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 June 30, 2015
[ ] TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the transition period from _____ to _____.
Commission
file number: 0-49936
ST.
JOSEPH, INC.
(Exact
name of registrant as specified in its charter)
| Colorado |
|
47-0844532 |
(State
or other jurisdiction of
incorporation or organization) |
|
(IRS
Employer
Identification No.) |
4205
Carmel Mountain Drive
McKinney,
TX |
|
75070 |
| Address
of Principal Executive Offices) |
|
(Zip
Code) |
Registrant’s
telephone number, including area code: (402) 902-9226
Indicate
by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
[X]
Yes [ ] No
Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
[X]
Yes [ ] No
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
| Large
accelerated filer [ ] |
|
Accelerated
filer [ ] |
| |
|
|
| Non-accelerated
filer [ ] (Do not check if a smaller reporting company) |
|
Smaller reporting
company [X] |
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [ ] Yes [X]
No
APPLICABLE
ONLY TO CORPORATE ISSUERS
As
of August 28, 2015, there were 13,395,341 shares issued and outstanding of the registrant’s common stock.
ST.
JOSEPH, INC.
Table
of Contents
PART
I – FINANCIAL INFORMATION
ITEM
1. CONDENSED FINANCIAL STATEMENTS
ST.
JOSEPH, INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS
| | |
June
30, 2015 | | |
December
31, 2014 | |
| | |
(Unaudited) | | |
(Derived
from audited financial statements) | |
ASSETS | |
| | | |
| | |
| CURRENT ASSETS: | |
| | | |
| | |
| Cash | |
$ | 17,832 | | |
$ | 12,721 | |
| Total current assets | |
| 17,832 | | |
| 12,721 | |
| | |
| | | |
| | |
| Prepaid expenses | |
| - | | |
| 60,000 | |
| | |
| | | |
| | |
| Total Assets | |
$ | 17,832 | | |
$ | 72,721 | |
| | |
| | | |
| | |
| LIABILITIES AND STOCKHOLDERS’
DEFICIT | |
| | | |
| | |
| | |
| | | |
| | |
| CURRENT LIABILITIES: | |
| | | |
| | |
| Accounts payable | |
$ | 458,038 | | |
$ | 458,634 | |
| Accrued liabilities | |
| 181,268 | | |
| 187,635 | |
| Accrued preferred dividend | |
| 42,047 | | |
| 42,047 | |
| Bank loan and notes
payable: | |
| | | |
| | |
| Bank loan | |
| - | | |
| 115,402 | |
| Advance from officer | |
| 29,700 | | |
| 29,700 | |
| Loan
from officer | |
| 45,000 | | |
| 45,000 | |
| Total current
liabilities | |
| 756,053 | | |
| 878,418 | |
| COMMITMENTS AND CONTINGENCIES | |
| | | |
| | |
| STOCKHOLDERS’ DEFICIT: | |
| | | |
| | |
Preferred stock, Series A; $0.001 par
value, $3.00 face value;
25,000,000 shares authorized; 5,708
(unaudited) and 5,708 shares issued and outstanding, respectively | |
| 6 | | |
| 6 | |
| Common stock, $0.001 par value; 100,000,000
shares authorized, 13,395,341 (unaudited) and 13,085,802 issued and outstanding, Respectively | |
| 13,395 | | |
| 13,085 | |
| Additional paid-in capital | |
| 4,044,446 | | |
| 3,967,256 | |
| Retained deficit | |
| (4,796,068 | ) | |
| (4,786,044 | ) |
| Total stockholders’
deficit | |
| (738,221 | ) | |
| (805,697 | ) |
| | |
| | | |
| | |
| Total Liabilities
and Stockholders’ Deficit | |
$ | 17,832 | | |
$ | 72,721 | |
The
accompanying footnotes are an integral part of these unaudited financial statements
ST.
JOSEPH, INC.
