U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2005
o TRANSITION REPORT UNDER 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.
(Name of small business issuer in its charter)
Colorado | | CH 47-0844532 |
(State or other jurisdiction of
incorporation or organization) | | (I.R.S. Employer
Identification No.) |
| | |
4870 S. Lewis, Suite 250 Tulsa, OK | | 74105 |
(Address of principal executive offices) | | (Zip Code) |
Issuer’s telephone number: (918) 742-1888
Former name, former address and former fiscal year if changed since last report
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x No o
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practical date:
Outstanding at March 30, 2005 |
5,111,712 |
$.001 par value common stock |
Transitional Small Business Disclosure Format (check one): Yes o No x
ST. JOSEPH, INC.
FORM 10-QSB
TABLE OF CONTENTS
ii
PART I—FINANCIAL INFORMATION
ITEM 1. Financial Statements
ST. JOSEPH, INC.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
INDEX
1
ST. JOSEPH, INC.
Condensed Consolidated Balance Sheet
(Unaudited)
March 31, 2005
Assets | | | |
| Current assets: | | | |
| Cash | | $ | 38,036 | |
| Marketable securities | | | 15,651 | |
| Accounts receivable | | | 194,503 | |
| |
| Total current assets | | | 248,190 | |
| Property and equipment, net | | | 37,516 | |
| Deposit | | | 1,230 | |
| Goodwill | | | 306,149 | |
| | | $ | 593,085 | |
| |
Liabilities and Shareholderss Equity | | | | |
| Current liabilities: | | | | |
| Accounts payable | | $ | 169,546 | |
| Accrued liabilities | | | 40,455 | |
| Line of credit (Note 3) | | | 150,000 | |
| Notes payable to related parties (Note 2) | | | 158,000 | |
| Accrued interest payable (Note 2) | | | 2,650 | |
| Preferred dividend accrual (Note 4) | | | 289 | |
| Total current liabilities | | | 520,940 | |
| |
| Shareholders' equity (Note 4): | | | | |
| Preferred stock, $.001 par value, $3.00 face value; 25,000,000 | | | | |
| shares authorized, 386,208 shares issued and outstanding | | | 386 | |
| Common stock, $.001 par value; 100,000,000 shares authorized, | | | | |
| 5,111,712 shares issued and outstanding | | | 5,112 | |
| Additional paid-in capital | | | 969,222 | |
| Retained deficit | | | (903,867 | ) |
| Other comprehensive income | | | 1,292 | |
| Total shareholders' equity | | | 72,145 | |
| | | $ | 593,085 | |
See accompanying notes to condensed consolidated financial statements
ST. JOSEPH, INC.
Condensed Consolidated Statements of Operations
(Unaudited)
| | | | Three Months Ended March 31, | |
| | | | 2005 | | | 2004 | |
| Service revenues, net | | $ | 410,453 | | $ | 446,759 | |
| Direct costs of services | | | 316,428 | | | 307,206 | |
| Gross profit | | | 94,025 | | | 139,553 | |
| Selling, general and administrative | | | 171,298 | | | 146,122 | |
| Depreciation | | | 5,460 | | | 6,433 | |
| Stock-based compensation | | | -- | | | 242,800 | |
| Loss from operations | | | (82,733 | ) | | (255,802 | ) |
| Non-operating income: | | | | | | | |
| Interest income | | | 3 | | | 205 | |
| Realized loss on marketable securities | | | 2,535 | | | -- | |
| Interest expense | | | (6,237 | ) | | (5,519 | ) |
| Loss before income taxes | | | (86,432 | ) | | (261,116 | ) |
| Income tax provision (Note 5) | | | -- | | | -- | |
| Net loss | | | (86,432 | ) | | (261,116 | ) |
| Preferred stock dividend requirements | | | (19,552 | ) | | (19,644 | ) |
| Loss applicable to common stock | | $ | (105,984 | ) | $ | (280,760 | ) |
| Basic and diluted loss per common share | | $ | (0.02 | ) | $ | (0.06 | ) |
| Weighted average common shares outstanding | | | 5,066,712 | | | 4,568,379 | |
See accompanying notes to condensed consolidated financial statements
ST. JOSEPH, INC.
