shares
of our $.001 par value common stock; and (ii) $200,000 in cash. Our Series A
convertible preferred stock has a face value of $3.00 per share with a yield of
6.75% dividend per annum, payable on a quarterly basis out of funds legally
available therefor, for a period of five years. As the Company did
not have funds legally available for distribution at times during this 5-year
period, Series A Convertible Preferred Stock dividends in the amount of $90,431
as of September 30, 2009 have been accrued to be paid at such time as the
Company may legally do so.
The
Series A convertible preferred stock may be converted into our common stock at
the rate of one share of convertible preferred stock for one share of common
stock at any time by the shareholder. We may call the Series A convertible
preferred stock for redemption no sooner than two years after the date of
issuance, and only if our common stock is trading on a recognized United States
stock exchange for a period of no less than thirty consecutive trading days at a
market value of $5.00 or more per share. However, as of this date, our common
stock has not traded at that price.
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.
- 12
-
Results
of Operations for the Nine Months Ended September 30, 2009 and 2008
For
the Nine Months Ended
|
||||||||||||||||||||||||
September 30, 2009
|
September 30, 2008
|
Change
|
Change
|
|||||||||||||||||||||
$
|
%
of Revenue
|
$
|
%
of Revenue
|
$
|
%
|
|||||||||||||||||||
Net
Revenues
|
$ | 685,343 | 100.00 | % | $ | 1,898,545 | 100.00 | % | $ | (1,213,202 | ) | (63.90 | ) % | |||||||||||
Cost
of Revenues
|
534,112 | 77.93 | % | 1,463,476 | 77.08 | % | (929,364 | ) | (63.50 | ) % | ||||||||||||||
Gross
Margin (Loss)
|
151,231 | 22.07 | % | 435,069 | 22.92 | % | (283,838 | ) | (65.24 | ) % | ||||||||||||||
Operating
Expenses
|
||||||||||||||||||||||||
Selling,
General and Administrative Expenses
|
315,978 | 46.11 | % | 397,258 | 20.92 | % | (81,280 | ) | (20.46 | ) % | ||||||||||||||
Depreciation
and Amortization
|
862 | 0.13 | % | 835 | 0.04 | % | 27 | 3.23 | % | |||||||||||||||
Total
Operating Expenses
|
$ | 316,840 | 46.23 | % | $ | 398,093 | 20.97 | % | $ | (81,253 | ) | (20.41 | ) % | |||||||||||
Income
(Loss) from Operations
|
$ | (165,609 | ) | (24.16 | ) % | 36,976 | 1.95 | % | (202,585 | ) | (547.88 | ) % | ||||||||||||
Other
Income (Expense)
|
||||||||||||||||||||||||
Interest
Income
|
- | 0.00 | % | - | 0.00 | % | - | 0.00 | % | |||||||||||||||
Other
Income (Expense)
|
25,926 | 3.78 | % | (100.00 | ) | (0.01 | ) % | 26,026 | (26,026.00 | ) % | ||||||||||||||
Interest
Expense
|
(15,575 | ) | (2.27 | ) % | (21,638 | ) | (1.14 | ) % | 6,063 | (28.02 | ) % | |||||||||||||
Net
Other Expense
|
$ | 10,351 | 1.51 | % | $ | (21,738 | ) | (1.14 | ) % | $ | 32,089 | (147.62 | ) % | |||||||||||
Loss
before provision for income tax
|
(155,258 | ) | (22.65 | ) % | 15,238 | 0.80 | % | (170,496 | ) | (1,118.89 | ) % | |||||||||||||
Provision
for Income Taxes
|
- | 0.00 | % | 3,200 | 0.17 | % | (3,200 | ) | (100.00 | ) % | ||||||||||||||
Net
Income (Loss)
|
$ | (155,258 | ) | (22.65 | ) % | $ | 12,038 | 0.63 | % | $ | (167,296 | ) | (1,389.73 | ) % | ||||||||||
Benefit
from tax loss carryforward
|
- | 0.00 | % | 3,200 | 0.17 | % | (3,200 | ) | (100.00 | ) % | ||||||||||||||
Net
Income (Loss)
|
$ | (155,258 | ) | (22.65 | ) % | $ | 15,238 | 0.80 | % | $ | (170,496 | ) | (1,118.89 | ) % | ||||||||||
Gross
Profit
For the
nine-month period ended September 30, 2009, we had a gross margin of $151,231
compared to a gross margin of $435,069 for the nine-month period ended
September, 30 2008. This decrease in our gross profitability of
$283,838 or approximately 65.24% over the prior period is due primarily to lower
number of contractors and renegotiated bill rates as explained
below.
