St. Joseph (STJO) 10-Q 2009 Q2 Quarterly report

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, 2009
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from _____ to _____.

Commission file number:  0-49936

ST. JOSEPH, INC.

(Exact name of registrant as specified in its charter)

Colorado	CH 47-0844532
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)
4870 S. Lewis, Suite 250 Tulsa, OK	74105
Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code: (918) 742-1888

Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

x Yes    o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

x Yes    o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o	Accelerated filer o
Non-accelerated filer   o (Do not check if a smaller reporting company)	Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). 

o Yes    x No

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

o Yes    o No

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:  10,406,802 shares as of July 30, 2009.

ST. JOSEPH, INC.

Form 10-Q

Table of Contents

PART I – FINANCIAL INFORMATION		3
ITEM 1.	FINANCIAL STATEMENTS	3
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
	AND RESULTS OF OPERATIONS	12
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	19
ITEM 4.	CONTROLS AND PROCEDURES	19
ITEM 4T.	CONTROLS AND PROCEDURES	19
PART II  - OTHER INFORMATION		20
ITEM 1.	LEGAL PROCEEDINGS	20
ITEM 1A.	RISK FACTORS	21
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	21
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	21
ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	21
ITEM 5.	OTHER INFORMATION	21
ITEM 6.	EXHIBITS	22

2

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ST. JOSEPH, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

ASSETS

	UNAUDITED			AUDITED
	June 30,			December 31,
	2009			2008
CURRENT ASSETS:
Cash	$	267,286		$	221,992
Accounts receivable, net of allowance for doubtful accounts of $2,208		49,904			212,821
Total current assets		317,190			434,813
Property and equipment, net of Accum Dep of $180,180 (6/30/09) and $179,606 (12/31/08)		2,404			2,978
Deposits		1,230			1,230
	$	320,824		$	439,021
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable	$	191,030		$	264,206
Accrued liabilities		9,000			18,168
Accrued preferred dividend		101,183			117,311
Due to former officer		-			25,000
Notes payable:
Notes payable		-			5,000
Bank (Note 3)		180,000			180,000
Former Officer (Note 2)		-			48,120
Total current liabilities		481,213			657,805
STOCKHOLDERS' DEFICIT (Note 7):
Preferred stock, Series A, $.001 par value, $3.00 face value; 25,000,000 shares authorized, 386,208 shares issued and outstanding		386			386
Common stock, $.001 par value; 100,000,000 shares authorized, 10,406,802 (6/30/09) and 7,406,802 (12/31/08) issued and outstanding		10,407			7,407
Additional paid-in capital		2,097,201			1,950,201
Retained deficit		(2,268,383	)		(2,176,778	)
Total Stockholders' Deficit		(160,389	)		(218,784	)
	$	320,824		$	439,021

See accompanying notes to condensed consolidated financial statements

3

ST. JOSEPH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

UNAUDITED

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2009			2008			2009			2008
REVENUES:
Contract	$	176,901		$	643,824		$	550,251		$	1,284,281
COST OF REVENUES		136,576			475,487			429,057			986,235
Gross Margin		40,325			168,337			121,194			298,046
COSTS AND EXPENSES:
General and Administrative Expenses		115,242			142,420			226,221			262,617
Depreciation and Amortization		287			(465	)		574			548
Total Costs and Expenses		115,529			141,955			226,795			263,165
Operating Income (Loss)		(75,204	)		26,382			(105,601	)		34,881
OTHER INCOME AND (EXPENSE):
Interest Income		-			-			-			-
Other Income (expense)		25,526			-			25,926			(100	)
Interest Expense		(8,485	)		(6,390	)		(11,929	)		(16,434	)
Net Other Expense		17,041			(6,390	)		13,997			(16,534	)
Loss before provision for income taxes		(58,163	)		19,992			(91,604	)		18,347
PROVISION FOR INCOME TAXES:
Provision for Federal income tax		-			2,999			-			2,752
Provision for State income tax		-			1,200			-			1,101
Total provision for income taxes		-			4,199			-			3,853
Loss before benefit from tax loss carryforward		(58,163	)		15,793			(91,604	)		14,494
Benefit from tax loss carryforward		-			4,199			-			3,853
Net Loss		(58,163	)		19,992			(91,604	)		18,347
Preferred stock dividend requirements		-			(19,552	)		-			(39,104	)
Loss applicable to common stockholders	$	(58,163	)	$	440		$	(91,604	)	$	(20,757	)
Basic and diluted loss per common share	$	(0.01	)	$	0.00		$	(0.01	)	$	(0.00	)
Weighted average common shares outstanding		10,156,802			7,406,802			9,573,469			7,406,802

See accompanying notes to condensed consolidated financial statements

4

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT

UNAUDITED

	Preferred Stock-Series A				Common Stock				Additional
	Shares		Par value		Shares		Par value		Paid-in Capital		Retained Deficit			Total
Balance December 31, 2008		386,208	$	386		7,406,802	$	7,407	$	1,950,201	$	(2,176,779	)	$	(218,785	)
Sale of common stock @ $0.05 per share		-		-		2,900,000		2,900		142,100					145,000
Conversion of Notes Payable @$0.05 per share		-		-		100,000		100		4,900					5,000
Net loss for the six months ended June 30, 2009		-		-		-		-		-		(91,604	)		(91,604	)
Balance June 30, 2009		386,208		386		10,406,802		10,407		2,097,201		(2,268,383	)		(160,389	)