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
| | |
Three
months ended | | |
Six
Months Ended | |
| | |
June
30, | | |
June
30, | |
| | |
2015 | | |
2014 | | |
2015 | | |
2014 | |
| REVENUES: | |
| | | |
| | | |
| | | |
| | |
| Contract | |
$ | - | | |
$ | 3,380 | | |
$ | - | | |
$ | 6,656 | |
| COST OF REVENUES | |
| - | | |
| 1,819 | | |
| - | | |
| 4,547 | |
| | |
| | | |
| | | |
| | | |
| | |
| Gross Margin | |
| - | | |
| 1,561 | | |
| - | | |
| 2,109 | |
| | |
| | | |
| | | |
| | | |
| | |
| COSTS AND EXPENSES: | |
| | | |
| | | |
| | | |
| | |
| General and Administrative Expenses | |
| 23,708 | | |
| 126,770 | | |
| 95,426 | | |
| 217,321 | |
| Depreciation and Amortization | |
| - | | |
| - | | |
| - | | |
| - | |
| Total Costs
and Expenses | |
| 23,708 | | |
| 126,770 | | |
| 95,426 | | |
| 217,321 | |
| | |
| | | |
| | | |
| | | |
| | |
| Operating Income
(Loss) | |
| (23,708 | ) | |
| (125,209 | ) | |
| (95,426 | ) | |
| (215,212 | ) |
| OTHER INCOME AND (EXPENSE): | |
| | | |
| | | |
| | | |
| | |
| Other Income (Expense) | |
| - | | |
| 3,800 | | |
| - | | |
| 4,075 | |
| Gain on Debt Restructuring | |
| - | | |
| - | | |
| 85,402 | | |
| - | |
| Interest Expense | |
| - | | |
| (6,640 | ) | |
| - | | |
| (34,069 | ) |
| Net Other Income
(Expense) | |
| - | | |
| (2,840 | ) | |
| 85,402 | | |
| (29,994 | ) |
| Income (Loss)
before provision for income taxes | |
| (23,708 | ) | |
| (128,049 | ) | |
| (10,024 | ) | |
| (245,206 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| Provision for
income taxes | |
| - | | |
| - | | |
| - | | |
| - | |
| Net Income (Loss) | |
$ | (23,708 | ) | |
$ | (128,049 | ) | |
$ | (10,024 | ) | |
$ | (245,206 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| Income (Loss)
applicable to common stockholders | |
$ | (23,708 | ) | |
$ | (128,049 | ) | |
$ | (10,024 | ) | |
$ | (245,206 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| Basic and diluted
earnings (loss) per common share | |
$ | (0.002 | ) | |
$ | (0.01 | ) | |
$ | (0.001 | ) | |
$ | (0.02 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| Weighted average common shares
outstanding | |
| 13,201,766 | | |
| 12,762,979 | | |
| 13,148,681 | | |
| 12,476,759 | |
The
accompanying footnotes are an integral part of these unaudited financial statements
ST.
JOSEPH, INC.
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
| | |
| | |
| | |
| | |
| | |
Additional | | |
| | |
| |
| | |
Preferred
Stock-Series A | | |
Common
Stock | | |
Paid-in | | |
Retained | | |
| |
| | |
Shares | | |
Par
value | | |
Shares | | |
Par
value | | |
Capital | | |
Deficit | | |
Total | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| Balance
December 31, 2014 | |
| 5,708 | | |
$ | 6 | | |
| 13,085,341 | | |
$ | 13,085 | | |
$ | 3,967,256 | | |
$ | (4,786,044 | ) | |
$ | (805,697 | ) |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Sale of common stock @ $0.25 per share | |
| - | | |
| - | | |
| 310,000 | | |
| 310 | | |
| 77,190 | | |
| - | | |
| 77,500 | |
Net
income for the six months ended June
30, 2015 | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (10,024 | ) | |
| (10,024 | ) |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Balance June
30, 2015 | |
| 5,708 | | |
$ | 6 | | |
| 13,395,341 | | |
$ | 13,395 | | |
$ | 4,044,446 | | |
$ | (4,796,068 | ) | |
$ | (738,221 | ) |
The
accompanying footnotes are an integral part of these unaudited financial statements
ST.
JOSEPH, INC.
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
| | |
Six
Months Ended | |
| | |
June
30, | |
| | |
2015 | | |
2014 | |
| OPERATING ACTIVITIES | |
| | | |
| | |
| Net income (loss) | |
$ | (10,024 | ) | |
$ | (245,206 | ) |
| Adjustments to reconcile net loss to net
cash provided by (used in) operating activities: | |
| | | |
| | |
| Stock-based compensation | |
| - | | |
| 50,986 | |
| Gain on debt restructuring | |
| (85,402 | ) | |
| - | |
| Changes in operating assets and liabilities: | |
| | | |
| | |
| (Increase)/decrease
in other assets | |
| 60,000 | | |
| 1,230 | |
| Increase/(decrease)
in accounts payable | |
| (596 | ) | |
| 39,415 | |
| Increase/(decrease)
in accrued liabilities | |
| (6,367 | ) | |
| 13,732 | |
| Net cash provided
by (used in) operating activities | |
| (42,389 | ) | |
| (139,843 | ) |
| | |
| | | |
| | |
| INVESTING ACTIVITIES | |
| - | | |
| - | |
| | |
| | | |
| | |
| FINANCING ACTIVITIES | |
| | | |
| | |
| Proceeds from sale
of common stock | |
| 77,500 | | |
| 140,000 | |
| Proceeds from officer
advance | |
| - | | |
| 2,200 | |
| Repayment
of bank loan | |
| (30,000 | ) | |
| (2,800 | ) |
| Net cash provided
by (used in) financing activities | |
| 47,500 | | |
| 139,400 | |
| | |
| | | |
| | |
| INCREASE (DECREASE) IN CASH | |
| 5,111 | | |
| (443 | ) |
| | |
| | | |
| | |
| CASH AT BEGINNING OF PERIOD | |
| 12,721 | | |
| 527 | |
| | |
| | | |
| | |
| CASH AT END OF PERIOD | |
$ | 17,832 | | |
$ | 84 | |
| | |
| | | |
| | |
SUPPLEMENTAL
INFORMATION: | |
| | | |
| | |
| Cash
paid for income taxes | |
$ | - | | |
$ | - | |
| Cash
paid for interest | |
$ | - | | |
$ | 22,158 | |
The
accompanying footnotes are an integral part of these unaudited financial statements
ST.
JOSEPH, INC.
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
(1)
Basis of Presentation
The
condensed balance sheet at December 31, 2014 has been derived from financial statements included in the Form 10-K. The accompanying
unaudited financial statements at June 30, 2015 presented herein have been prepared by St. Joseph, Inc. (the “Company”)
in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) pursuant
to the rules and regulations of the Securities and Exchange Commission (“SEC”). These financial statements should
be read in conjunction with the audited financial statements and notes thereto contained in the Company’s annual report
on Form 10-K for the year ended December 31, 2014.
The
accompanying unaudited interim financial statements have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.
In the opinion of management, the accompanying condensed consolidated financial statements contain all adjustments (consisting
only of normal recurring adjustments) which are necessary to provide a fair presentation of operating results for the interim
periods presented. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and accompanying notes. The results of operations
presented for the six months ended June 30, 2015 are not necessarily indicative of the results to be expected for the full year
ending December 31, 2015.
There
is no provision for dividends for the quarter to which this quarterly report relates.
Financial
data presented herein are unaudited.
Principles
of Consolidation
The
consolidated financial statements for the years ended December 31, 2013 and 2012 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 June 30, 2015 (unaudited)
and December 31, 2014. In our financial statements for the years ended December 31, 2014 and 2013, 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.
ST.
JOSEPH, INC.
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
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 June 30, 2015 (unaudited) and
December 31, 2014.
The
carrying amounts of cash, receivables and current liabilities approximate fair value due to the short-term maturity of the instruments.
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.
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.
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 June
30, 2015 were not included in the diluted loss per share as all 5,708 preferred shares and all 502,500 options were anti-dilutive
as the Company incurred losses during the period.
ST.
JOSEPH, INC.
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Preferred
stock and common stock options outstanding at December 31, 2014 were not included in the diluted loss per share as all 5,708 preferred
shares and all 502,500 options were anti-dilutive as the Company incurred losses during the year. Therefore, basic and diluted
losses per share at June 30, 2015 (unaudited) and December 31, 2014 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 has modified its outstanding stock
options several times over the prior three years resulting in recognition of additional expenses (see Note 4).
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.
(2)
Related Party Transactions
In
prior years, COLEMC advanced the Company a total of $45,000 for working capital in exchange for three promissory notes. The notes
do not bear interest and matured on December 31, 2015.
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. During the year ended December 31, 2013, the officer advanced the Company an additional
$5,500. The total balance of the notes is $29,700 and do not bear any interest. The notes matured on December 31, 2014.
ST.
JOSEPH, INC.
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
(3)
Notes Payable
Bank
Loan
The
Company originally had a $200,000 line of credit 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; and 2) covenants to provide certain financial documents
to the bank on a monthly and annual basis. On September 9, 2013, the Company received a default letter from the bank. Since that
time, the bank has requested the Company bring the loan current by making monthly payments of $2,698 plus late fees of $50 per
month.
On
April 9, 2015, the Company entered into a Settlement Agreement for repayment of the bank loan. Under terms of the Settlement Agreement,
the Company was required to repay the bank $30,000 as follows: $7,500 on or before April 20, 2015, $7,500 on or before May 20,
2015, and a final payment of $15,000 on or before June 20, 2015. As of June 30, 2015, the Company had repaid all $30,000 under
the Settlement Agreement. As a result, the Company recorded a $85,402 gain on the debt restructuring for the six months ended
June 30, 2015.
Interest
expense on the Company’s bank borrowing was $-0- (unaudited) and $3,710, during the six months ended June 30, 2015 and 2014,
respectively.
Other
Notes Payable
The
Company recognized a $14,277 loss in connection with the loan conversions based on the difference between the conversion rate
of $0.50 and the market value of the Company’s stock on January 31, 2014 of $0.55.
(4)
Shareholders’ Deficit
Preferred
Stock
The
Board of Directors is authorized to issue shares of Series A Convertible Preferred Stock and to fix the number of shares in such
series, as well as the designation, relative rights, powers, preferences, restrictions and limitations of all such series. In
December 2003, the Company issued 386,208 shares of Series A Convertible Preferred Stock and 5,708 have not been converted to
common stock at June 30, 2015.
ST.
JOSEPH, INC.
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
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 five years.
The
Company is currently delinquent in making dividend payments pursuant to the terms of a settlement agreement, as disclosed in an
8-K released on May 9, 2009. The accrued balance due on Series A Convertible Preferred Stock dividends total $42,047 (unaudited)
and $42,047 as of June 30, 2015 December 31, 2014, respectively. The Company will commence dividend payments pursuant to the terms
of a settlement agreement as funds are available.
Common
Stock
In
a private placement during the six months ended June 30, 2015, the Company sold 310,000 (unaudited) shares of common stock to
accredited investors at a price of $0.25 per share for gross proceeds totaling $77,500 (unaudited).
In
a private placement during the year ended December 31, 2014, the Company sold 330,000 shares of common stock to accredited investors
at a price of $0.50 per share for gross proceeds totaling $165,000.
In
a private placement during the year ended December 31, 2014, the Company sold 250,000 shares of common stock to accredited investors
at a price of $0.25 per share for gross proceeds totaling $62,500.
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.
Debt
Conversion
Effective
January 31, 2014, the Company converted loans and related accrued interest totaling $142,769 into 285,539 shares of common stock
at a value of $0.50 per share.