Revenues
for the nine-month period ended September 30, 2009 decreased to $685,343 from
$1,898,545 for the nine-month period ended September, 30 2008. This
decrease in net revenues of $1,213,202, or approximately 63.90%, over the prior
period, is due primarily to lower number of contractors and renegotiated bill
rates.
Cost of
revenues for the nine-month period ended September 30, 2009 decreased to
$534,112 from $1,463,476 for the nine-month period ended September, 30
2008. This decrease in cost of revenues of $929,364, or approximately
63.50% over the prior period, is due primarily to lower number of contractors
and renegotiated bill rates.
- 13
-
Total Costs and
Expenses
Total
costs and expenses for the nine-month period ended September 30, 2009 decreased
to $316,840 from $398,093 for the nine-month period ended September, 30
2008. This decrease in our total operating expenses of $81,253 is
approximately 20.41% less than that of the prior period.
General
and administrative expenses for the nine-month period ended September 30, 2009
decreased to $315,978 from $397,258 for the nine-month period ended September,
30 2008. This decrease in general and administrative expenses of
$81,280 is approximately 20.46% under that of the prior period.
Other
Income/Expenses
Interest
expense for the nine-month period ended September 30, 2009 decreased to $15,575
from $21,638 for the nine-month period ended September, 30 2008. This
decrease in interest expense of $6,063, or approximately 28.02% over the prior
period, is due primarily to the decrease in interest due on legal fees and our
line of credit.
For the
nine-month period ended September 30, 2009, we had other income of $25,926
compared to other expenses of $100 for the nine-month period ended September 30,
2008. This decrease of other expenses of $26,026, or approximately
26,026% over the prior period, is due primarily to the gain on the settlement of
liabilities due to related party.
For the
nine-month period ended September 30, 2009, we had total other income in the
amount of $10,351 compared to ($21,738) in total other income for the nine-month
period ended September, 30 2008. This decrease of $32,089 is approximately
147.62% less than that of the prior period.
Profits
For the
nine-month period ended September 30, 2009, we incurred an operating loss of
$155,258 compared to an operating profit for the nine-month period ended
September 30, 2008 of $15,238. This decrease in operating profits is
due primarily to lower margins and decreased number of revenue generating
contractor placements.
Net loss
for the nine-month period ended September 30, 2009 increased to $155,258 from
$15,238 of net income for the nine-month period ended September 30, 2008. This
increase in losses of $170,496 or 1,118.89% over the prior period, is due
primarily to lower margins and decreased number of revenue generating contractor
placements as discussed above.
- 14
-
Results
of Operations for the Three months ended September 30, 2009 and
2008
For
the Three Months Ended
|
||||||||||||||||
September 30, 2009
|
September 30, 2008
|
Change
|
Change
|
|||||||||||||
$
|
$
|
$
|
%
|
|||||||||||||
Net
Revenues
|
$ | 135,092 | $ | 614,264 | $ | (479,172 | ) | (78.01 | ) % | |||||||
Cost
of Revenues
|
105,055 | 477,241 | (372,186 | ) | (77.99 | ) % | ||||||||||
Gross
Margin (Loss)
|
30,037 | 137,023 | (106,986 | ) | (78.08 | ) % | ||||||||||
Operating
Expenses
|
||||||||||||||||
Selling,
General and Administrative Expenses
|
89,757 | 134,641 | (44,884 | ) | (33.34 | ) % | ||||||||||
Depreciation
and Amortization
|
288 | 287 | 1 | 0.35 | % | |||||||||||
Total
Operating Expenses
|
$ | 90,045 | $ | 134,928 | $ | (44,883 | ) | (33.26 | ) % | |||||||
Income
(Loss) from Operations
|
$ | (60,008 | ) | 2,095 | (62,103 | ) | (2,964.34 | ) % | ||||||||
Other
Income (Expense)
|
||||||||||||||||
Interest
Income
|
- | - | - | 0.00 | % | |||||||||||
Other
Income (Expense)
|
- | - | - | 0.00 | % | |||||||||||
Interest
Expense
|
(3,646 | ) | (5,204 | ) | 1,558 | (29.94 | ) % | |||||||||
Net
Other Expense
|
$ | (3,646 | ) | $ | (5,204 | ) | $ | 1,558 | (29.94 | ) % | ||||||
Loss
before provision for income tax
|
(63,654 | ) | (3,109 | ) | (60,545 | ) | 1,947.41 | % | ||||||||
Provision
for Income Taxes
|
- | 4,199 | (4,199 | ) | (100.00 | ) % | ||||||||||
Net
Income (Loss)
|
$ | (63,654 | ) | $ | (7,308 | ) | $ | (56,346 | ) | 771.02 | % | |||||
Benefit
forom tax loss carryforward
|
- | 4,199 | (4,199 | ) | (100.00 | ) % | ||||||||||
Net
Income (Loss)
|
$ | (63,654 | ) | $ | (3,109 | ) | $ | (60,545 | ) | 1,947.41 | % | |||||
For the
three-month period ended September 30, 2009, we had a gross margin of $30,037
compared to a gross margin of $137,023 for the three-month period ended
September 30, 2008. This decrease in our gross profitability of
$106,986, or approximately 78.08 % over the prior period, is due primarily to a
reduction in the number of contractor placements.