Condensed Consolidated Statement of Changes in Shareholders' Equity
(Unaudited)
| | | | | | | | | | | | | | | Other | | | |
| | | | | | | | | | | | | | | Comprehensive | | | |
| | | | | | | | | | | | | | | Income | | | |
| | | | | | | | | | | Additional | | | | Unrealized | | | |
| | | Preferred Stock | | Common Stock | | Paid-in | | Retained | | Investment | | | |
| | | Shares | | Par Value | | Shares | | Par Value | | Capital | | Deficit | | Gains | | Total | |
| Balance, January 1, 2005 | | | 386,208 | | $ | 386 | | | 5,021,712 | | $ | 5,022 | | $ | 924,312 | | $ | (797,883 | ) | $ | 1,292 | | $ | 133,129 | |
| Sale of common stock at $.50 per share (Note4) | | | — | | | — | | | 90,000 | | | 90 | | | 44,910 | | | — | | | — | | | 45,000 | |
| Preferred stock dividends. | | | — | | | — | | | — | | | — | | | — | | | (19,552 | ) | | — | | | (19,552 | ) |
| Comprehensive income (loss): | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net loss | | | — | | | — | | | — | | | — | | | — | | | (86,432 | ) | | — | | | (86,432 | ) |
| Comprehensive income (loss) | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (86,432 | ) |
| Balance, March 31, 2005 | | | 386,208 | | $ | 386 | | | 5,111,712 | | $ | 5,112 | | $ | 969,222 | | $ | (903,867 | ) | $ | 1,292 | | $ | 72,145 | |
See accompanying notes to condensed consolidated financial statements
ST. JOSEPH, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| | | | Three Months Ended March 31, | |
| Net cash used in | | | 2005 | | | 2004 | |
| operating activities | | $ | (63,509 | ) | $ | 23,841 | |
| Cash flows from investing activities: | | | | | | | |
| Purhcase marketable securities | | | (1,047 | ) | | -- | |
| Payment to acquire subsidiary | | | -- | | | (80,000 | ) |
| Net cash used in | | | | | | | |
| investing activities | | | (1,047 | ) | | (80,000 | ) |
| Cash flows from financing activities: | | | | | | | |
| Capital contributed by an officer | | | -- | | | -- | |
| Proceeds from officer's note payable (Note 2) | | | 37,000 | | | -- | |
| Principal payment on officer's note payable (Note 2) | | | (37,000 | ) | | -- | |
| Proceeds from shareholders' notes payable (Note 2) | | | 62,000 | | | -- | |
| Payments for preferred stock dividends (Note 4) | | | (19,263 | ) | | (19,355 | ) |
| Proceeds from the sale of common stock (Note 4) | | | 45,000 | | | 70,000 | |
| Net cash provided by (used in) | | | | | | | |
| financing activities | | | 87,737 | | | 50,645 | |
| Net change in cash | | | 23,181 | | | (5,514 | ) |
| Cash, beginning of period | | | 14,855 | | | 194,519 | |
| Cash, end of period | | $ | 38,036 | | $ | 189,005 | |
| Supplemental disclosure of cash flow information: | | | | | | | |
| Income taxes | | $ | -- | | $ | -- | |
| Interest | | $ | 3,837 | | $ | 644 | |
See accompanying notes to condensed consolidated financial statements
ST. JOSEPH, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
| (1) | Basis of Presentation |
The condensed financial statements presented herein have been prepared by the Company in accordance with the instructions for Form 10-QSB and the accounting policies in its Form 10-KSB for the year ended December 31, 2004 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 three months ended March 31, 2005 are not necessarily indicative of the results to be expected for the year.
Financial data presented herein are unaudited.
| (2) | Related Party Transactions |
During December 2003, an officer advanced the Company $195,000 for working capital in exchange for a promissory note. As of December 31, 2004, the Company owed the officer $96,000 on the note. The note carries a ten percent interest rate, payable quarterly, and matures on June 15, 2005. During the three months ended March 31, 2005, the officer advanced the Company an additional $37,000, which the Company repaid prior to March 31, 2005. As of March 31, 2005, the Company owed $96,000 in principal and $2,400 in accrued interest on the note.
During March 2005, a shareholder advanced the Company $22,000 for working capital in exchange for a promissory note. The note does not carry an interest rate and matures on June 1, 2005.
During March 2005, a shareholder advanced the Company $40,000 for working capital in exchange for a promissory note. On or before April 1, 2005, the Company is to repay the shareholder the $40,000 principal and $250 for interest. The $250 interest charge is recorded as accrued interest at March 31, 2005.
The Company has a $150,000 line of credit and the entire balance was unpaid and outstanding at March 31, 2005. The interest rate on the credit line was seven percent at March 31, 2005. Interest payments are due monthly. The line matures on August 30, 2005.
Preferred Stock
The Board of Directors is authorized to issue shares of preferred stock in series 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 convertible preferred stock that remain outstanding at March 31, 2005. Each share of preferred stock is convertible to one share of common stock and has a yield of 6.75 percent dividend per annum, which is paid quarterly on a calendar basis for a period of 5 years. The Company paid $19,263 in preferred stock dividends during the three months ended March 31, 2005. Dividends unpaid as of March 31, 2005 totaled $289.
Common Stock
During the three months ended March 31, 2005, the Company sold 90,000 shares of its common stock at $.50 per share pursuant to the exemptions afforded by Section 4(2) of the Securities Act of 1933 (the “Act”), as amended. The Company received gross proceeds of $45,000.
ST. JOSEPH, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The Company records its income taxes in accordance with Statement of Financial Accounting Standards No. 109, “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 $-0- income taxes.
(6) Concentration of Credit Risk
The Company conducts a significant portion of its operations with one customer. During the three months ended March 31, 2005, approximately 68.4 percent of the Company’s service revenues were conducted with one customer.
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion and analysis of the financial condition and plan of operation should be read in conjunction with the Financial Statements and Notes thereto appearing elsewhere in this Form 10-QSB. This discussion and analysis contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements.
Material Accounting Policies
The discussion and analysis of St. Joseph’s condition and result of operations are based on the condensed consolidated financial statements that have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires estimates and assumptions that affect the reported amounts and disclosures.
General / Plan of Operation
At our year ended December 31, 2003, we had not generated any revenues since our inception, however, in December of 2003, we elected to pursue a new business purpose and on December 2, 2003, we entered into an Agreement of Share Exchange and Purchase and Sale with Staf*Tek Services, Inc. (“Staf*Tek”), an Oklahoma corporation. On January 2, 2004, we completed the acquisition of Staf*Tek by acquiring all of the issued and outstanding common shares of Staf*Tek. Since its inception, Staf*Tek has been a leader in the recruiting and the placement of professional technical personnel on a temporary and permanent basis in the Tulsa, Oklahoma area. Staf*Tek assists their clients with projects that require specialized expertise ranging from multiple platform systems integration to end-user support, including specialists in programming, networking, systems integration, database design and help desk support.
Staf*Tek is our only subsidiary by which we generate operating revenues. Staf*Tek generates revenue primarily by providing its clients with IT professionals either on a permanent or contractual basis. The Management of Staf*Tek has placed an increased emphasis on pursuing new clients as well as continuing exemplary service to existing ones. To that end, during 2004 Staf*Tek added two sales personnel and two advertising and marketing specialists in an effort to grow the Company’s business.
The Company plans to satisfy cash requirements over the next 12 months through the continuation and renewal of contractual agreements in the IT staffing industry. The Company also anticipates raising additional funds from the sale of its stock.