Equity
Awards Granted to Employees
The
following schedule summarizes the changes in the Company’s equity awards for the six months ended June 30, 2015.
| | |
| | |
| | |
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, 2015 | |
| 502,500 | | |
$ | 1.05 | | |
$ | 1.05 | | |
| 1.00
yrs. | | |
$ | 25,125 | |
| Granted | |
| - | | |
$ | - | | |
$ | - | | |
| | | |
| | |
| Exercised | |
| - | | |
$ | - | | |
$ | - | | |
| | | |
| | |
| Cancelled/Expired | |
| - | | |
$ | - | | |
$ | - | | |
| | | |
| | |
| Outstanding and exercisable at June 30, 2015 | |
| 502,500 | | |
$ | 0.50 | | |
$ | 0.50 | | |
| 0.50
yrs. | | |
$ | - | |
ST.
JOSEPH, INC.
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
Deadlines
for the exercise of all options have been extended to December 31, 2015.
On
April 23, 2014, the Company’s Board of Directors extended the deadline for the exercise of the 502,500 options by six months
from June 30, 2014 to December 31, 2014. Accordingly, the Company revalued the stock options, which resulted in a charge to share-based
compensation totaling $50,986 during the year ended December 31, 2014.
On
September 9, 2014, the Company’s Board of Directors extended the deadline for the exercise of the 502,500 options by one
year from December 31, 2014 to December 31, 2015. In addition, the Board reduced the exercise price of the options from $1.05
to $0.50. Accordingly, the Company revalued the stock options, which resulted in a charge to share-based compensation totaling
$118,350 during the year ended December 31, 2014.
All
stock options were fully vested as of June 30, 2015 and December 31, 2014. 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 June 30, 2015, and then multiplying
that amount by the number of options. The per share market value of the stock was below the exercise price on June 30, 2015, resulting
in no aggregate intrinsic value.
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.
(5)
Income Taxes
At
June 30, 2015, the Company’s current tax benefit consisted of a net tax asset of $1,132,660 (unaudited) due to operating
loss carryforwards of approximately $3,537,520 (unaudited) which have been fully provided against in the valuation allowance of
$1,132,660 (unaudited). The valuation allowance results in deferred tax expense, which offsets the net deferred tax asset for
which there is no assurance of recovery.
At
December 31, 2014, the Company’s current tax benefit consisted of a net tax asset of $1,130,645 due to operating loss carryforwards
of approximately $3,527,496 which have been fully provided against in the valuation allowance of $1,130,645. 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, 2014 and 2013 were $173,318 and $259,509, respectively. Net operating
loss carry forwards will expire through 2034.
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.
ST.
JOSEPH, INC.
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
(6)
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 six 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 filed a motion for partial summary judgment on June 12, 2014. The Company responded on June
27, 2014 and the motion for partial summary judgment was denied on July 29, 2014. 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. In the event judgment is made against the Company and payment deemed appropriate, it may force
the Company out of business.
(7)
Commitment
The
Company leased office space in Tulsa, Oklahoma under an operating lease, which expired in April 2012. We leased the office space
on a month-to-month basis through May 2014.
The
Company currently leases office space in McKinney, Texas on a month-to-month basis. Rent expense for the six months ended June
30, 2015 totaled $3,000 (unaudited).
(8)
Subsequent Event
The
Company has evaluated subsequent events through August 24, 2015. Other than those described below, there have been no subsequent
events after June 30, 2015 for which disclosure is required.
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This
quarterly report on Form 10-Q and other reports filed by St. Joseph, Inc. (the “Company”) from time to time with the
U.S. Securities and Exchange Commission (the “SEC”) contain or may contain forward-looking statements and information
that are based upon beliefs of, and information currently available to, the Company’s management as well as estimates and
assumptions made by Company’s management.
Readers
are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of
the date hereof. When used in the filings, the words “anticipate,” “believe,” “estimate,”
“expect,” “future,” “intend,” “plan,” or the negative of these terms and similar
expressions as they relate to the Company or the Company’s management identify forward-looking statements. Such statements
reflect the current view of the Company with respect to future events and are subject to risks, uncertainties, assumptions, and
other factors, including the risks contained in the “Risk Factors” section of the Company’s Annual Report on
Form 10-K for the fiscal year ended December 31, 2014, relating to the Company’s industry, the Company’s operations
and results of operations, and any businesses that the Company may acquire. Should one or more of these risks or uncertainties
materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated,
believed, estimated, expected, intended, or planned.
Although
the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee
future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities
laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements
to actual results.
Company
Overview
St.
Joseph, Inc. 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 through the Internet. 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 unsuccessfully 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.
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.
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 value creation 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.
Staf*Tek
Services Inc.
In
anticipation of the completion of our reverse acquisition and in an effort to reduce expenses management recently downsized the
operational expense at Staf*Tek by reducing the number of recruiters specializing in placement of professional technical personnel,
as well as finance and accounting personnel on a temporary and permanent basis. Staf*Tek is primarily a regional professional
service firm located in the Tulsa, Oklahoma area. Over the course of the last several years the area has experienced a downturn
in the demand for highly specialized and qualified personnel further identifying the need for the reduction in personnel and expense.
Proposed
Reverse Acquisition of Zone USA, Inc.
On
February 26, 2015, St. Joseph entered into a nonbinding Letter of Intent with Zone USA, Inc. The Letter of Intent provides for
St. Joseph to acquire 100% of Zone USA, Inc., which has a 50% ownership position in ANZ Communications, LLC.
The
Letter of Intent contemplates the transaction being structured as a reverse acquisition with St. Joseph purchasing Zone USA’s
50% ownership position in ANZ Communications in return for the issuance of (i) such number of shares of common stock that will
be equal to not more than 80% of the total issued and outstanding shares of St. Joseph on a fully diluted and converted basis,
or (ii) preferred stock convertible into such number of common stock. In addition, the Letter of Intent contemplates that the
execution of a definitive agreement for the RTO is conditional on the involved parties being satisfied with their initial due
diligence reviews, and the raising by St. Joseph of not less than $10 million in net proceeds. It is also contemplated that the
definitive agreement will contain customary representations, warranties, covenants, undertakings and indemnities, including by
the Company’s principal shareholders, together with non-competition agreements required by the Zone USA Investor (or its
affiliates) relating to the existing Company’s business and restraints on the disposal by the Company’s principal
shareholders’ shares in the Company post-closing for an agreed period.
The
proposed transaction may be subject to the approval of our shareholders and the approval of Zone USA’s owners. The approvals
necessary 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 if 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.
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 Zone USA.
Results
of Operations for the Three Months Ended June 30, 2015 and 2014
The
following tables sets forth the summary income statement for the three months ended June 30, 2015 and 2014:
| | |
Three Months Ended | | |
| | |
| |
| | |
June
30, | | |
| | |
| |
| | |
2015 | | |
2014 | | |
| | |
| |
| | |
| | |
% of | | |
| | |
% of | | |
Change | | |
Change | |
| | |
$ | | |
Revenue | | |
$ | | |
Revenue | | |
$ | | |
% | |
| REVENUES: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Contract | |
$ | - | | |
| 0.00 | % | |
$ | 3,380 | | |
| 100.00 | % | |
$ | (3,380 | ) | |
| -100.00 | % |
| COST OF REVENUES | |
| - | | |
| 0.00 | % | |
| 1,819 | | |
| 53.82 | % | |
| (1,819 | ) | |
| -100.00 | % |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Gross Margin | |
| - | | |
| 0.00 | % | |
| 1,561 | | |
| 46.18 | % | |
| (1,561 | ) | |
| -100.00 | % |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| COSTS AND EXPENSES: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| General and Administrative Expenses | |
| 23,708 | | |
| 100.00 | % | |
| 126,770 | | |
| 3750.59 | % | |
| (103,062 | ) | |
| -81.30 | % |
| Depreciation and Amortization | |
| - | | |
| 0.00 | % | |
| - | | |
| 0.00 | % | |
| - | | |
| 0.00 | % |
| Total Costs
and Expenses | |
| 23,708 | | |
| 100.00 | % | |
| 126,770 | | |
| 3750.59 | % | |
| (103,062 | ) | |
| -81.30 | % |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Operating Income
(Loss) | |
| (23,708 | ) | |
| -100.00 | % | |
| (125,209 | ) | |
| -3704.41 | % | |
| 101,501 | | |
| -81.07 | % |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| OTHER INCOME AND (EXPENSE): | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Other Income (expense) | |
| - | | |
| 0.00 | % | |
| 3,800 | | |
| 112.43 | % | |
| (3,800 | ) | |
| -100.00 | % |
| Interest Expense | |
| - | | |
| 0.00 | % | |
| (6,640 | ) | |
| -196.45 | % | |
| 6,640 | | |
| -100.00 | % |
| Net Other Expense | |
| - | | |
| 0.00 | % | |
| (2,840 | ) | |
| -84.02 | % | |
| 2,840 | | |
| -100.00 | % |
| Loss before
provision for income taxes | |
| (23,708 | ) | |
| -100.00 | % | |
| (128,049 | ) | |
| -3788.43 | % | |
| 104,341 | | |
| -81.49 | % |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Provision for
income taxes | |
| - | | |
| 0.00 | % | |
| - | | |
| 0.00 | % | |
| - | | |
| 0.00 | % |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Net Loss | |
$ | (23,708 | ) | |
| -100.00 | % | |
$ | (128,049 | ) | |
| -3788.43 | % | |
$ | 104,341 | | |
| -81.49 | % |
Revenues
Revenues
for the three months ended June 30, 2015 decreased to $-0- from $3,380 for the three months ended June 30, 2014. This decrease
in net revenues of $3,380, or 100%, over the prior period, is attributable to the termination of the Company’s revenue-producing
operations.
Gross
Profit
For
the three months ended June 30, 2015, we had no gross profit compared to a gross profit of $1,561 for the three months ended June
30, 2014. This decrease in our gross profitability of $1,561, or 100% over the prior period, is due to the termination of the
Company’s revenue-producing operations.
Total
Costs and Expenses
Total
costs and expenses for the three months ended June 30, 2015 decreased to $23,708 from $126,770 for the three months ended June
30, 2014. This decrease in our total operating expenses of $103,062 is approximately 81.3% below that of the prior period is attributed
to the termination of the Company’s revenue-producing operations.
Net
Other Income (Expense)
Net
other income/expense for the three months ended June 30, 2015 increased to $-0- from $(2,840) for the three months ended June
30, 2014. This is an increase in net other income/expense of $2,840, or approximately 100% over the prior period is attributed
to the termination of the Company’s revenue-producing operations.
Net
Income (Loss)
Due
to the aforementioned reasons, our net loss for the three months ended June 30, 2015 decreased to $23,708 as compared to a $128,049
loss for the three months ended June 30, 2014. This decrease in net loss of $104,341 is approximately 81.5% above that of the
prior period loss is attributed to the termination of the Company’s revenue-producing operations.
Results
of Operations for the Six Months Ended June 30, 2015 and 2014
The
following tables sets forth the summary income statement for the six months ended June 30, 2015 and 2014:
| | |
Six Months Ended | | |
| | |
| |
| | |
June
30, | | |
| | |
| |
| | |
2015 | | |
2014 | | |
| | |
| |
| | |
| | |
% of | | |
| | |
% of | | |
Change | | |
Change | |
| | |
$ | | |
Revenue | | |
$ | | |
Revenue | | |
$ | | |
% | |
| REVENUES: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Contract | |
$ | - | | |
| 0.00 | % | |
$ | 6,656 | | |
| 100.00 | % | |
$ | (6,656 | ) | |
| -100.00 | % |
| COST OF REVENUES | |
| - | | |
| 0.00 | % | |
| 4,547 | | |
| 68.31 | % | |
| (4,547 | ) | |
| -100.00 | % |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Gross Margin | |
| - | | |
| 0.00 | % | |
| 2,109 | | |
| 31.69 | % | |
| (2,109 | ) | |
| -100.00 | % |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| COSTS AND EXPENSES: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| General and Administrative Expenses | |
| 95,426 | | |
| 100.00 | % | |
| 217,321 | | |
| 3265.04 | % | |
| (121,895 | ) | |
| -56.09 | % |
| Depreciation and Amortization | |
| - | | |
| 0.00 | % | |
| - | | |
| 0.00 | % | |
| - | | |
| 0.00 | % |
| Total Costs
and Expenses | |
| 95,426 | | |
| 100.00 | % | |
| 217,321 | | |
| 3265.04 | % | |
| (121,895 | ) | |
| -56.09 | % |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Operating Income
(Loss) | |
| (95,426 | ) | |
| -100.00 | % | |
| (215,212 | ) | |
| -3233.35 | % | |
| 119,786 | | |
| -55.66 | % |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| OTHER INCOME AND (EXPENSE): | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Other Income (expense) | |
| 85,402 | | |
| 0.00 | % | |
| 4,075 | | |
| 61.22 | % | |
| 81,327 | | |
| 1995.75 | % |
| Interest Expense | |
| - | | |
| 0.00 | % | |
| (34,069 | ) | |
| -511.85 | % | |
| 34,069 | | |
| -100.00 | % |
| Net Other Expense | |
| 85,402 | | |
| 0.00 | % | |
| (29,994 | ) | |
| -450.63 | % | |
| 115,396 | | |
| -384.73 | % |
| Loss before
provision for income taxes | |
| (10,024 | ) | |
| -100.00 | % | |
| (245,206 | ) | |
| -3683.98 | % | |
| 235,182 | | |
| -95.91 | % |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Provision for income taxes | |
| - | | |
| 0.00 | % | |
| - | | |
| 0.00 | % | |
| - | | |
| 0.00 | % |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Net Loss | |
$ | (10,024 | ) | |
| -100.00 | % | |
$ | (245,206 | ) | |
| -3683.98 | % | |
$ | 235,182 | | |
| -95.91 | % |
Revenues
Revenues
for the six months ended June 30, 2015 decreased to $-0- from $6,656 for the six months ended June 30, 2014. This decrease in
net revenues of $6,656, or 100%, over the prior period, is attributable to the termination of the Company’s revenue-producing
operations.
Gross
Profit
For
the six months ended June 30, 2015, we had no gross profit compared to a gross profit of $2,109 for the six months ended June
30, 2014. This decrease in our gross profitability of $2,109, or 100% over the prior period, is due to the termination of the
Company’s revenue-producing operations.
Total
Costs and Expenses
Total
costs and expenses for the six months ended June 30, 2015 decreased to $95,426 from $217,321 for the six months ended June 30,
2014. This decrease in our total operating expenses of $121,895 is approximately 56.1% below that of the prior period is attributed
to the termination of the Company’s revenue-producing operations.
Net
Other Income (Expense)
Net
other income/expense for the six months ended June 30, 2015 increased to $85,402 from $(29,994) for the six months ended June
30, 2014. This is an increase in net other income/expense of $115,396, or approximately 384.7% over the prior period is attributed
to the $85,402 gain on debt restructuring and the termination of the Company’s revenue-producing operations.
Net
Income (Loss)
Due
to the aforementioned reasons, our net loss for the six months ended June 30, 2015 decreased to $10,024 as compared to a $245,206
loss for the six months ended June 30, 2014. This decrease in net loss of $235,182 is approximately 95.9% above that of the prior
period loss is attributed to the $85,402 gain on debt restructuring and the termination of the Company’s revenue-producing
operations.
Liquidity
and Capital Resources
As
of June 30, 2015, we had a cash balance of $17,832.
The
following table summarizes total current assets, liabilities and working capital at June 30, 2015 compared to December 31, 2014:
| | |
Period
Ended | | |
| |
| | |
June
30, 2015 | | |
December
31, 2014 | | |
Increase/Decrease | |
| Current Assets | |
$ | 17,832 | | |
$ | 12,721 | | |
$ | 5,111 | |
| Current Liabilities | |
$ | 756,053 | | |
$ | 878,418 | | |
$ | (122,365 | ) |
| Working Capital Deficit | |
$ | (738,221 | ) | |
$ | (865,697 | ) | |
$ | (127,476 | ) |
Going
Concern
For
the six months ended June 30, 2015, our funds are insufficient to fund our daily operations. We must to seek other sources of
financing to maintain liquidity. The ability of the Company to continue is dependent on management’s plans, which include
the raising of capital through the debt and/or equity markets, with some additional funding from other traditional financing sources,
including term notes. The Company may need to incur additional liabilities with certain related parties to sustain the Company’s
existence. There can be no assurance that the Company will be able to raise any additional capital.
Our
plan regarding these matters is to raise additional debt and/or equity financing to give us the ability to cover our current cash
flow requirements and meet our obligations as they become due. There can be no assurances that financing will be available or,
if available, that such financing will be available under favorable terms. In the event that we are unable to generate adequate
revenues to cover expenses and cannot obtain additional financing in the near future, we may seek protection under bankruptcy
laws. The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of business.
These
financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the
liabilities that might be necessary should the Company be unable to continue as a going concern.
Summary
Cash Flows for the six months ended June 30, 2015 and 2014
| | |
Six
months ended June 30, | |
| | |
2015 | | |
2014 | |
| Net cash provided by (used in) operating activities | |
$ | (42,389 | ) | |
$ | (139,843 | ) |
| Net cash provided by (used in) investing activities | |
$ | - | | |
$ | - | |
| Net cash provided by (used in) financing activities | |
$ | 47,500 | | |
$ | 139,400 | |
Cash
Used In Operating Activities
Net
cash used in our operating activities in the first six months of 2015 totaled $42,389, which compared to net cash used in our
operating activities of $139,843 for the same three months in the prior year. This decrease in cash used in operating activities
of $97,454 is attributed to the $85,402 gain on debt restructuring, the write-off of a $60,000 prepaid expense and the significant
decrease in net loss due to the termination of the Company’s revenue-producing operations.
Cash
Provided By Financing Activities
In
a private placement during the six months ended June 30, 2015, the Company sold 310,000 (unaudited) shares of common stock to
accredited investors at a price of $0.25 per share for gross proceeds totaling $77,500 (unaudited). The Company also made debt
repayments totaling $30,000, resulting in net cash provided by financing activities for the six months ended June 30, 2015 of
$47,500.
Recent
Accounting Pronouncements
None.
Critical
Accounting Policies
Our
financial statements and related public financial information are based on the application of accounting principles generally
accepted in the United States (“GAAP”). GAAP requires the use of estimates; assumptions, judgments and subjective
interpretations of accounting principles that have an impact on the assets, liabilities, revenues and expense amounts reported.
These estimates can also affect supplemental information contained in our external disclosures, including information regarding
contingencies, risk and financial condition. We believe our use of estimates and underlying accounting assumptions adhere to GAAP
and are consistently and conservatively applied. We base our estimates on historical experience and on various other assumptions
that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different
assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements.
Our
significant accounting policies are summarized in Note 1 of our financial statements. While all these significant accounting policies
impact our financial condition and results of operations, we view certain of these policies as critical. Policies determined to
be critical are those policies that have the most significant impact on our financial statements and require management to use
a greater degree of judgment and estimates. Actual results may differ from those estimates. Our management believes that given
current facts and circumstances, it is unlikely that applying any other reasonable judgments or estimate methodologies would cause
an effect on our consolidated results of operations, financial position or liquidity for the periods presented in this report.
We
believe the following critical accounting policies and procedures, among others, affect our more significant judgments and estimates
used in the preparation of our consolidated financial statements.
Use
of Estimates and Assumptions
The
preparation of financial statements in conformity with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses
during the reporting period.
The
Company’s significant estimates and assumptions include the fair value of financial instruments; the carrying value, recoverability
and impairment, if any, of long-lived assets; interest rate, income tax rate, income tax provision and valuation allowance of
deferred tax assets; and the assumption that the Company will continue as a going concern. Those significant accounting estimates
or assumptions bear the risk of change due to the fact that there are uncertainties attached to those estimates or assumptions,
and certain estimates or assumptions are difficult to measure or value.
Management
bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the
financial statements taken as a whole under the circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from other sources.
Management
regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes
in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those
estimates are adjusted accordingly. Actual results could differ from those estimates.
Off
Balance Sheet Arrangements
During
the six months ended June 30, 2015, we did not engage in any material off-balance sheet activities, nor have any relationships
or arrangements with unconsolidated entities established for the purpose of facilitating off-balance sheet arrangements or other
contractually narrow or limited purposes. Further, we have not guaranteed any obligations of unconsolidated entities, nor do we
have any commitment or intent to provide additional funding to any such entities.
ITEM
3. Quantitative and Qualitative Disclosures about Market Risk
We
do not hold any derivative instruments and do not engage in any hedging activities.
ITEM
4. Controls and Procedures
| |
(a) |
Evaluation
of disclosure controls and procedures |
Pursuant
to Rule 13a-15(b) under the Exchange Act, the Company carried out an evaluation, with the participation of the Company’s
management, including the Company’s Principal Executive Officer (“PEO”) and Principal Financial Officer (“PFO”),
of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange
Act) as of the end of the period covered by this report.
Based
upon that evaluation, the Company’s PEO and PFO concluded that the Company’s disclosure controls and procedures were
effective to ensure that information required to be disclosed by the Company in the reports that the Company files or submits
under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s
rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s
PEO and PFO, as appropriate, to allow timely decisions regarding required disclosure.
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.
| |
(b) |
Changes
in internal control over financial reporting |
There
have been no changes in our internal controls over financial reporting (as such term is defined in Rule 13a-15(f) and 15d-15(f)
under the Securities Exchange Act) during the quarter ended June 30, 2015, that have materially affected, or are reasonably likely
to materially affect, our internal control over financial reporting.
PART
II – OTHER INFORMATION
ITEM
1. LEGAL PROCEEDINGS
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 its 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 six 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 filed a motion for partial summary judgment on June 12, 2014. The Company responded on June
27, 2014 and the motion for partial summary judgment was denied on July 29, 2014. 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. In the event a judgment is made against the Company and payment deemed appropriate, it may force
the Company out of business.
ITEM
1A. RISK FACTORS
We
believe there are no changes that constitute material changes from the risk factors previously disclosed in our Annual Report
on Form 10-K for the year ended December 31, 2014, filed with the U.S. Securities and Exchange Commission.
ITEM
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
In
a private placement during the six months ended June 30, 2015, the Company sold 310,000 (unaudited) shares of common stock to
accredited investors at a price of $0.25 per share for gross proceeds totaling $77,500 (unaudited).
ITEM
3. DEFAULTS UPON SENIOR SECURITIES
The
Company is currently delinquent in making dividend payments pursuant to the terms of a settlement agreement, as disclosed in an
8-K filed on May 9, 2009. The accrued balance due on Series A Convertible Preferred Stock dividends will commence dividend payments
pursuant to the terms of a settlement agreement as funds are available. There is an accrued amount of Series A Convertible Preferred
Stock dividends in the amount of $42,047 as of March 31, 2015 $42,047 at December 31, 2014).
ITEM
4. MINE SAFETY DISCLOSURES
Not
applicable.
ITEM
5. OTHER INFORMATION
None.
ITEM
6. EXHIBITS
| Exhibit
No. |
|
Description |
| |
|
|
| 31.1 |
|
Certification
of Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a), as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002. (Filed herewith)
|
| |
|
|
| 31.2 |
|
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 requirement 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:
August 28, 2015 |
| |
|
| |
ST. JOSEPH, INC. |
| |
|
| |
/s/
GERALD MCILHARGEY |
| |
Gerald McIlhargey,
Chief Executive Officer |
EXHIBIT
31.1
CERTIFICATION
OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT
TO 18 U.S.C. SECTION 1350,
AS
ADOPTED PURSUANT TO SECTION 302 OF
THE
SARBANES-OXLEY ACT OF 2002
I,
Gerald McIlhargey, certify that:
1.
I have reviewed this Quarterly Report on Form 10-Q 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(s) 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(s) 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:
August 28, 2015 |
/s/
GERALD MCILHARGEY |
| |
Gerald McIlhargey |
| |
Principal Executive
Officer |
| |
St. Joseph, Inc. |
EXHIBIT
31.2
CERTIFICATION
OF PRINCIPAL FINANCIAL OFFICER
PURSUANT
TO 18 U.S.C. SECTION 1350,
AS
ADOPTED PURSUANT TO SECTION 302 OF
THE
SARBANES-OXLEY ACT OF 2002
I,
Kenneth L. Johnson, certify that:
1.
I have reviewed this Quarterly Report on Form 10-Q 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(s) 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(s) 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:
August 28, 2015 |
/s/
KENNETH L. JOHNSON |
| |
Kenneth L. Johnson |
| |
Principal Account
Officer |
| |
St. Joseph, Inc. |
EXHIBIT
32.1
CERTIFICATION
OF PRINCIPAL 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 Quarterly Report on Form 10-Q for the fiscal quarter ended June 30,
2015, 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 Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2015, fairly presents, in all material respects,
the financial condition and results of operations of St. Joseph, Inc.
| Date:
August 28, 2015 |
By: |
/s/
GERALD MCILHARGEY |
| |
|
Gerald McIlhargey |
| |
|
Principal Executive
Officer |
| |
|
St. Joseph, Inc. |
| |
|
|
EXHIBIT
32.2
CERTIFICATION
OF PRINCIPAL FINANCIAL OFFICER
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, Principal Accounting 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 Quarterly Report on Form 10-Q for the fiscal quarter ended
June 30, 2015 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 Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2015, fairly presents, in all material respects,
the financial condition and results of operations of St. Joseph, Inc.
| Date:
August 28, 2015 |
By: |
/s/
KENNETH L. JOHNSON |
| |
|
Kenneth L. Johnson |
| |
|
Principal Accounting
Officer |
| |
|
St. Joseph, Inc. |
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