Revenues
for the three-month period ended September 30, 2009 decreased to $135,092 from
$614,264 for the three-month period ended September 30, 2008. This
decrease in net revenues of $479,172, or approximately 78.01 % over the prior
period, is due primarily to a reduction in the number of contractor placements
and contractor placements with lower margins.
- 15
-
Cost of
revenues for the three-month period ended September 30, 2009 decreased to
$105,055 from $477,241 for the three-month period ended September 30,
2008. This decrease in cost of revenues of $372,186, or approximately
77.99% from that of the prior period, is due primarily to a decrease in the
number of contractor placements.
Total Costs and
Expenses
Total
costs and expenses for the three-month period ended September 30, 2009 decreased
to $90,045 from 134,928 for the three-month period ended September 30,
2008. This decrease in our total operating expenses of $44,883 is
approximately 33.26% over that of the prior period.
General
and administrative expenses for the three-month period ended September 30, 2009
decreased to $89,757 from $134,641 for the three-month period ended September
30, 2008. This decrease in general and administrative expenses of
$44,884 is approximately 33.34% over that of the prior period.
Other
Income/Expenses
For the
three-month period ended September 30, 2009, we had no other income as well as
none for the three-month period ended September 30, 2008.
For the
three-month period ended September 30, 2009, we had net other expenses in the
amount of $3,646 compared to $5,204 for the three-month period ended September
30, 2008. This decrease of $1,558 is approximately 29.94% less than that of the
prior period.
Profits
For the
three-month period ended September 30, 2009, we incurred an operating loss of
$60,008 compared to operating income for the three-month period ended September
30, 2008 of $2,095. This increase in operating loss is due primarily
to a decrease number and lower margins with our contractor
placements.
Net loss
for the three-month period ended September 30, 2009 was $63,654 compared to net
loss of $7,308 for the three-month period ended September 30, 2008. This
increase in net loss is due primarily to a decrease number and lower margins
with our contractor placements as discussed above.
Liquidity
and Capital Resources
As of
September 30, 2009, we had a cash reserve of $193,239. During the
nine months ended September 30, 2009, we used cash in the amount of $126,083 in
our operating activities. During this period $165,000 of new funds
were raised.
During
the nine months ended September 30, 2009 and 2008, the Company’s cash
activities were as follows:
2009
|
2008
|
|||||||
Cash
used for operating activities
|
$ | (126,083 | ) | $ | (69,404 | ) | ||
Cash
used in investing activities
|
$ | (1,542 | ) | $ | (1,627 | ) | ||
Cash
provided by financing activities
|
$ | 98,872 | $ | (12,500 | ) |
- 16
-
Internal
Sources of Liquidity
For the
nine months ended September 30, 2009, the funds generated from our operations
were insufficient to fund our daily operations. For the nine months
ended September 30, 2009, we had a gross margin of $151,231 and we were thus
unable to meet our operating expenses of $316,840 for the same
period. After accounting for our total other income of $10,351 for
this period, we suffered a net loss of $155,258 for the period. We can provide
no assurance that funds from our operations will continue to meet the
requirements of our daily operations in the future. In the event that
funds from our operations are insufficient to meet our expenses, we will need to
seek other sources of financing to maintain liquidity.
External
Sources of Liquidity
Because
the funds generated from our operations have been not been sufficient to fully
fund our operations, we have been on dependent on debt and equity financing to
make up the shortfall. We actively pursue all potential financing options as we
look to secure additional funds to both stabilize and grow our business
operations. Our management will review any financing options at their disposal,
and will judge each potential source of funds on 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 a result, our
independent registered public accounting firm has issued a “going concern”
modification to its report on our audited financial statements for the year
ended December 31, 2008.
We have
been utilizing a $200,000 line of credit in order to meet our operating
expenses. This line of credit is secured by most of our assets and expires
January 7, 2009. Interest is due on the line of credit at the rate of
6.79% per annum and interest payments are due monthly. As of September 30, 2009,
the line of credit had an outstanding balance of $180,000. There has
been a temporary verbal extension on the line of credit. Discussions are ongoing
regarding the future amount of the line of credit and there cannot be any
assurance that the amount will not be reduced.
In our
quarter ended June 30, 2009, we completed a private offering we commenced in
October 2008. In the private placement we sold 2,900,000 shares of common stock
to 11 accredited investors at a price of $0.05 per share for gross proceeds of
$145,000. Of these amounts, during the quarter ended June 30, 2009,
we sold 400,000 shares of common stock to one accredited investor for projected
gross proceeds of $20,000.
During
the quarter ended September 30, 2009, we borrowed money from our management as
follows:
·
|
On
July 24, 2009 Kenneth Johnson, our Secretary, Treasurer and a member of
our Board, advanced $15,000 to the Company for working capital in exchange
for an unsecured promissory note which matures on July 24,
2010 and does not bear any
interest.
|
·
|
On
September 17, 2009, Gerry McIlhargey, our President and a member of our
Board, advanced $5,000 for working capital in exchange for an unsecured
promissory note which matures on September 17, 2010 and does not bear any
interest.
|
Off
Balance Sheet Arrangements
We do not
have nor do we maintain any off-balance sheet arrangements that have or are
reasonably likely to have a current or future effect on our financial condition,
changes in financial condition, revenues or expenses, results of operations,
liquidity, capital expenditures or capital resources that are material to our
investors.
- 17
-
Risk
Factors
Reference
is made to “Risk Factors” included in our Annual Report on Form 10-KSB for the
year ended December 31, 2008 for information concerning risk factors. There have
been no material changes in the risk factors since the filing of this Annual
Report with the SEC on September 30, 2009.
ITEM
3.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
|
As a
smaller reporting company, we are not required to provide the information
required by this Item.
ITEM
4.
|
CONTROLS
AND PROCEDURES
|
As
required by Rule 13a-15(b) under the Securities Exchange Act of 1934 (the
“Exchange Act”), we carried out an evaluation of the effectiveness of the design
and operation of our disclosure controls as of the end of the period covered by
this report, September 30, 2009. This evaluation was carried out
under the supervision and with the participation of our Chief Executive Officer,
Mr. Gerald McIlhargey, and our Treasurer, Mr. Kenneth L. Johnson (collectively,
the “Certifying Officers”). Based upon that evaluation, our
Certifying Officers concluded that as of the end of the period covered by this
report, September 30, 2009, our disclosure controls and procedures are effective
in timely alerting management to material information relating to us and
required to be included in our periodic filings with the Securities and Exchange
Commission (the “Commission”).
Disclosure
controls and procedures are controls and procedures that are designed to ensure
that information required to be disclosed in our periodic reports under the
Exchange Act is recorded, processed, summarized and reported, within the time
periods specified in the Commission's rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed in our periodic reports that we
file under the Exchange Act is accumulated and communicated to our management,
including our principal executive and principal financial officers, or persons
performing similar functions, as appropriate to allow timely decisions regarding
required disclosure.
Internal
Control over Financial Reporting
Further,
as required by Rule 13a-15(d) of the Exchange Act and under the supervision and
with the participation of our Certifying Officers, we carried out an evaluation
as to whether there has been any change in our internal control over financial
reporting during our fiscal quarter ended September 30, 2009. Based upon this
evaluation, our Certifying Officers have concluded that there has not been any
change in our internal control over financial reporting during our fiscal
quarter ended September 30, 2009, that has materially affected, or is reasonably
likely to materially affect, our internal control over financial
reporting.
Internal
control over financial reporting is a process designed by, or under the
supervision of, our principal executive and principal financial officers, or
persons performing similar functions, and effected by our board of directors,
management and other personnel, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting
principles. Internal control over financial reporting includes those
policies and procedures that: (i) pertain to the maintenance of records that in
reasonable detail accurately and fairly reflect the transactions and
dispositions of our assets; (ii) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that our receipts
and expenditures are being made only in accordance with authorizations of our
management and directors; and (iii) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use or disposition
of our assets that could have a material effect on the financial
statements.
- 18
-
ITEM
4T.
|
CONTROLS
AND PROCEDURES
|
Not
Applicable
PART
II - OTHER INFORMATION
ITEM
1.
|
LEGAL
PROCEEDINGS
|
As
previously disclosed in a quarterly report on Form 10-QSB, filed with the SEC on
November 20, 2006, on July 28, 2006, Zachary Karo, a former employee, filed a
lawsuit against the Company and its subsidiary Staf*Tek Services, Inc. in the
district court in Tulsa County, Oklahoma, Case No. CJ 2006 04713, in connection
with stock options allegedly granted to Mr. Karo. Mr. Karo alleges that he was
granted an option to purchase up to 25,000 shares of the Company’s common stock
at $0.10 per share but that management refused to issue Mr. Karo such shares
upon his attempt to exercise of the alleged
option. A motion was made by the Company and granted with
prejudice to dismiss the case. Mr. Karo re-filed to
vacate the dismissal, which was subsequently vacated; at this time there is a
pretrial conference set for November 23, 2009. Mr. Karo is seeking damages,
actual and exemplary, against the Company in an amount in excess of $10,000.
Management denies that Mr. Karo was owed such stock options. The Company has
engaged local counsel and intends to vigorously defend this action on the basis
brought by the plaintiffs. The costs of defending against the complaint could be
substantial; however management is unable to estimate an amount at this
time.
Material
developments in legal proceedings during our first and second quarters for
fiscal 2009 are disclosed in our Quarterly Reports on Form 10-Q filed for such
periods.
ITEM
1A.
|
RISK
FACTORS
|
As a
smaller reporting company, we are not required to provide the information
required by this Item.
ITEM
2.
|
UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
|
During
our fiscal quarter ended September 30, 2009, we made the following sales of
equity securities: In September 2009, a shareholder exercised her
right to convert 330,000 shares of Series A Convertible Preferred Shares into
330,000 shares of common stock. These shares of common stock were
issued as restricted stock pursuant to Rule 144. This issuance of
common stock was exempt from registration under Section 3(a)(9) of the
Securities Act of 1933, as amended.
ITEM
3.
|
DEFAULTS
UPON SENIOR SECURITIES
|
None.
ITEM
4.
|
SUBMISSION
OF MATTERS TO A VOTE OF SECURITY
HOLDERS
|
On August
30, 2009, shareholders holding a majority of the voting rights of our capital
stock executed a written consent (the “Written Consent”) to effect (i) the
election of five directors for a term of one year or until their successors are
duly elected and qualified, and (ii) the ratification of the appointment of
Cordovano & Honeck, LLP, as our independent public accountants.
Pursuant
to the Written Consent, the Board of Directors, as described in our Annual
Report on Form 10-KSB for fiscal 2008, was re-elected in its entirety. The
Written Consent was executed to become effective 20 days following the mailing
of a definitive information statement to our shareholders and accordingly became
effective on approximately August 30, 2009. Shareholders holding 6,883,088
shares of common stock executed the Written Consent.
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ITEM
5.
|
OTHER
INFORMATION
|
None.
ITEM
6.
|
EXHIBITS
|
Exhibit No.
|
Description
|
31.1
|
Certification
of Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a), as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002. (Filed herewith)
|
31.2
|
Certification
of Chief Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a), as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002. (Filed herewith)
|
32.1
|
Certification
of Chief Executive Officer pursuant to pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 (Filed herewith)
|
32.2
|
Certification
of Chief Financial Officer pursuant to pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 (Filed
herewith)
|
SIGNATURES
Pursuant
to the requirments 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.
Date: November
17, 2009
ST.
JOSEPH, INC.
/s/ GERALD
MCILHARGEY
Gerald
McIlhargey, Chief Executive Officer
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