See accompanying notes to condensed consolidated financial statements

5

ST. JOSEPH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

UNDAUDITED

	Six Months Ended
	June 30,
OPERATING ACTIVITIES	2009			2008
Net loss	$	(91,604	)	$	18,347
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization		574			548
Gain on settlement of note payable due to
related party and related accrued interest		(25,526	)
Changes in operating assets and liabilities:
Increase/decrease in accounts receivable		162,917			(43,219	)
Increase in allowance for doubtful accounts		-			-
Increase (decrease) in accounts payable		(73,176	)		(2,844	)
Decrease in accrued liabilities		(6,763	)		11,054
Net cash provided by (used in) operating activities		(33,578	)		(16,114	)
INVESTING ACTIVITIES
Equipment acquisitions		-			(1,628	)
Net cash used in investing activities		-			(1,628	)
FINANCING ACTIVITIES
Payments on line of credit		-			(5,000	)
Settlement of notes payable to related parties		(50,000	)		-
Payments on notes payable to related parties		-			-
Payments on preferred stock dividends		(16,128	)		-
Proceeds from sale of common stock		145,000			-
Proceeds from sale of preferred stock		-			-
Net cash provided by (used in) financing activities		78,872			(5,000	)
INCREASE (DECREASE) IN CASH		45,294			(22,742	)
CASH AT BEGINNING OF PERIOD		221,992			204,135
CASH AT END OF PERIOD	$	267,286		$	181,393
SUPPLEMENTAL INFORMATION:
Cash paid during the period for:
Interest	$	11,929		$	16,434
Income taxes	$	-		$	-

See accompanying notes to condensed consolidated financial statements

6

ST. JOSEPH, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(1) Basis of Presentation

The condensed financial statements presented herein have been prepared by St. Joseph, Inc. (the “Company”) in accordance with the instructions for Form 10-Q and the accounting policies described in its Form 10-K for the year ended December 31, 2008, and should be read in conjunction with the notes thereto.

In the opinion of management, the accompanying condensed financial statements contain all adjustments (consisting only of normal recurring adjustments) which are necessary to provide a fair presentation of operating results for the interim periods presented.  The results of operations presented for the three months ended March 31, 2009 are not necessarily indicative of the results to be expected for the year.

In June 2009, the FASB issued SFAS No. 168 “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles – A Replacement of FASB Statement No. 162” (“SFAS 168”). Statement 168 establishes the FASB Accounting Standards Codification TM (Codification) as the single source of authoritative U.S. GAAP recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants. SFAS 168 and the Codification are effective for financial statements issued for interim and annual periods ending after September 15, 2009.

When effective, the Codification will supersede all existing non-SEC accounting and reporting standards. All other non-grandfathered non-SEC accounting literature not included in the Codification will become non-authoritative. Following SFAS 168, the FASB will not issue new standards in the form of Statements, FASB Staff Positions, or Emerging Issues Task Force Abstracts. Instead, the FASB will issue Accounting Standards Updates, which will serve only to: (a) update the Codification; (b) provide background information about the guidance; and (c) provide the bases for conclusions on the change(s) in the Codification. The Company does not expect the adoption of SFAS 168 to have a material impact on the Company’s financial statements.

In May 2009, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 165 “Subsequent Events,” which establishes general standards of accounting for and disclosures of events that occur after the balance sheet date but before the financial statements are issued or are available to be issued. It requires the disclosure of the date through which an entity has evaluated subsequent events. SFAS No. 165 is effective for interim and annual reporting periods ending after June 15, 2009. We adopted the new disclosure requirements in our June 30, 2009 condensed financial statements. The adoption of this provision did not have a material effect on our financial statements or related disclosures.

Financial data presented herein are unaudited.

(2) Related Party Transactions

During the quarter ended June 30, 2009, as disclosed in a 8-K released on May 9, 2009, we settled a lawsuit between the Company and a former President, CEO and director, John H. Simmons by executing a settlement agreement. In the agreement the Company and Mr. Simmons released all claims against each other. The settlement agreement required the Company to pay Mr. Simmons a sum of $50,000.  The Company booked a one-time credit in the amount of $48,120 in principal and $2,406 in accrued interest to its balance sheet for the cancellation of a note due to Mr. Simmons. The Company also booked an additional one-time credit in the amount of $25,000 to its balance sheet for the cancellation of a note which was due to Mr. Simmons for the cancellation of 250,000 options which had been previously exercised.

8

(3)  Line of Credit

The Company has a $200,000 line of credit.  At June 30, 2009, the Company has an unpaid and outstanding balance of $180,000.  Interest payments are due monthly.  The Company paid $5,754 in interest payments during the six months ended June 30, 2009.  The line matured on July 7, 2009, there has been a temporary verbal extension on the line of credit. Discussions are ongoing regarding the future amount of the line of credit and there cannot be any assurance that the amount will not be reduced.

(4)  Shareholders’ Equity

Preferred Stock

During the six Months ended June 30, 2009, the Company did not issue any Series A Convertible Preferred Stock.  The Board of Directors is authorized to issue shares of Series A Convertible Preferred Stock and to fix the number of shares in such series as well as the designation, relative rights, powers, preferences, restrictions, and limitations of all such series.  In December 2003, the Company issued 386,208 shares of Series A Convertible Preferred Stock that remain outstanding at June 30, 2009.  Each share of Series A Convertible Preferred Stock is convertible to one share of common stock and has a yield of 6.75% dividend per annum, payable on a quarterly basis out of funds legally available therefor, for a period of 5 years or until December 31, 2008.  There is an accrued amount of Series A Convertible Preferred Stock dividends in the amount of $101,183 as of June 30, 2009.  This amount was lowered by $16,128 in the three months ended June 30, 2009. The Company is currently making dividend payments pursuant to the terms of a settlement agreement, as disclosed in an 8-K released on May 9, 2009.

Common Stock

In a private placement completed in the quarter ended June 30, 2009, the Companysold 2,900,000 shares of common stock to 11 accredited investors at a price of $0.05 per share for gross proceeds of $145,000, of which $20,000 was received by the Company in the quarter ended June 30, 2009.  No underwriters were used and no underwriting discounts or commissions were payable.  

During the quarter ended June 30, 2009 a $5,000 note payable issued during fiscal year ended December 31, 2008 was converted to common stock at a rate of $0.05 per share resulting in a grant of 100,000 common shares.

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 to 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.

Common Stock Options

The following schedule summarizes the changes in the Company’s equity awards for the six months ended June 30, 2009:

9

						Weighted		Weighted
	Awards					Average		Average
	Outstanding			Exercise		Exercise		Remaining	Aggregate
	and			Price		Price		Contractual	Intrinsic
	Exercisable			Per Share		Per Share		Life	Value
Outstanding at January 1, 2009		560,000		$	0.10 - $1.05	$	0.80	2.8 years
Granted		-		$	-	$	-
Exercised		-		$	-	$	-
Cancelled/Expired		(150,000	)	$	0.10	$	-
Outstanding at June 30, 2009		410,000		$	1.05	$	1.05	2.2 years	$	-

(5)  Income Taxes

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 no income taxes.

(6)  Concentration of Credit Risk

The Company conducts a significant portion of its operations with one customer. During the six months ended June 30, 2009, approximately 58% of the Company's service revenues were conducted with this one customer.

10

(7)  Legal Proceedings

As disclosed in an 8-K released on May 9, 2009, we settled a lawsuit between us and a former President, CEO and director, John H. Simmons by executing a settlement agreement.

On October 11, 2007, the Company had filed a lawsuit against Mr. Simmons in the United States District Court, Northern District of Texas, Dallas Division, Civil Action No. 307CV1718-R alleging, among other things, that Mr. Simmons breached his fiduciary duties by diverting Company funds for personal and recreational use and acquiring shares of our common stock without adequate consideration. We sought damages against Mr. Simmons of not less than $75,000, attorneys’ fees, costs of litigation, interest and tremble damages

On October 3, 2007, Mr. Simmons filed a lawsuit in United States District Court, Dallas County, Civil Action No. DC-07-11801 against the Company, its officers, and other individuals.  The complaint alleged, among other things, that the Mr. Simmons 1,900,000 options were converted and that the Company failed to repay a $96,000 promissory note and breached a duty to indemnify Mr. Simmons in relation to previously filed litigation. The complaint also made a variety of accusations against Company’s officers and other individuals, including accusations that these individuals breached fiduciary duties with regard to Mr. Simmons, engaged in fraud and conspiracy to commit fraud, and converted shares and options owned by him. Mr. Simmons sought unspecified damages, both actual and exemplary, against the Company and the other defendants.  During the quarter ended March 31, 2008, Gerald McIlhargey, Maureen O’Brien, Donal Ford and Bruce Schreiner, and David Core were all released from the suit as defendants.

Pursuant to the settlement agreement, the Company and Mr. Simmons released all claims against each other. The settlement agreement required the Company to pay Mr. Simmons a sum of $50,000.  In addition, two shareholders of the Company agreed to effect the purchase of Mr. Simmons’s remaining 60,000 shares of Company common stock for an aggregate price of $30,000 ($0.50 per share).

In connection with the settlement, the Company booked a one-time credit in the amount of $48,120 in principal and $2,406 in accrued interest to its balance sheet for the cancellation of a note due to Mr. Simmons. The Company also booked an additional one-time credit in the amount of $25,000 to its balance sheet for the cancellation of a note, which was due to Mr. Simmons for the cancellation of 250,000 options which had been previously exercised.