Results of Operations:
Service revenues decreased by 8% from $446,759 for the three months ended March 31, 2004 to $410,453 for the three months ended March 31, 2005. In addition, our gross profit percentage decreased to 23% for three months ended March 31, 2005, as compared to 31% for the three months ended March 31, 2004. These reductions in revenues and gross profit primarily related to the completion of contracts with two of Staf*Tek’s clients, the expense of adding four corporate in-house employees, and the ongoing expenses of legal and accounting fees associated with the reporting requirements of public companies.
Our loss of $86,432 for the three months ended March 31, 2005, was an improvement over our $261,116 loss incurred for the three months ended March 31, 2004, largely due to $242,800 of stock-based compensation incurred in 2004 related to the issuance of common stock options.
Liquidity and Financial Resources:
We had a working capital deficit of $272,750 at March 31, 2005. Our working capital decreased from a working capital balance of $217,226 at December 31, 2004, largely due to $62,000 in promissory notes issued to two of our shareholders for working capital.
During the three months ended March 31, 2005, we used $63,509 through our operating activities. Our investing activities used $1,047 for marketable securities purchases. Our financing activities provided cash totaling $87,737 consisting of $45,000 from the sale of 90,000 shares of our common stock and $99,000 in proceeds from note payable issuances; less $19,263 paid for preferred stock dividends and $37,000 repaid against the notes payable.
Our business plan involves, in part, increasing the number of employees placed both on a temporary and permanent basis. Such increased placement is expected to result in increased profit to us, although it also results in increased short term cash needs. We have utilized net revenues, the proceeds from a number of private sales of our equity securities, the issuance of debt instruments to an officer and shareholders, the exercise of options, and our line of credit to meet our working capital requirements. We are reluctant to incur further debt and intend to rely upon net revenues and private sales of equity securities to meet our liquidity needs for the next 12 months.
ITEM 3. Controls and Procedures
(a) Evaluation of Disclosure Controls & Procedures.
The Company maintains disclosure controls and procedures designed to ensure that it is able to collect the information it is required to disclose in the reports it files with the Securities and Exchange Commission (SEC), and to process, summarize and disclose this information within the time periods specified in the rules of the SEC. Based on an evaluation of the Company’s disclosure controls and procedures as of the end of the period covered by this report conducted by the Company’s management, with the participation of the Principal Executive and Principal Financial Officers, the Principal Executive and Principal Financial Officers believe that these controls and procedures are effective to ensure that the Company is able to collect, process, and disclose the information it is required to disclose in the reports it files with the SEC within the required time periods.
(b) Changes in Internal Control over Financial Reporting.
During the period covered by this report, there have been no changes in the Company’s internal control over financial reporting that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.
PART II — OTHER INFORMATION
ITEM 1. Legal Proceedings
We have no pending legal proceedings.
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
During the first quarter of 2005, the Company sold shares of its common stock as follows: David Johnson (40,000 shares), Thomas Johnson (40,000 shares), and Bill Eddy (10,000 shares). All such shares were sold at a price of $.50 per share pursuant to the exemptions afforded by Section 4(2) of the Securities Act of 1933 (the “Act”), as amended. The Company received gross proceeds of $45,000 and used the proceeds for working capital.
This transaction was exempt from the registration requirements of the Securities Act of 1933, as amended, by virtue of the exemptions provided under section 4(2) was available because:
• The transfer or issuance did not involve underwriters, underwriting discounts or commissions;
• A restriction on transfer legend was placed on all certificates issued;
• The distributions did not involve general solicitation or advertising; and,
• The distribution was made only to insiders, accredited investors or investors who were sophisticated enough to evaluate the risks of the investment. The shareholder was given access to all information about our business and the opportunity to ask questions and receive answers about our business from our management prior to making any investment decision.
ITEM 3. Defaults Upon Senior Securities
We incurred no defaults upon senior securities during this reporting period.
ITEM 4. Submission of Matters to a Vote of Security Holders
None
ITEM 5. Other Information
Market Information. As of the date of this Form 10-QSB, there is no public trading market for the Company’s Common Stock. The Company has engaged a broker/dealer, Burt Martin Arnold Securities, which has filed an application with the National Association of Securities Dealers, Inc. (NASD) to have its Common Stock traded in the Pink Sheets and the OTC Bulletin Board® (OTCBB) upon satisfaction of all disclosure and regulatory requirements, which include, among other things, completion of the review process with the NASD. The Company’s stock will not be eligible to trade until all such requirements are met, and there can be no assurance when, if ever, trading will begin, although the Company is vigorously pursuing the fulfillment of these requirements.
The Securities and Exchange Commission has adopted regulations concerning low priced securities or “penny stocks.” The regulations define a penny stock to be any equity security that has a market price of less than $5.00 per share, subject to certain exceptions. For transactions covered by these regulations, a broker-dealer intending to sell to persons other than established customers or accredited investors must make a special suitability determination for the purchaser and must have received the purchaser’s written consent to the transaction prior to the sale. If our common stock will constitute penny stock upon trading, these additional burdens may discourage broker-dealers from effecting transactions in our common stock and could limit our market liquidity and your ability to sell in the secondary market. In addition, it is unlikely that any bank or financial institution will accept penny stock as collateral.
In general, under Rule 144 as currently in effect, a person (or persons whose shares are aggregated), including an affiliate, who beneficially owns “restricted securities” may not sell those securities until they have been beneficially owned for at least one year. Thereafter, the person would be entitled to sell within any three-month period a number of shares that does not exceed the greater of:
• 1% of the number of shares of common stock then outstanding (approximately 5,111,712 shares are outstanding as of March 31, 2005); or
• the average weekly trading volume of the common stock during the four calendar weeks preceding the filing with the SEC of a notice on the SEC’s Form 144 with respect to such sale (shares of St. Joseph are not trading as of March 31, 2005).
Sales under Rule 144 are also subject to certain other requirements regarding the manner of sale, notice and availability of current public information about St. Joseph.
Under Rule 144(k), a person who is not, and has not been at any time during the 90 days preceding a sale, an affiliate of St. Joseph and who has beneficially owned the shares proposed to be sold for at least two years (including the holding period of any prior owner except an affiliate) is entitled to sell such shares without complying with the manner of sale, public information, volume limitation or notice provisions of Rule 144.
ITEM 6. Exhibits and Reports on Form 8-K
(a) | Exhibits |
| |
3(i) | Articles of Incorporation of Pottery Connection, Inc. * |
3(ii) | Amended Articles of Incorporation (Name change to St. Joseph Energy, Inc.) * |
3(iii) | Bylaws of Pottery Connection, Inc. * |
3(iv) | Amended Articles of Incorporation (Name change to St. Joseph, Inc.) * |
4.0 | Specimen form of Registrant’s common stock * |
10.1 | Exclusive Agreement between David Johnson-St. Joseph Energy, Inc. * |
10.2 | St. Joseph Energy, Inc. User Agreement * |
31.1 | Principal Executive Officer Certification under Section 302 of the Sarbanes-Oxley Act of 2002 |
| |
31.2 | Principal Financial Officer Certification under Section 302 of the Sarbanes-Oxley Act of 2002 |
| |
32.1 | Principal Executive Officer Certification under Section 906 of the Sarbanes-Oxley Act of 2002 |
| |
32.2 | Principal Financial Officer Certification under Section 906 of the Sarbanes-Oxley Act of 2002 |
| |
(b) Reports on Form 8-K |
| |
The Company did not file any Reports on Form 8-K during this reporting period. |
* Incorporated by reference to a previously filed exhibit or report.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
St. Joseph, Inc. | |
(Registrant) | |
| |
| |
/s/ John H. Simmons | |
John H. Simmons | |
President | |
| |
Date: May 16, 2005 | |
