ST JOSEPH INC - FORM 10-K - March 31, 2014

Attached files

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EX-32.2 - EXHIBIT 32.2 - ST JOSEPH INC	ex32-2.htm
EX-31.2 - EXHIBIT 31.2 - ST JOSEPH INC	ex31-2.htm
EX-32.1 - EXHIBIT 32.1 - ST JOSEPH INC	ex32-1.htm
EX-31.1 - EXHIBIT 31.1 - ST JOSEPH INC	ex31-1.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

[X]	ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended: December 31, 2013

[ ]	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 0-49936

ST. JOSEPH, INC.

(Exact name of registrant as specified in its charter)

COLORADO		CH 90-0197648
(State or other jurisdiction of		(I.R.S. Employer
incorporationor organization)		Identification No.)

4870 S. Lewis, Suite 250, Tulsa, Oklahoma 74105

(Address of principal executive offices)

(918) 742-1888

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Class A Common Stock, par value $0.001

Indicate by checkmark if registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [X]

Indicate by checkmark if registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X]

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. Yes [X] 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). Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]

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

Large Accelerated Filer	[ ]		Accelerated Filer	[ ]
Non-Accelerated Filer	[ ]		Smaller reporting company	[X]

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Act). Yes [ ] No [X]

Based on the closing sale price of $0.43 of the registrant’s common stock on the last business day of our most recent third quarter, ended September 30, 2013, the aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant computed by reference to the price at which the common stock was last sold was $4,049,738.71.

As of March 31, 2014, there were 12,705,341 shares of the registrant’s common stock issued and outstanding.

ST. JOSEPH, INC.

Form 10-K

For the Fiscal Year Ended December 31, 2012

TABLE OF CONTENTS

		Page
PART I
Item 1.	Business	4
Item 1A.	Risk Factors	6
Item 1B.	Unresolved Staff Comments	11
Item 2.	Description of Property	11
Item 3.	Legal Proceedings	11
Item 4.	Mine Safety Disclosures	11

PART II
Item 5.	Market for Common Equity and Related Stockholder Matters	12
Item 6.	Selected Financial Data	13
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	18
Item 8.	Financial Statements
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	19
Item 9A.	Controls and Procedures	19
Item 9B.	Other Information	19

PART III
Item 10.	Directors, Executive Officers, and Corporate Governance	20
Item 11.	Executive Compensation	24
Item 12.	Security Ownership of Certain Beneficial Owners and Management	25
Item 13.	Certain Relationships and Related Transactions; Director Independence	28
Item 14.	Principal Accounting Fees and Services	29
Item 15.	Exhibits, Financial Statement Schedules	30

	SIGNATURES	31

FORWARD LOOKING STATEMENTS

This Form 10-K, the other reports, statements, and information that we have previously filed or that we may subsequently file with the Securities and Exchange Commission and public announcements that we have previously made or may subsequently make include, may include, incorporate by reference or may incorporate by reference certain statements that may be deemed to be “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements relate to such matters as, among other things, our anticipated financial performance, business prospects, technological developments, new products, future distribution or license rights, international expansion, possible strategic alternatives, new business concepts, capital expenditures, consumer trends and similar matters.

Forward looking statements necessarily involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance, or achievement expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “intend,” “expect,” “anticipate,” “assume”, “hope”, “plan,” “believe,” “seek,” “estimate,” “predict,” “approximate,” “potential,” “continue”, or the negative of such terms. Statements including these words and variations of such words, and other similar expressions, are forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable based upon our knowledge of our business, we cannot absolutely predict or guarantee our future results, levels of activity, performance, or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of such statements.

We note that a variety of factors could cause our actual results and experience to differ materially from the anticipated results or other expectations expressed in our forward-looking statements. The risks and uncertainties that may affect the operations, performance, development and results of our business include, but are not limited to, the following: changes in consumer spending patterns; changes in consumer preferences and overall economic conditions; the impact of competition and pricing; the financial condition of the suppliers and manufacturers from whom we source our merchandise; economic and political instability in foreign countries or restrictive actions by the governments of foreign countries in which suppliers and manufacturers from whom we source products are located or in which we may actually conduct or intend to expand our business; changes in tax laws, or the laws and regulations governing direct or network marketing organizations; our ability to hire, train and retain a consistent supply of reliable and effective participants in our direct or network marketing operation; general economic, business and social conditions in the United States and in countries from which we may source products, supplies or customers; the costs of complying with changes in applicable labor laws or requirements, including without limitation with respect to health care; changes in the costs of interest rates, insurance, shipping and postage, energy, fuel and other business utilities; the reliability, longevity and performance of our licensors and others from whom we derive intellectual property or distribution rights in our business; the risk of non-payment by, and/or insolvency or bankruptcy of, customers and others owing indebtedness to us; threats or acts of terrorism or war; and strikes, work stoppages or slowdowns by unions affecting businesses which have an impact on our ability to conduct our own business operations.

Forward-looking statements that we make, or that are made by others on our behalf with our knowledge and express permission, are based on knowledge of our business and the environment in which we operate, but because of the factors listed above, actual results may differ from those in the forward-looking statements. Consequently, these cautionary statements qualify all of the forward-looking statements we make herein. We cannot assure the reader that the results or developments anticipated by us will be realized or, even if substantially realized, that those results or developments will result in the expected consequences for us or affect us, our business or our operations in the way we expect. We caution readers not to place undue reliance on these forward-looking statements, which speak only as of their dates, or on any subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. We do not undertake any obligation to release publicly any revisions to such forward-looking statements to reflect events or circumstances after the date hereof or thereof or to reflect the occurrence of unanticipated events.

PART I

Item 1. Business

Company Overview

St. Joseph, Inc. was organized under the laws of the State of Colorado on March 19, 1999 as Pottery Connection, Inc. Our Company was originally organized to produce and sell pottery of all forms, as well as arts and crafts through the Internet. On March 19, 2001, we changed our corporate name to St. Joseph Energy, Inc. in anticipation of changing our business purpose to the exploration and development of oil and gas properties. However, after unsuccessfully investing in two oil wells located in the State of Louisiana, we elected to abandon that endeavor and return to our original business purpose.

On November 6, 2003, we changed our corporate name to St. Joseph, Inc.

Staf*Tek was organized under the laws of the State of Oklahoma on January 2, 1997. On December 2, 2003, we acquired all of the issued and outstanding shares of common stock of Staf*Tek stock in exchange for (1) 380,500 shares of our Series A Preferred Shares (“Series A Shares”); (2) 219,500 shares of our common stock; and (3) $200,000 in cash. The acquisition closed on January 2, 2004, at which time Staf*Tek became a wholly owned subsidiary of St. Joseph.

We also hope to acquire other operating companies as subsidiaries and are pursuing suitable candidates for future acquisition that could potentially create value for our existing shareholders. Acquisition targets may be in sectors other than our current sector of providing employment agency services. Although it is not our goal, we would also consider a reverse merger opportunity, if it were seen to be a value creation opportunity for our existing shareholders.

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

Proposed Reverse Acquisition of Zone USA, Inc.

On August 7, 2012, St. Joseph entered into a nonbinding Letter of Intent with Karavos Holdings Limited, a subsidiary of e-Kong Group, Ltd, which is a Bermuda company, headquartered in Hong Kong and traded on the Hong Kong Stock Exchange. The Letter of Intent provides for St. Joseph to acquire 100% of Zone USA, Inc., which has a 50% ownership position in ANZ Communications, LLC.

The Letter of Intent contemplates the transaction being structured as a reverse acquisition with St. Joseph purchasing Zone USA’s 50% ownership position in ANZ Communications in return for the issuance to Karavos Holdings Limited of (i) such number of shares of common stock that will be equal to not less than 80% of the total issued and outstanding shares of St. Joseph on a fully diluted and converted basis, or (ii) preferred stock convertible into such number of common stock. In addition, the Letter of Intent contemplates that the execution of a definitive agreement for the RTO is conditional on the involved parties being satisfied with their initial due diligence reviews, and the raising by St. Joseph of not less than $14 million in net proceeds. It is also contemplated that the definitive agreement will contain customary representations, warranties, covenants, undertakings and indemnities, including by the Company’s principal shareholders, together with non-competition agreements required by the Zone USA Investor (or its affiliates) relating to the existing Company’s business and restraints on the disposal by the Company’s principal shareholders’ shares in the Company post-closing for an agreed period.

The proposed transaction may be subject to the approval of our shareholders and the approval of Karavos Holdings Limited owners. The approvals necessary will depend on the transaction structure contained in any definitive agreement that may be entered into. We cannot provide any assurance that the required approvals will be granted, and in the event they are not, we will not be able to proceed with the transaction. Any consummation of the proposed transaction will need to be performed in compliance with applicable securities laws and regulations, and may require the filing of comprehensive disclosure documents which may add to the expense and time needed for the completion of the transaction. Depending on the final transaction structure we may need to register as an Investment Company under the Investment Company Act of 1940 or obtain an exemption from such registration. In such event, we may have to abandon the transaction of we not able to register as an Investment Company or not able to obtain an exemption. Our management cautions investors against making investment decisions based on any expectation that the proposed transaction will be consummated, or that the proposed transaction will result in any increase in share value, because, in its view, such expectations are speculative.

The Letter of Intent contemplates that if the parties proceed with the transaction, on its consummation, St Joseph’s board of directors and executive officers will be replaced by nominees to be named by the existing equity holders of Zone USA.

Staf*Tek Services, Inc.

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.

Staf*Tek was founded on the premise that there is an increasing demand for high quality outsourced professional services. Staf*Tek’s business premise combines client service orientation and commitment to quality. Staf*Tek is positioned to take advantage of what we believe are two converging trends in the outsourced professional services industry — increasing demand for outsourced professional services by corporate clients and increasing the supply of professionals interested in working on an outsourced basis. Staf*Tek believes that its business premise allows it to offer challenging yet flexible career opportunities, attract highly qualified, experienced professionals and, in turn, attract clients with varying professional needs.

Staf*Tek is primarily a regional professional service firm that provides experienced and highly qualified personnel who can demonstrate diversity, and flexibility in the work force. Staf*Tek has determined that its market is primarily in the Tulsa, Oklahoma area.

Supply of Professionals

Concurrent with the growth in the demand for outsourced services, Staf*Tek is of the belief, based on discussions with its associates that the number of professionals seeking work on a project and non-project basis has increased due to a desire for:

	●	more flexible hours and work arrangements, coupled with competitive wages and benefits; and

	●	challenging engagements that advance careers, develop skills, and add to experience.

Staf*Tek maintains its own database of approximately 20,000 trained independent contract professionals. Once a professional is placed, he or she either becomes an employee of our Company or the client’s employee.

Marketing and Recruiting

Staf*Tek markets its temporary and permanent staffing services to business clients as well as employment candidates. Marketing and recruiting directed to business clients and employment candidates consists primarily of yellow pages advertisements, classified advertisements, websites, internet job sites, trade shows and website promotion on the Internet. We and our subsidiaries have registered the following domain names: staftek.com and stjosephinc.com.

Management of the Staf*Tek’s temporary and permanent staffing operations is coordinated from our headquarters in Tulsa, Oklahoma. Our headquarters provides support and centralized services related to administrative, marketing, public relations, accounting and training.

Competition

Staf*Tek’s temporary and permanent staffing services face competition in attracting clients as well as high-quality specialized employment candidates. The temporary and permanent placement businesses are highly competitive, with a number of firms offering services similar to those provided by Staf*Tek on a national, regional or local basis. In many areas the local companies are the most successful competitors. The most significant competitive factors in the temporary and permanent placement businesses are price and the reliability of service, both of which are often a function of the availability and quality of professional personnel. We believe that Staf*Tek derives a competitive advantage from its extensive experience and commitment to the specialized employment market, temporary employees placed by it are, in fact, Staf*Tek’s employees for all purposes while they are working on assignments. Once a professional is permanently placed, he or she either becomes an employee of Staf*Tek or of Staf*Tek’s client. During the temporary phase, Staf*Tek pays the related costs of employment, such as workers’ compensation insurance, state and federal unemployment taxes, social security and certain fringe benefits. Staf*Tek provides access to voluntary

health insurance coverage to interested employees.

Major Clients

Staf*Tek is currently dependent on one client for all of our revenues and this client was a significant percentage of our revenues during our year ended December 31, 2013. Approximately 84.6% of our revenues were derived from this client and all of our revenues were derived from a total of three clients, during the year ended December 31, 2013.

Employees

As of December 31, 2013, we had approximately 4 full time employees and no part-time employees.

Available Information

We file electronically with the U.S. Securities and Exchange Commission (SEC) our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934. The public can obtain materials that we file with the SEC through the SEC’s website at http://www.sec.gov or at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. Information on the operation of the Public Reference Room is available by calling the SEC at 800-SEC-0330.

Item 1A. Risk Factors

You should carefully consider the risks described below, together with all of the other information included in this report, in considering our business and prospects. The risks and uncertainties described below are not the only ones facing the Company. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations. The occurrence of any of the following risks could harm our business, financial condition or results of operations.

Risks Related to Our Business and Industry

Our business prospects are subject to various risks and uncertainties that impact our business. The most important of these risks and uncertainties are as follows:

Our auditor has expressed substantial doubt as to our ability to continue as a going concern. An inability to continue as a going concern would likely lead to a loss of your entire investment.

Our independent certified public accountant’s report on our financial statements for the fiscal years ended December 31, 2013 and 2013 contains an explanatory paragraph indicating that we have incurred recurring losses, and as of December 31, 2013, had negative working capital and a net capital deficiency. These factors raise substantial doubt about our ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Our revenues and our total assets have declined precipitously over the last several years while our stockholder’s deficit has increased, creating doubt as to our ability to continue our operations or achieve profitability.

During our 2013 fiscal year, we had revenues of $215,589, down from $427,376 in our 2012 fiscal year, and down from $467,907 in our 2011 fiscal year. As of December 31, 2013 we had total assets of $62,849, up from $37,545 on December 31, 2012 and down from $86,553 on December 31, 2011. Over this period of time, our total stockholders’ deficit increased to $888,721 as of December 31, 2013, as compared to $645,798 as of December 31, 2012 and $419,083 as of December 31, 2011. These declines in our revenues and asset value, combined with our growing stockholders’ deficit create doubt that we will be able to remain in operation or achieve profitability. We have been relying primarily on funds raised from the sale of our shares in private placements. However, our declining business operations may increase the difficulty of raising additional funds. If we are unable to reverse these trends, we may go out of business, and our stockholders may lose their entire investment.

We may engage in a “reverse merger” acquisition, resulting in severe dilution to existing stockholders.

In the event we engage in a merger or acquisition, it is likely that the transaction will be structured as a” reverse merger” that would result in severe dilution to existing stockholders. In connection with any such reverse merger, our stock may be subject to a reverse stock split, and the value of our stockholder’s shares may be negatively impacted. We can provide no assurance that we will engage in any reverse merger, or any other merger or acquisition transaction.

We will require substantial additional capital to pursue our business plan.

We have financed our operations largely through debt and the sale of equity securities. Our capital requirements will depend on many factors, including, among other things, the cost of developing our business and marketing activities, the efficacy and effectiveness of our proposed services, costs (whether or not foreseen), the length of time required to collect accounts receivable we may in the future generate. Changes in our proposed business or business plan could materially increase our capital requirements. We cannot assure you that our proposed plans will not change or that changed circumstances will not result in the depletion of our capital resources more rapidly than currently anticipated.

We will need to obtain substantial additional financing to, among other things, secure net proceeds of $14,000,000 in connection with the Planned Reverse Acquisition Transaction of Zone USA, Inc. Any additional equity financing, if available, may be dilutive to stockholders and any such additional equity securities may have rights, preferences or privileges that are senior to those of the holders of shares of our Common Stock. Debt financing, if available, will require payment of interest and may involve our granting security interests on our assets and restrictive covenants that could impose limitations on our operating flexibility.

In December 2013, we engaged Brean Capital, LLC, an independent investment bank and asset management firm, to serve as our Company’s exclusive corporate finance advisor and investment banker. In connection with the Planned Reverse Acquisition Transaction of Zone USA, Inc., Brean will work with our Company towards consummating the Transaction and providing other customary investment banking services, as required, to include raising net proceeds of $14,000,000 to consummate the Transaction with Zone USA. Our ability to obtain needed financing, with or without the assistance of Brean, may be impaired by such factors as the capital markets, our capital structure, the lack of an active market for shares of our Common Stock, and our lack of profitability, all of which would impact the availability or cost of future financings. We cannot assure prospective investors that we will be able to obtain requisite financing in a timely fashion or at all and, if obtained, on acceptable terms. Our inability to obtain needed financing on acceptable terms would have a material adverse effect on the implementation of our proposed business plan.

If we default on our secured bank loan, the bank may foreclose on substantially all of our assets, putting us out of business.

We have an outstanding bank loan that is secured by substantially all of our assets. As of December 31, 2013, the outstanding balance on this loan was $118,202. The bank loan which had a maturity date of August 31, 2013 called for payments of principal and interest in the amount of $2,698 per month with a final balloon payment in the amount of $117,937, which came due on its maturity date of August 31, 2013. On September 9, 2013, the Company received a default letter from the bank. Since that time the bank has requested the company bring the loan current by making monthly payments of $2,698 plus late fees of $50 per month for the nine months which the Company is delinquent, for the total amount as of March 31, 2014 of $24,732, which includes principal, interest and fees. At such time the Company is able to bring the loan current the bank stated the remaining balance will be refinanced, which terms are yet to be determined. At this time the principal loan balance continues to bear 6.5% interest. In the event the Company is unable to bring the bank loan current the bank may foreclose which would force the Company out of business.

We operate solely through our subsidiary, Staf*Tek Services, Inc.; our revenues are dependent on the performance of our subsidiary.

We operate and generate revenues solely through our subsidiary, Staf*Tek. St. Joseph, Inc. has not generated any revenues since its inception and does not expect to generate any revenues in the future. Our success depends on the success of Staf*Tek and there is no assurance that we can achieve profitability through Staf*Tek in the future. Our performance will depend on our ability to manage this anticipated growth effectively by hiring key management personnel, implementing and maintaining operational, administrative, marketing and control systems on a timely basis, building and maintaining our network infrastructure, conducting successful marketing and sales programs, attracting and retaining qualified employees and having access to working capital to support the growth in inventory, receivables, capital requirements and operating costs necessitated by the assumed increased sales.

From time to time, we may need additional capital to meet the objectives of our business plan, and there is no assurance that we will be able to raise such capital or that such financing will be on terms that are favorable or acceptable to us.

The placement of temporary employees requires substantial additional capital to fund our working capital needs. When an employee is placed on a temporary basis, an invoice is generated for the placement fee, which may not be paid for a number of weeks while the employment costs are immediately incurred. Thus, even though, in the long run, our success in placing temporary employees will enhance our revenues; in the short term, our increasing placement of temporary employees is decreasing our liquidity. Accordingly, to remain viable, we must substantially increase our revenues, raise additional capital, increase our credit facilities, and/or reduce our operations. In the event that our plans or assumptions change or prove to be inaccurate, or if delays increase the payment of our placement fees, we may be required to raise additional funds through the issuance of equity securities, in which case the percentage ownership of our current stockholders will be diluted. Such equity securities may also have rights, preferences or privileges senior to common stock. Furthermore, there can be no assurance that additional financing will be available when needed on terms favorable to us or at all. If we are unable to raise more money, our growth could be impeded, and our business could be materially adversely affected.

Our failure to effectively manage growth could have a material adverse effect on our business and operations.

If we are able to grow our business, such growth could occur rapidly at an uneven pace. Such growth will place a significant strain on our management systems and resources. We will need to continue to improve our operational and financial systems and managerial controls and procedures, and we will need to continue to expand, train and manage our workforce. We will have to maintain close coordination among our technical, accounting, finance, marketing and sales personnel.

If we lose key personnel or fail to integrate replacement personnel successfully, our ability to manage our business could be impaired.

Our future success depends upon the continued service of our key management and other critical personnel such as John Blackmon. Whether we are able to execute our business strategy effectively will depend in large part on how well key management and other personnel perform in their positions and are integrated within our company. There is no assurance that we will be able to retain these key management and personnel. The loss of any key employee could result in significant disruptions to our operations, the successful implementation and completion of company initiatives and the results of our operations. In addition, the integration of replacement personnel could be time consuming, may cause additional disruptions to our operations and may be unsuccessful.

Factors outside of our control may adversely affect our operations and operating results.

The demand for our temporary and permanent staffing services is highly dependent upon the state of the economy and upon the staffing needs of our clients. Any variation in the economic condition or unemployment levels in the United States or in the economic condition of the region where our clients are located, or in any specific industry may severely reduce the demand for our services and thereby significantly decrease our revenues and profits. Furthermore, our temporary and permanent staffing services business consists of the placement of individuals seeking temporary and permanent employment. There can be no assurance that qualified candidates for employment will continue to seek employment through Staf*Tek. Qualified candidates generally seek temporary or permanent positions through multiple sources, including Staf*Tek and its competitors. Any shortage of qualified candidates could materially adversely affect our revenues.

Our market is competitive, and our financial results and financial condition could be adversely affected if we are unable to anticipate or react to this competition.

The market for temporary and permanent staffing services is highly competitive and, because it is a service business, the barriers to entry are quite low. There are many competitors, some of which have greater resources than us, and new competitors are constantly entering the market. In addition, long-term contracts form a negligible portion of our revenues. Therefore, there can be no assurance that we will be able to retain clients or market share in the future. Nor can there be any assurance that we will, in light of competitive pressures, be able to remain profitable or maintain our current profit margins. If we fail to compete successfully in this highly competitive market, our business, financial condition, and results of operations will be materially and adversely affected.

We depend on attracting and retaining qualified candidates; during periods of economic growth, our costs to do so increases and it becomes more difficult to attract and retain people.

The success of our staffing services depends on our ability to attract and retain qualified employees for placement with our customers. Our ability to attract and retain qualified personnel could be impaired by rapid improvement in economic conditions resulting in lower unemployment and increases in compensation. During periods of economic growth, we face growing competition for retaining and recruiting qualified personnel, which in turn leads to greater advertising and recruiting costs and increased salary expenses. If we cannot attract and retain qualified employees, the quality of our services may deteriorate and our reputation and results of operations could be adversely affected.

Our inability to attract and retain qualified employees could have a material adverse effect on our business, financial condition and results of operations.

Our business involves the delivery of professional services and is very labor intensive. Our success depends in large part upon our ability to attract, develop, motivate and retain highly skilled technical employees. We can experience high turnover of our personnel and are often required to recruit and train replacement personnel as a result of a changing and expanding work force. Accordingly, we may experience increased compensation costs that may not be offset through either increased productivity or higher customer pricing. Furthermore, the market for IT services change rapidly because of technological innovation, new product introductions, changes in customer requirements, evolving industry standards and many other factors. New products and new technology often render existing information services or technology infrastructure obsolete, excessively costly or otherwise unmarketable. As a result, our success depends on our ability to attract and retain qualified employee candidates who are knowledgeable and familiar with these new products and technologies. We cannot guarantee that we will be successful in recruiting and retaining sufficient numbers of qualified employee candidates in the future, especially when we need to expand our services in a short time period. Our inability to attract and retain qualified personnel, or increases in wages or other costs of attracting, training or retaining qualified personnel, could have a material adverse effect on our business, financial condition and results of operations.

84.6% of our revenues come from one client.

During our year ended December 31, 2013, approximately 84.6% of our revenues were derived from our largest client. The loss of this client or the decline in business from this client would have a material adverse effect on our revenues and profits. Accordingly, any events that create an adverse affect on this client’s operations or financial performance will also create a material adverse effect on our revenues and profits.

Risk Relating to the Planned Reverse Acquisition Transaction with Zone USA, Inc.

The Planned Reverse Acquisition Transaction by which we acquire Zone USA, Inc. may never take place, or may take place on terms different from those contemplated by the Letter of Intent.

Investors are cautioned that the Company can provide no assurance that the transaction will be consummated, or if consummated that it will have the terms described in the Letter of Intent. The Company is not a party to any binding agreement for the Planned Reverse Acquisition Transaction, nor can it provide any assurance that it will enter into one. Currently, the Company and Karavos Holdings Limited have only entered into a Letter of Intent that is nonbinding as to the consummation of the Planned Reverse Acquisition Transaction or its terms. Any binding obligation to proceed with the transaction would need to be included in a definitive agreement negotiated between the parties. Our management understands that a definitive agreement will be negotiated only after $14,000,000 in net proceeds being raised. Moreover, the definitive agreement for the Planned Reverse Acquisition Transaction may contain indemnification or ― claw back provisions. At or prior to the time of the Planned Reverse Acquisition Transaction, it is possible that Zone USA may have suffered from material adverse changes in its business, assets or financial condition, including for example, adverse changes resulting from political, economic or financial conditions, changes in the industry conditions, changes in law, changes in generally accepted accounting principles, changes in Zone USA’s business operations, changes resulting from the loss of key customers or declines in revenue, changes resulting from failure to comply with

applicable laws and regulations, changes resulting from lawsuits or the failure to comply with contracts.

The Company can provide no assurance that the terms of any definitive agreement for the Planned Reverse Acquisition Transaction will protect against any such adverse material changes by allowing the Company not to proceed with the transaction or by providing for adjustments in the terms of the transaction. Further, even if the definitive agreement does allow for the Company to terminate the transaction in the event of any such adverse material changes, the Company can provide no assurance that its management will elect to exercise such rights.

The Company’s future capital structure and management is subject to substantial uncertainty in connection with the Planned Reverse Acquisition Transaction with Zone USA, Inc.

Because the Company plans on proceeding with the reverse acquisition of Zone USA, Inc. immediately if it is successful at securing the required $14 million in net proceeds, the Company’s management, business and corporate structure are all subject to substantial uncertainty. Pursuant to the Letter of Intent, as supplemented by prior negotiations, any consummation of the Planned Reverse Acquisition Transaction is expected to result in a company to be nominated by the beneficial owner of Zone USA, that is a subsidiary of e-Kong Group Limited, a company organized in Bermuda and headquartered in Hong Kong holding 80% or more of the Company’s common stock on a fully diluted basis, the business of Zone USA, Inc. would become the business of the Company, and the Zone USA Investor would appoint new officers and directors of the Company.

There is no definitive agreement in place and we can make no assurances as to what the final terms will be. Even if the final terms of any reverse acquisition are in keeping with our expectations, it is expected that the Zone Investor will have discretion regarding the appointment of our officers and directors, and our board and management may therefore deviate, possibly substantially, from that of the current board and management of Zone USA, Inc. Additionally, the net proceeds used in this offering may be used for a

variety of purposes and may be invested into ANZ Communications, LLC assuming that Zone USA is allowed to make capital contributions, but may also be used for acquisitions of other assets or for other purposes.

Investors are cautioned that the Company can provide no assurance that the transaction will be consummated. The Company is not party to any binding agreement for the Planned Reverse Acquisition Transaction, nor can it provide any assurance that it will enter into one. