FORM 10-QSB
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 19345
For the quarterly period ended March 31, 2006
--------------
[ ] 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.
(Exact name of Small Business Issuer as specified in its charter)
Colorado CH 47-0844532
------------------------------------------------ --------------------------------------------------------
(State or other jurisdiction of incorporation (IRS Employer Identification Number)
or organization)
4870 S. Lewis, Suite 250 Tulsa, OK 74105
------------------------------------------------ --------------------------------------------------------
Address of Principal Executive Offices) (Zip Code)
Issuer's telephone number, including area code: (918) 742-1888
Check whether the issuer (1) 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 is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes __ No X .
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed documents and reports required to be filed by
Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities
under a plan confirmed by a court. Yes __ No __
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 6,249,212 shares as of May 19, 2006.
Transitional Small Business Disclosure Format (check one); Yes [ ] No [X]
ST. JOSEPH, INC.
Form 10-QSB
Table of Contents
PART I - FINANCIAL INFORMATION................................................3
ITEM 1. FINANCIAL STATEMENTS............................................3
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.......10
ITEM 3. CONTROLS AND PROCEDURES.........................................15
PART II - OTHER INFORMATION..................................................16
ITEM 1. LEGAL PROCEEDINGS...............................................16
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.....16
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.................................17
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.............17
ITEM 5. OTHER INFORMATION...............................................17
ITEM 6. EXHIBITS........................................................18
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ST. JOSEPH, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
March 31, 2006
Assets
Current assets:
Cash $ 34,898
Marketable securities 10,019
Accounts receivable 370,753
Employee advances 2,200
-----------
Total current assets 417,870
Property and equipment, net 18,115
Deposit 1,230
Goodwill 258,525
-----------
$ 695,740
===========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 237,597
Accrued liabilities 84,390
Line of credit (Note 3) 200,000
Notes payable to related parties (Note 2) 48,120
-----------
Total current liabilities 570,107
-----------
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,
6,159,212 shares issued and outstanding 6,159
Additional paid-in capital 1,364,675
Retained deficit (1,245,587)
-----------
Total shareholders/ equity 125,633
-----------
$ 695,740
===========
See accompanying notes to condensed consolidated financial statements
3
ST. JOSEPH, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
Three Months Ended
March 31,
--------------------------
2006 2005
----------- -----------
Service revenues, net $ 813,187 $ 410,453
Direct costs of services 629,913 316,428
----------- -----------
Gross profit 183,274 94,025
Selling, general and administrative 192,099 171,298
Depreciation 4,019 5,460
----------- -----------
Loss from operations (12,844) (82,733)
Non-operating income:
Interest income 34 3
Realized gain/(loss) on marketable securities (2,674) 2,535
Interest expense (8,721) (6,237)
----------- -----------
Loss before income taxes (24,205) (86,432)
Income tax provision (Note 5) -- --
----------- -----------
Net loss (24,205) (86,432)
Preferred stock dividend requirements (19,552) (19,552)
----------- -----------
Loss applicable to common stock $ (43,757) $ (105,984)
=========== ===========
Basic and diluted loss per common share $ (0.01) $ (0.02)
=========== ===========
Weighted average common
shares outstanding 6,022,962 5,066,712
=========== ===========
See accompanying notes to condensed consolidated financial statements
4
ST. JOSEPH, INC.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(UNAUDITED)
Preferred Stock Common Stock
------------------------- ------------------------
Shares Par Value Shares Par Value
----------- ----------- ----------- -----------
Balance, January 1, 2006 386,208 $ 386 5,830,712 $ 5,831
Sale of common stock at $2.00
per share (Note 4) -- -- 28,500 28
Exercised stock options (Note 4) -- -- 300,000 300
Preferred stock dividends -- -- -- --
Comprehensive income (loss):
Unrealized investment gains -- -- -- --
Net loss -- -- -- --
Comprehensive income (loss) -- -- -- --
----------- ----------- ----------- -----------
Balance, March 31, 2006 386,208 $ 386 6,159,212 $ 6,159
=========== =========== =========== ===========
Other
Comprehensive
Income
-----------
Additional Unrealized
Paid-in Retained Investment
Capital Deficit Gains Total
----------- ----------- ----------- -----------
Balance, January 1, 2006 $ 1,278,003 $(1,201,830) $ (1,601) $ 80,789
Sale of common stock at $2.00
per share (Note 4) 56,972 -- -- 57,000
Exercised stock options (Note 4) 29,700 -- -- 30,000
Preferred stock dividends -- (19,552) -- (19,552)
Comprehensive income (loss):
Unrealized investment gains -- -- 1,601 1,601
Net loss -- (24,205) -- (24,205)
-----------
Comprehensive income (loss) -- -- -- (22,604)
----------- ----------- ----------- -----------
Balance, March 31, 2006 $ 1,364,675 $(1,245,587) $ -- $ 125,633
=========== =========== =========== ===========
See accompanying notes to condensed consolidated financial statements
5
ST. JOSEPH, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
Three Months Ended
March 31,
--------------------
2006 2005
-------- --------
Net cash used in
operating activities $(42,533) $(63,509)
-------- --------
Cash flows from investing activities:
Purhcase marketable securities -- (1,047)
-------- --------
Net cash used in
investing activities -- (1,047)
-------- --------
Cash flows from financing activities:
Proceeds from officer's note payable (Note 2) -- 37,000
Principal payment on officer's note payable (Note 2) (47,880) (37,000)
Proceeds from shareholders' notes payable (Note 2) 40,000 62,000
Principal payment on shareholder's note payable (Note 2) (40,000) --
Payments for preferred stock dividends (Note 4) (19,552) (19,263)
Proceeds from the sale of common stock (Note 4) 57,000 45,000
Proceeds from exercise of stock options (Note 4) 30,000
-------- --------
Net cash provided by (used in)
financing activities 19,568 87,737
-------- --------
Net change in cash (22,965) 23,181
Cash, beginning of period 57,863 14,855
-------- --------
Cash, end of period $ 34,898 $ 38,036
======== ========
Supplemental disclosure of cash flow information:
Income taxes $ -- $ --
======== ========
Interest $ 8,721 $ 3,837
======== ========
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-QSB
and the accounting policies described in its Form 10-KSB for the year ended
December 31, 2005, 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, 2006 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, of which $96,000 remained unpaid as
of December 31, 2005. The note carries a ten percent interest rate, payable
quarterly, and matures on June 15, 2006. During the three months ended March 31,
2006, the Company repaid $47,880 of principal and $2,400 of interest. As of
March 31, 2006, the Company owed $48,120 in principal and $-0- in accrued
interest on the note. Interest expense on the note totaled $2,400 for the three
months ended March 31, 2006.
On January 5, 2006, a shareholder advanced the Company $40,000 for working
capital. The Company repaid the advance on January 31, 2006.
During the year ended December 31, 2005, an employee advanced the Company
$51,900 for working capital in exchange for promissory notes, of which $11,834
remained unpaid as of December 31, 2005. The Company repaid the $11,834 prior to
March 31, 2006.
(3) Line of Credit
The Company has a $200,000 line of credit and the entire balance was unpaid and
outstanding as at March 31, 2006. Interest payments are due monthly. The line
matures on August 1, 2006. The line is collateralized by most all of the
Company's assets and is guaranteed by the Company's president.
7
ST. JOSEPH, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(4) Shareholders' Equity
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, 2006. 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 $19,552 in preferred stock
dividends during the three months ended March 31, 2006.
Common Stock
During the three months ended March 31, 2006, the Company sold 28,500 shares of
its common stock at $2.00 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 $57,000 from such sales.
Common Stock Options
The following schedule summarizes the changes in the Company's stock options for
the three months ended March 31, 2006:
Options Outstanding and Exercisable
------------------------------------------ Weighted Average
Number of Exercise Price Exercise Price
Shares Per Share Per Share
---------- --------- --------
Balance at December 31, 2005 2,500,000 $ 0.10 $ 0.10
Options granted -- N/A N/A
Options exercised (300,000) $ 0.10 $ 0.10
Options expired -- N/A N/A
---------- --------- --------
Balance at March 31, 2006 2,200,000 $ 0.10 $ 0.10
==========
(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 $-0- income taxes.
8
ST. JOSEPH, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(6) Concentration of Credit Risk
The Company conducts a significant portion of its operations with two customers.
During the three months ended March 31, 2006, approximately 85% of the Company's
service revenues were conducted with these customers.
(7) Subsequent Events
On April 4, 2006, the Company issued a press release announcing that it had
signed a non-binding letter of intent to acquire Intellamed, Inc., a private
company, as a wholly-owned subsidiary. Intellamed is a Texas-based medical asset
management company whose medical services and equipment divisions facilitate the
procurement and support of medical equipment to over 3,600 healthcare facilities
throughout the United States. The acquisition, which called for a purchase price
of approximately 30,000,000 shares of our common stock in exchange for 100% of
the issued and outstanding shares of Intellamed, Inc., was subject to due
diligence, approval by our Board of Directors, and the execution of a definitive
agreement. Based upon further due diligence, we have attempted to negotiate a
transaction for substantially less shares of our common stock than originally
discussed, but no agreement with Intellamed regarding transaction terms has as
yet been reached. At a Board of Directors meeting held on May 8, 2006, our Board
determined to hold off on further negotiations until the financial statement of
Intellamed for the six-month period ended June 30, 2006 can be analyzed and our
due diligence effort with respect to that acquisition candidate is completed.
On May17, 2006, Johnny H. Simmons delivered a note to the Company's Board of
Directors that he resigned as President and Chief Executive Officer of the
Company and its subsidiaries effective that day. The notice of resignation did
not reference that he had any disagreement with the policies, practices or
operations of the Company. Mr. Simmons still serves as a member of the Company's
Board of Directors. He was replaced by Gerald McIlhargey, an independent
director of the Company's Board of Directors up to his appointment by the Board
as acting President and Chief Executive Officer.
9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
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-QSB. 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") conducts all of our
business through our wholly-owned subsidiaries, Staf*Tek Services, Inc. and
Staf*Med Global, Inc.
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 (1) 380,500 shares
of our $.001 par value convertible preferred stock; (2) 219,500 shares of our
$.001 par value common stock; and (3) $200,000 in cash. Our convertible
preferred stock has a face value of $3.00 per share with a yield of 6.75%
dividend per annum, which will be paid quarterly on a calendar basis for a
period of five (5) years. The 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
convertible preferred stock for redemption no sooner than two (2) 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, the stock has not traded at that amount.
During the three month period ended March 31, 2006, we paid $19,552 in dividends
on our convertible preferred stock. There were no accrued and unpaid dividends
on our convertible preferred stock as at March 31, 2006.
As a result of the acquisition, Staf*Tek currently operates as our wholly-owned
subisidary, specializing in the recruiting and placement of professional
technical personnel on a temporary and permanent basis. Staf*Tek is primarily a
regional professional service firm that provides experienced and highly
qualified information technology personnel who can demonstrate diversity and
flexibility in the work force. Staf*Tek provides Information Technology
employees in areas 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's candidate
databases concerning Information Technology (IT) experience, skills, and
performance are continually being updated regarding new referrals and existing
candidates. Staf*Tek's contract services are performed by a nucleus of both
permanent and temporary professionals. Staf*Tek responds to a broad range of
assignments from technical one-person assignments to major projects including,
but not limited to: Internet/Intranet Development, Desktop Applications
Development, Project Management and Completion, Enterprise Systems Development,
SAP Implementation and Legacy MainFrame Projects. Staf*Tek also provides
computer training, online assessments and certification at its web-site,
www.staftek.com, through Get Smart Online. The Get Smart Online technology
provides anyone with internet access the opportunity to get tested and certified
in over fifty (50) Information Technology skill sets.
10
Staf*Med Global, Inc.
We formed Staf*Med Global, Inc., a Texas corporation ("Staf*Med"), on September
8, 2005 as our wholly-owned subsidiary to service the staffing needs of the
rapidly growing healthcare industry with the same values we represent at
Staf*Tek Services, Inc. Staf*Med offers opportunities and services to virtually
every sector of the healthcare industry. As of March 29, 2006, Staf*Med is still
in the process of acquiring a database of qualified staff and has not yet
received any income from operations.
Staf*Tek and Staf*Med currently utilize one office located in Tulsa, Oklahoma.
However, as the business begins to develop, it proposes to open an office in
Dallas, Texas within the next 12 months.
11
Results of Operations For The Three Monthds Ended March 31, 2006 and 2005.
- ----------------------------------------------------------------------------------------------------------------------------------
For the Three Months Ended
- ----------------------------------------------------------------------------------------------------------------------------------
March 31, 2006 March 31, 2005 Change Change
-------------- -------------- ------ ------
% of % of
$ Revenue $ Revenue $ %
--------- --------- ----------- ---------- ---------- --------------
Service Revenues, Net $ 813,187 100.00% $ 410,453 100.00% 402,734 98.12%
Direct Cost of
Services 629,913 77.46% 316,428 77.09% 313,485 99.07%
--------- --------- ----------- ---------- ---------- --------------
Gross Profit (Loss) 183,274 22.54% 94,025 22.91% 89,249 94.92%
Selling, General
and Administrative
Expenses 192,099 23.62% 171,298 41.73% 20,801 12.14%
Depreciation 4,019 0.49% 5,460 1.33% (1,441) -26.39%
Total Operating
Expenses $ 196,118 24.12% $ 176,758 43.06% 19,360 10.95%
--------- --------- ----------- ---------- ---------- --------------
Income (Loss) from
Operations $ (12,844) -1.58% $ (82,733) -20.16% 69,889 -84.48%
--------- --------- ----------- ---------- ---------- --------------
Non-operating
Income
Interest Income 34 --% 3 --% 31 1033.33%
Realized gain
(loss) on
marketable
securities (2,674) -0.33% 2,535 0.62% (5,209) -205.48%
Interest Expense (8,721) -1.07% (6,237) -1.52% (2,484)
--------- ----------
--------- ----------- ---------- --------------
Net Other Income $ (11,361) -1.40% $ (3,699) -0.90% (7,662) 207.14%
(Expense)
--------- --------- ----------- ---------- ---------- --------------
Loss before income
taxes (24,205) -2.98% (86,432) -21.06% 62,227 -72.00%
Income Tax Provision -- --% -- --% -- --
--------- --------- ----------- ---------- ---------- --------------
Net Loss $ (24,205) -2.98% $ (86,432) -21.06% 62,227 -72.00%
========= ========= =========== ========== ========== ==============
- ----------------------------------------------------------------------------------------------------------------------------------
12
Net Service Revenues
Net service revenues for the three-month period ended March 31, 2006 increased
to $813,187 from $416,453 for the three month period ended March 31, 2005. This
increase in net service revenues of $402,734, or approximately 98.12% over the
prior period, is due primarily to the addition of approximately fifteen new
contracted employees since the prior period.
Direct Cost of Services
Direct costs of our services for the three-month period ended March 31, 2006
increased to $629,913 from $316,428 for the three-month period ended March 31,
2005. This increase in our direct costs of services of $313,485, or
approximately 99.07% over the prior period, is due primarily to the cost of the
increased number of new contracted employees described above.
Gross Profit
For the three-month period ended March 31, 2006, we had a gross profit of
$183,274, compared to a gross profit of $94,025 for the three-month period ended
March 31, 2005. This increase in our gross profitability of $89,249, or
approximately 94.92% over the prior period, is due primarily to the gross profit
on increased number of contracted employees described above.
Total Operating Expenses
Total operating expenses for the three-month period ended March 31, 2006
increased to $196,118 from $176,758 for the three month period ended March 31,
2005. This increase in our total operating expenses of $19,360, or approximately
10.95%, is covered below in our discussion of Selling, General and
Administrative Expenses and Depreciation Expenses.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the three-month period ended
March 31, 2006 increased to $192,099 from $171,298 for the three-month period
ended March 31, 2005. This increase in selling, general and administrative
expenses of $20,801, or approximately 12.14% over the prior period, is due
primarily to the cost of adding two new job boards to assist in candidate
searches and a new employee in the sales function department.
Depreciation
Depreciation expense for the three-month period ended March 31, 2006 decreased
to $4,109 from $5,460 for the three-month period ended March 31, 2005. This
decrease in the depreciation expense of $1,441 or approximately 26.39% over the
prior period is due primarily to normal decline in depreciation expense for
aging assets based on the company's depreciation method and asset lives
utilized.
Loss from Operations
For the three-month period ended March 31, 2006, we incurred a loss from
operations in the amount of $12,844 compared to a loss from operations for the
three-month period ended March 31, 2005 of $82,733. This reduction in loss from
operation of $69,889, or approximately 84.48% over the prior period, is due to
those factors discussed above.
13
Non-Operating Expenses
For the three-month period ended March 31, 2006, we incurred non-operating
expenses in the amount of $11,361 compared to non-operating expenses totaling
$6,237 for the three-month period ended March 31, 2005. This increase in
non-operating expenses of $7,662 or approximately 207.14% over the prior period
is covered below in our discussion of Interest Income, Interest Expense and
Realized Losses on Marketable Securities.
Interest Income
For the three-month period ended March 31, 2006, we had interest income of $34
compared to interest income of $3 for the three-month period ended March 31,
2005.
Realized Gain (Loss) on Marketable Securities
For the three-month period ended March 31, 2006, we had a realized loss on
marketable securities aggregating $2,674, compared to a realized gain on
marketable securities aggregating $2,535 for the three month period ended March
31, 2005. This difference of $5,209, or approximately 205.48%, is due primarily
to market conditions existing at the time the positions were closed.
Interest Expense
Interest expense for the three-month period ended March 31, 2006 increased to
$8,721 from $6,237 for the three-month period ended March 31, 2005. This
increase in interest expense of $2,484, or approximately 39.83% over the prior
period, is due primarily to interest rate changes.
Net Loss
Net loss for the three-month period ended March 31, 2006 decreased to $24,205
from $86,432 for the three-month period ended March 31, 2005. This reduction in
losses of $62,227, or 72% over the prior period, is due primarily to the factors
described above.
Liquidity and Capital Resources
For the three-months ended March 31, 2006, we used cash of $42,533 in our
operating activities and received cash of $19,568 from our financing activities.
Net cash provided by our financing activities for the three months ended March
31, 2006 were from principal payment on officer's note payable in the amount of
$47,880, proceeds from shareholders' notes payable aggregating $40,000,
principal payment on shareholder's note payable aggregating $40,000, payments
for preferred stock dividends aggregating $19,522, proceeds from the sale of
common stock aggregating $57,000, and proceeds from the exercise of stock
options aggregating $30,000.
Internal Sources of Liquidity
For the three months ended March 31, 2006, the funds generated from our
operations were insufficient to fund our daily operations. For the three months
ended March 31, 2006, we had a gross profit of $183,274, and we were thus unable
to meet our operating expenses of $196,118 for the same period. There is no
assurance that funds from our operations will meet the requirements of our daily
operations in the future. In the event that funds from our operations will be
insufficient to meet our operating requirements, we will need to seek other
sources of financing to maintain liquidity.
14
External Sources of Liquidity
At March 31, 2006, we have debt owing to related parties aggregating $48,120 as
summarized in Note 2 to the financial statements.
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, 2005.
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.
ITEM 3. 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, March 31, 2006. This evaluation was carried out under the
supervision and with the participation of our acting President, Mr. Gerald
McIlhargey, and our acting Chief Financial Officer, 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, March 31, 2006, 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 March 31, 2006.
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 March 31, 2006, that has materially affected, or is
reasonably likely to materially affect, our internal control over financial
reporting.
15
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.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time we may become involved in legal proceedings relating to claims
arising out of our operations in the normal course of business, as well as
claims arising from our status as an issuer of securities and/or a publicly
reporting company. As of the date of this Report, we are not a party to any
pending legal proceeding and our Management is not aware of any threatened
litigation, claims or assessments.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
During the three months ended March 31, 2006, we issued and/or sold the
securities set forth below without registration under the Securities Act of
1933.
No underwriters were involved in these transactions. Selling prices for the
shares may have been discounted from then prevailing market prices to reflect
the restricted status of the shares or the urgency of our need for capital. When
shares were issued for property or services, in each instance the valuation of
the property or services was based on the board of director's determination of
the value received for the shares, unless otherwise specified below.
In the case of sales of our securities, such securities were sold by our
officers without the use of an underwriter. In effecting the sales, we relied on
the exemption authority provided by Section 4(2) of the Securities Act of 1933,
as amended, relating to sales not involving any public offering, and Regulation
S, relating to securities sold in bona fide offshore transactions. We believe
that all such sales were made by our executive officers in private, negotiated
transactions without any advertising, public announcements or general
solicitation. The purchasers of the shares represented themselves in writing to
be, and we believe them to be, members of one or more of the following classes
of purchaser:
a. Officers, directors, promoters or control persons of the issuer;
b. Accredited investors, as defined in Rule 501 under Regulation D of
the Securities Act;
c. Individuals who:
a. Are knowledgeable and sophisticated in investment matters;
ii. Are able to assess the risks of an investment such as in our
securities;
iii. Are financially able to bear the risk of a loss of their
entire investment; and
iv. Have access to pertinent information regarding the issuer and
its operations.
The shares are subject to the resale provisions of Rule 144 under the Securities
Act of 1933, as amended, and may not be sold or transferred without registration
except in accordance with that rule. Certificates representing the securities
bear a legend to that effect.
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Sale of Common Stock
During the three months ended March 31, 2006, the Company sold 28,500 shares of
its common stock at $2.00 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 $57,000 from the sale of these securities.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
During the three month period ended March 31, 2006, there have been no material
defaults in the payment of principal, interest, a sinking or purchase fund
installment, or any other material default not cured within 30 days, with
respect to any of our indebtedness exceeding 5% of our total assets.
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 March 31, 2006.
ITEM 5. OTHER INFORMATION
Reports on Form 8-K
Item 3.02(b) Recent Sales of Unregistered Securities
Our discussion contained in Item 2 of Part II of this Report is hereby
incorporated by this reference.
Item 5.02(a) Departure of Pincipal Officers; Appointment of Principal Officers
On May17, 2006, Johnny H. Simmons delivered a note to the Company's Board of
Directors that he resigned as President and Chief Executive Officer of the
Company and its subsidiaries effective that day. The notice of resignation did
not reference that he had any disagreement with the policies, practices or
operations of the Company. Mr. Simmons still serves as a member of the Company's
Board of Directors. He was replaced by Gerald McIlhargey, an independent
director of the Company's Board of Directors up to his appointment by the Board
as acting President and Chief Executive Officer.
Item 8.01 Other Events
On January 3, 2006, the Company issued a press release announcing that the Board
of Directors had voted to seek to identify suitable candidates for potential
future acquisitions that would increase shareholder value.
On April 4, 2006, the Company issued a press release announcing that it had
signed a non-binding letter of intent to acquire Intellamed, Inc., a private
company, as a wholly-owned subsidiary. Intellamed is a Texas-based medical asset
management company whose medical services and equipment divisions facilitate the
procurement and support of medical equipment to over 3,600 healthcare facilities
throughout the United States. The acquisition, which called for a purchase price
of approximately 30,000,000 shares of our common stock in exchange for 100% of
the issued and outstanding shares of Intellamed, Inc., was subject to due
diligence, approval by our Board of Directors, and the execution of a definitive
agreement. Based upon further due diligence, we have attempted to negotiate a
transaction for substantially less shares of our common stock than originally
discussed, but no agreement with Intellamed regarding transaction terms has as
yet been reached. At a Board of Directors meeting held on May 8, 2006, our Board
determined to hold off on further negotiations until the financial statement of
Intellamed for the six-month period ended June 30, 2006 can be analyzed and our
due diligence effort with respect to that acquisition candidate is completed.
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)
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SIGNATURES
In accordance with the requirments of the Exchange Act, the registrant
cause this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
ST. JOSEPH, INC.
Date: May 22,, 2006
/s/ GERALD MCILHARGEY
------------------------------------------------
Gerald McIlhargey, Acting President and Director
Date: May 22, 2006
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