As previously disclosed in a quarterly report on Form 10-QSB, filed with the SEC on November 20, 2006, on July 28, 2006, Zachary Karo, a former employee, filed a lawsuit against the Company and its subsidiary Staf*Tek Services, Inc. in the district court in Tulsa County, Oklahoma, Case No. CJ 2006 04713, in connection with stock options allegedly granted to Mr. Karo. Mr. Karo alleges that he was granted an option to purchase up to 25,000 shares of the Company’s common stock at $0.10 per share but that management refused to issue Mr. Karo such shares upon his attempt toexercise of the alleged option. A motion was made by the Companyand granted with prejudice to dismiss the case.Mr. Karo re-filed to vacate the dismissal, which was subsequently vacated; at this time there the pretrial is set for October 29, 2009. Mr. Karo is seeking damages, actual and exemplary, against the Company in an amount in excess of $10,000. Management denies that Mr. Karo was owed such stock options. The Company has engaged local counsel and intends to vigorously defend this action on the basis brought by the plaintiffs. The costs of defending against the complaint could be substantial; however management is unable to estimate an amount at this time.

As disclosed in a 8-K released on May 9, 2009, we settled a lawsuit against us by two holders of our Series A Preferred Convertible Stock (the “Preferred A”), Phyllis Bell and Paul Aelmore, by entering into a settlement agreement dated effective May 9, 2009 and which was signed by the Company May 5, 2009.  The settlement agreement provides for us to pay the holders of the Preferred A an aggregate of $2,700 per month, retroactive to January 1, 2009, until the balance of Series A dividends owed to them of $117,312.00 is fully paid.  If we make all required payments, we will have paid down this balance in August 2012.  Of the monthly amount to be paid to the Preferred A holders, Ms. Bell is to receive $2,295.00 per month and Mr. Aelmore is to receive $176.50 per month.

11

Because the monthly payments are retroactive to January 1, 2009, we made a one-time payment of $12,357 to Ms. Bell and Mr. Aelmore to cover the period of January through May 2009. The monthly payments commenced on June 1, 2009.

Ms. Bell and Mr. Aelmore filed a lawsuit in United States District Court, Northern District of Oklahoma, Case No. 08-CF-00470-TCK-SAJ against the Company, and officers and directors of the Company in September 2008.  Their complaint alleged, among other things, that the Company breached the Share Purchase Agreement by failing to pay dividends on the Series A Convertible Preferred Stock. The Company had been accruing the dividends following a determination by its management that the Company did not have funds legally available for distribution.

In consideration of the obligations undertaken by the Company in the settlement agreement, Ms. Bell and Mr. Aelmore released the Company and its officers and directors named as defendants from all claims made in the complaint and agreed to a dismissal of their legal action.  Further the settlement agreement provides that if the Company is barred by Colorado law from making the required dividend payments, the Company shall not be in default so long as it promptly remits payment at such time as it may legally do so.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following presentation of Management’s Discussion and Analysis has been prepared by internal management and should be read in conjunction with the financial statements and notes thereto included in Item 1 of this Quarterly Report on Form 10-Q. Except for the historical information contained herein, the discussion in this report contains certain forward-looking statements that involve risks and uncertainties, such as statements of our business plans, objectives, expectations and intentions as of the date of this filing.  The cautionary statements about reliance on forward-looking statements made earlier in this document should be given serious consideration with respect to all forward-looking statements wherever they appear in this report, notwithstanding that the “safe harbor” protections available to some publicly reporting companies under applicable federal securities law do not apply to us as an issuer of penny stocks.  Our actual results could differ materially from those discussed here.

General

St. Joseph, Inc. (“us,” “we,” “our” or the “Company”) currently conducts all of our business through our wholly-owned subsidiary, Staf*Tek Services, Inc. We also hope to acquire other operating companies as subsidiaries and are pursuing suitable candidates for future acquisition that could potentially create value for our existing shareholders.  Acquisition targets may be in sectors other than our current sector of providing employment agency services. Although it is not our goal, we would also consider a reverse merger opportunity, if it were seen to be a growth opportunity for our existing shareholders.

To date, we have not consummated any acquisition and cannot provide any assurance that we will be successful in this endeavor. Any acquisition may be structured as a share exchange and may result in significant dilution to our existing shareholders.

12

Staf*Tek Services, Inc.

Staf*Tek Services, Inc. (“Staf*Tek”) was organized as an Oklahoma corporation on January 2, 1997. On January 2, 2004, we closed our acquisition of Staf*Tek pursuant to an agreement by which we acquired 100% percent of the  issued and outstanding shares of Staf*Tek's common stock in exchange for (i) 380,500 shares of our $.001 par value Series A convertible preferred stock; (ii) 219,500 shares of our $.001 par value common stock; and (ii) $200,000 in cash. Our Series A convertible preferred stock has a face value of $3.00 per share with a yield of 6.75% dividend per annum, payable on a quarterly basis out of funds legally available therefor, for a period of five years.  As the Company did not have funds legally available for distribution at times during this 5-year period, Series A Convertible Preferred Stock dividends in the amount of $101,183 as of June 30, 2009 have been accrued to be paid at such time as the Company may legally do so.

The Series A convertible preferred stock may be converted into our common stock at the rate of one share of convertible preferred stock for one share of common stock at any time by the shareholder. We may call the Series A convertible preferred stock for redemption no sooner than two years after the date of issuance, and only if our common stock is trading on a recognized United States stock exchange for a period of no less than thirty consecutive trading days at a market value of $5.00 or more per share. However, as of this date, our common stock has not traded at that amount.

Staf*Tek specializes in the recruiting and placement of professional technical personnel, as well as finance and accounting personnel on a temporary and permanent basis.  Staf*Tek provides its customers with employee candidates with information technology (“IT”) skills in areas ranging from multiple platform systems integration to end-user support, including specialists in programming, networking, systems integration, database design, help desk support, including senior and entry level finance and accounting candidates.  Staf*Tek's candidate databases contain information on the candidates experience, skills, and performance and are continually being updated to include information on new referrals and to update information on existing candidates.  Staf*Tek responds to a broad range of assignments from technical one-person assignments to major projects including, without limitation, Internet/Intranet development, desktop applications development, project management, enterprise systems development, SAP implementation and legacy mainframe projects.  Staf*Tek also provides employee candidates computer training, online assessments, certification and the opportunity to be tested and certified in over 50 skill sets.

13

Results of Operations for the Six Months Ended June 30, 2009 and 2008

		For the Six Months Ended
		June 30, 2009					June 30, 2008
				% of					% of			Change		Change
		$		Revenue			$		Revenue			$		%
Net Revenues	$	550,251		100.00	%	$	1,284,281		100.00	%	$	(734,030	)	(57.15	)%
Cost of Revenues		429,057		77.97	%		986,235		76.79	%		(557,178	)	(56.50	)%
Gross Margin (Loss)		121,194		22.03	%		298,046		23.21	%		(176,852	)	(59.34	)%
Operating Expenses
Selling, General and
Administrative Expenses		226,221		41.11	%		262,617		20.45	%		(36,396	)	(13.86	)%
Depreciation and Amortization		574		0.10	%		548		0.04	%		26		4.74	%
Total Operating Expenses	$	226,795		41.22	%	$	263,165		20.49	%	$	(36,370	)	(13.82	)%
Income (Loss) from Operations	$	(105,601	)	(19.19	)%		34,881		2.72	%		(140,482	)	(402.75	)%
Other Income (Expense)
Interest Income	$	-		0.00	%		-		0.00	%	$	-		0.00	%
Other Income (Expense)		25,926		4.71	%		(100.00	)	(0.01	)%		26,026		(26,026.00	)%
Interest Expense		(11,929	)	(2.17	)%		(16,434	)	(1.28	)%		4,505		(27.41	)%
Net Other Expense	$	13,997		2.54	%	$	(16,534	)	(1.29	)%	$	30,531		(184.66	)%
Loss before provision for income
tax		(91,604	)	(16.65	)%		18,347		1.43	%		(109,951	)	(599.29	)%
Provision for Income Taxes	$	-		0.00	%		3,853		0.30	%		(3,853	)	(100.00	)%
Net Income (Loss)	$	(91,604	)	(16.65	)%	$	14,494		1.13	%	$	(106,098	)	(732.01	)%

Gross Profit

For the six-month period ended June 30, 2009, we had a gross margin of $121,194 compared to a gross margin of $298,046 for the six-month period ended June 30, 2008.  This decrease in our gross profitability of $176,852, or approximately 59.34 % over the prior period, is due primarily to lower number of contractors and renegotiated bill rates as explained below.

Revenues for the six-month period ended June 30, 2009 decreased to $550,251 from $1,284,281 for the six-month period ended June 30, 2008.  This decrease in net revenues of $734,030, or approximately 57.15 %, over the prior period, is due primarily to lower number of contractors and renegotiated bill rates.

Cost of revenues for the six-month period ended June 30, 2009 decreased to $429,057 from $986,235 for the six-month period ended June 30, 2008.  This decrease in cost of revenues of $557,178, or approximately 56.50 %, over the prior period, is due primarily to lower number of contractors and renegotiated bill rates.

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Total Costs and Expenses

Total costs and expenses for the six-month period ended June 30, 2009 decreased to $226,795 from $263,165 for the six-month period ended June 30, 2008.  This decrease in our total operating expenses of $36,370 is approximately     13.82% under that of the prior period.

General and administrative expenses for the six-month period ended June 30, 2009 decreased to $226,221 from $262,617 for the six-month period ended June 30, 2008.  This decrease in general and administrative expenses of $36,396 is approximately 13.86% under that of the prior period.

Other Income/Expenses

Interest expense for the six-month period ended June 30, 2009 decreased to $11,929 from $16,434 for the six-month period ended June 30, 2008.  This decrease in interest expense of $4,505, or approximately 27.41 % over the prior period, is due primarily to the decrease in interest due on legal fees and our line of credit.

For the six-month period ended June 30, 2009, we had other income of $25,926 compared to other expenses of $100 for the six-month period ended June 30, 2008.  This decrease of other expenses of $26,026, or approximately 26,026 % over the prior period, is due primarily to the gain on the settlement of liabilities due to related party.

For the six-month period ended June 30, 2009, we had total other Income/(Expenses) in the amount of $13,997 compared to ($16,534) in total other Income/(Expenses) for the six-month period ended June 30, 2008. This decrease of $30,531 is approximately 184.66 % over the prior period.

Profits

For the six-month period ended June 30, 2009, we incurred an operating loss of $105,601 compared to an operating profit for the six-month period ended June 30, 2008 of $34,881.  This decrease in operating profits is due primarily to lower margins and decreased number of revenue generating contractor placements.

Net loss for the six-month period ended June 30, 2009 increased to $91,604 from $14,494 of net income for the six-month period ended June 30, 2008. This increase in losses of $106,098 or 732.01% over the prior period is due primarily to lower margins and decreased number of revenue generating contractor placements as discussed above.

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Results of Operations for the Three months ended June 30, 2009 and 2008

		For the Three Months Ended
		June 30, 2009			June 30, 2008			Change		Change
		$			$			$		$
Net Revenues	$	176,901		$	643,824		$	(466,923	)	(72.52	)%
Cost of Revenues		136,576			475,487			(338,911	)	(71.28	)%
Gross Margin (Loss)		40,325			168,337			(128,012	)	(76.05	)%
Operating Expenses
Selling, General and Administrative
Expenses		115,242			142,420			(27,178	)	(19.08	)%
Depreciation and Amortization		287			(465	)		752		(161.72	)%
Total Operating Expenses	$	115,529		$	141,955		$	(26,426	)	(18.62	)%
Income (Loss) from Operations	$	(75,204	)		26,382			(101,586	)	(385.06	)%
Other Income (Expense)
Interest Income		-			-			-		0.00	%
Other Income (Expense)		25,526			-			25,526		0.00	%
Interest Expense		(8,485	)		(6,390	)		(2,095	)	32.79	%
Net Other Expense	$	17,041		$	(6,390	)	$	23,431		(366.68	)%
Loss before provision for income tax		(58,163	)		19,992			(78,155	)	(390.93	)%
Provision for Income Taxes		-			4,199			(4,199	)	(100.00	)%
Net Income (Loss)	$	(58,163	)	$	15,793		$	(73,956	)	(468.28	)%
Benefit forom tax loss carryforward		-			4,199			(4,199	)	(100.00	)%
Net Income (Loss)	$	(58,163	)	$	19,992		$	(78,155	)	(390.93	)%

Gross Profit

For the three-month period ended June 30, 2009, we had a gross margin of $40,325 compared to a gross margin of $168,337 for the three-month period ended June 30, 2008.  This decrease in our gross profitability of $128,012, or approximately 76.05% over the prior period, is due primarily to a reduction in the number of contractor placements.

Revenues for the three-month period ended June 30, 2009 decreased to $176,901 from $643,824 for the three-month period ended June 30, 2008.  This decrease in net revenues of $466,923, or approximately 72.52%, over the prior period, is due primarily to a reduction in the number of contractor placements and contractor placements with lower margins.

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Cost of revenues for the three-month period ended June 30, 2009 decreased to $136,576 from $475,487 for the three-month period ended June 30, 2008.  This decrease in cost of revenues of $338,911, or approximately 71.28%, from that of the prior period, is due primarily to a decrease in the number of contractor placements.

Total Costs and Expenses

Total costs and expenses for the three-month period ended June 30, 2009 decreased to $115,529 from $141,955 for the three-month period ended June 30, 2008.  This decrease in our total operating expenses of $26,426 is approximately 18.62% over that of the prior period.

General and administrative expenses for the three-month period ended June 30, 2009 decreased to $115,242 from $142,420 for the three-month period ended June 30, 2008.  This decrease in general and administrative expenses of $27,178 is approximately 19.08% over that of the prior period.

Other Income/Expenses

For the three-month period ended June 30, 2009, we had other income of $25,526 compared to none for the three-month period ended June 30, 2008.  This increase of other income of $25,526 is due primarily to the gain on the settlement of liabilities due to related party.

For the three-month period ended June 30, 2009, we had net other income in the amount of $17,041 compared to $6,390 in total other expenses for the three-month period ended June 30, 2008. This decrease of $23,431 is approximately 366.68% less than that of the prior period.

Profits

For the three-month period ended June 30, 2009, we incurred an operating loss of $75,204 compared to operating income for the three-month period ended June 30, 2008 of $26,382.  This increase in operating loss is due primarily to an increased number and higher margins with our revenue generating contractor placements.

Net loss for the three-month period ended June 30, 2009 was $58,163 compared to net income of $15,793 for the three-month period ended June 30, 2008. This increase in net loss is due primarily to increased number and higher margins with our revenue generating contractor placements as discussed above.

Liquidity and Capital Resources

As of June 30, 2009, we had a cash reserve of $267,286.  During the six months ended June 30, 2009, we used cash in the amount of $33,578 in our operating activities.  During this period $145,000 of new funds were raised.

During the six months ended June 30, 2009 and 2008, the Company’s cash activities were as follows:

	2009			2008
Cash used for operating activities	$	(33,578	)	$	(16,114	)
Cash used in investing activities		-		$	(1,628	)
Cash provided by financing activities	$	78,872		$	(5,000	)

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Internal Sources of Liquidity

For the six months ended June 30, 2009, the funds generated from our operations were insufficient to fund our daily operations.  For the six months ended June 30, 2009, we had a gross margin of $121,194, and we were thus unable to meet our operating expenses of $226,795 for the same period.  After accounting for our total other income of $13,997       for this period, we suffered a net loss of $91,604 for the period. We can provide no assurance that funds from our operations will continue to meet the requirements of our daily operations in the future.  In the event that funds from our operations are insufficient to meet our expenses, we will need to seek other sources of financing to maintain liquidity.

External Sources of Liquidity

Because the funds generated from our operations have been not been sufficient to fully fund our operations, we have been on dependent on debt and equity financing to make up the shortfall. We actively pursue all potential financing options as we look to secure additional funds to both stabilize and grow our business operations. Our management will review any financing options at their disposal, and will judge each potential source of funds on its individual merits. There can be no assurance that we will be able to secure additional funds from debt or equity financing, as and when we need to, or if we can, that the terms of such financing will be favorable to us or our existing stockholders. As a result, our independent registered public accounting firm has issued a “going concern” modification to its report on our audited financial statements for the year ended December 31, 2008.

We have been utilizing a $200,000 line of credit in order to meet our operating expenses. This line of credit is secured by most of our assets and expired on July 7, 2009.  Interest is due on the line of credit at the rate of 6.79% per annum and interest payments are due monthly. As of June 30, 2009, the line of credit had an outstanding balance of $180,000.  There has been a temporary verbal extension on the line of credit. Discussions are ongoing regarding the future amount of the line of credit and there cannot be any assurance that the amount will not be reduced.

During the quarter ended June 30, 2009, we completed a private offering we commenced in October 2008. In the private placement we sold 2,900,000 shares of common stock to 11 accredited investors at a price of $0.05 per share for gross proceeds of $145,000.  Of these amounts, during the quarter ended June 30, 2009, we sold 400,000 shares of common stock to one accredited investor for projected gross proceeds of $20,000.

As of June 30, 2009, we retired debt owing to a former officer, John H. Simmons, aggregating $48,120 as further discussed in Item 1 of Part II of this report.

Off Balance Sheet Arrangements

We do not have nor do we maintain any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our investors.

Risk Factors

Reference is made to “Risk Factors” included in our Annual Report on Form 10-KSB for the year ended December 31, 2008 for information concerning risk factors. There have been no material changes in the risk factors since the filing of this Annual Report with the SEC on June 30, 2009.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a smaller reporting company, we are not required to provide the information required by this Item.

ITEM 4. CONTROLS AND PROCEDURES

As required by Rule 13a-15(b) under the Securities Exchange Act of 1934 (the “Exchange Act”), we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls as of the end of the period covered by this report, June 30, 2009.  This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer, Mr. Gerald McIlhargey, and our Treasurer, Mr. Kenneth L. Johnson (collectively, the “Certifying Officers”).  Based upon that evaluation, our Certifying Officers concluded that as of the end of the period covered by this report, June 30, 2009, our disclosure controls and procedures are effective in timely alerting management to material information relating to us and required to be included in our periodic filings with the Securities and Exchange Commission (the “Commission”).

Disclosure controls and procedures are controls and procedures that are designed to ensure that information required to be disclosed in our periodic reports under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our periodic reports that we file under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Internal Control over Financial Reporting

Further, as required by Rule 13a-15(d) of the Exchange Act and under the supervision and with the participation of our Certifying Officers, we carried out an evaluation as to whether there has been any change in our internal control over financial reporting during our fiscal quarter ended June 30, 2009. Based upon this evaluation, our Certifying Officers have concluded that there has not been any change in our internal control over financial reporting during our fiscal quarter ended June 30, 2009, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Internal control over financial reporting is a process designed by, or under the supervision of, our principal executive and principal financial officers, or persons performing similar functions, and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.  Internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

ITEM 4T. CONTROLS AND PROCEDURES

Not Applicable.

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PART II  - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

As disclosed in a 8-K released on May 9, 2009, we settled a lawsuit between us and a former President, CEO and director, John H. Simmons by executing a settlement agreement.

On October 11, 2007, the Company had filed a lawsuit against Mr. Simmons in the United States District Court, Northern District of Texas, Dallas Division, Civil Action No. 307CV1718-R alleging, among other things, that Mr. Simmons breached his fiduciary duties by diverting Company funds for personal and recreational use and acquiring shares of our common stock without adequate consideration. We sought damages against Mr. Simmons of not less than $75,000, attorneys’ fees, costs of litigation, interest and tremble damages

On October 3, 2007, Mr. Simmons filed a lawsuit in United States District Court, Dallas County, Civil Action No. DC-07-11801 against the Company, its officers, and other individuals.  The complaint alleged, among other things, that the Mr. Simmons 1,900,000 options were converted and that the Company failed to repay a $96,000 promissory note and breached a duty to indemnify Mr. Simmons in relation to previously filed litigation. The complaint also made a variety of accusations against Company’s officers and other individuals, including accusations that these individuals breached fiduciary duties with regard to Mr. Simmons, engaged in fraud and conspiracy to commit fraud, and converted shares and options owned by him. Mr. Simmons sought unspecified damages, both actual and exemplary, against the Company and the other defendants.  During the quarter ended March 31, 2008, Gerald McIlhargey, Maureen O’Brien, Donal Ford and Bruce Schreiner, and David Core were all released from the suit as defendants.

Pursuant to the settlement agreement, the Company and Mr. Simmons released all claims against each other. The settlement agreement required the Company to pay Mr. Simmons a sum of $50,000.  In addition, two shareholders of the Company agreed to effect the purchase of Mr. Simmons’s remaining 60,000 shares of Company common stock for an aggregate price of $30,000 ($0.50 per share).

In connection with the settlement, the Company booked a one-time credit in the amount of $48,120 in principal and $2,406 in accrued interest to its balance sheet for the cancellation of a note due to Mr. Simmons. The Company also booked an additional one-time credit in the amount of $25,000 to its balance sheet for the cancellation of a note, which was due to Mr. Simmons for the cancellation of 250,000 options which had been previously exercised.

As previously disclosed in a quarterly report on Form 10-QSB, filed with the SEC on November 20, 2006, on July 28, 2006, Zachary Karo, a former employee, filed a lawsuit against the Company and its subsidiary Staf*Tek Services, Inc. in the district court in Tulsa County, Oklahoma, Case No. CJ 2006 04713, in connection with stock options allegedly granted to Mr. Karo. Mr. Karo alleges that he was granted an option to purchase up to 25,000 shares of the Company’s common stock at $0.10 per share but that management refused to issue Mr. Karo such shares upon his attempt toexercise of the alleged option. A motion was made by the Companyand granted with prejudice to dismiss the case.Mr. Karo re-filed to vacate the dismissal, which was subsequently vacated; at this time there the pretrial is set for October 29, 2009. Mr. Karo is seeking damages, actual and exemplary, against the Company in an amount in excess of $10,000. Management denies that Mr. Karo was owed such stock options. The Company has engaged local counsel and intends to vigorously defend this action on the basis brought by the plaintiffs. The costs of defending against the complaint could be substantial; however management is unable to estimate an amount at this time.

As disclosed in a 8-K released on May 9, 2009, we settled a lawsuit against us by two holders of our Series A Preferred Convertible Stock (the “Preferred A”), Phyllis Bell and Paul Aelmore, by entering into a settlement agreement dated effective May 9, 2009 and which was signed by the Company May 5, 2009.  The settlement agreement provides for us to pay the holders of the Preferred A an aggregate of $2,700 per month, retroactive to January 1, 2009, until the balance of Series A dividends owed to them of $117,312.00 is fully paid.  If we make all required payments, we will have paid down this balance in August 2012.  Of the monthly amount to be paid to the Preferred A holders, Ms. Bell is to receive $2,295.00 per month and Mr. Aelmore is to receive $176.50 per month.

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Because the monthly payments are retroactive to January 1, 2009, we made a one-time payment of $12,357 to Ms. Bell and Mr. Aelmore to cover the period of January through May, 2009. The monthly payments commenced on June 1, 2009.

Ms. Bell and Mr. Aelmore filed a lawsuit in United States District Court, Northern District of Oklahoma, Case No. 08-CF-00470-TCK-SAJ against the Company, and officers and directors of the Company in September 2008.  Their complaint alleged, among other things, that the Company breached the Share Purchase Agreement by failing to pay dividends on the Series A Convertible Preferred Stock. The Company had been accruing the dividends following a determination by its management that the Company did not have funds legally available for distribution.

In consideration of the obligations undertaken by the Company in the settlement agreement, Ms. Bell and Mr. Aelmore released the Company and its officers and directors named as defendants from all claims made in the complaint and agreed to a dismissal of their legal action.  Further the settlement agreement provides that if the Company is barred by Colorado law from making the required dividend payments, the Company shall not be in default so long as it promptly remits payment at such time as it may legally do so.

ITEM 1A. RISK FACTORS

As a smaller reporting company, we are not required to provide the information required by this Item.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

During our fiscal quarter ended June 30, 2009, we made the following sales of equity securities.  In April 2009, we sold 400,000 shares of common stock to one accredited investor, for gross proceeds of $20,000.  As part of a private placement commenced in 2008. The shares were 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 to only to accredited investors, as such term is defined by Rule 501 of Regulation D and all of the shares sold in the private placement were restricted securities pursuant to Rule 144.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of our security holders during the three-month period ended June 30, 2009.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6.  EXHIBITS

Exhibit No.	Description
31.1	Certification of Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.  (Filed herewith)
31.2	Certification of Chief Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.  (Filed herewith)
32.1	Certification of Chief Executive Officer pursuant to pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act  of  2002 (Filed herewith)
32.2	Certification of Chief Financial Officer pursuant to pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act  of  2002 (Filed herewith)

SIGNATURES

Pursuant to the requirments of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	ST. JOSEPH, INC.
Date: August 14, 2009	/s/ GERALD MCILHARGEY
	Gerald McIlhargey,
	Chief Executive Officer

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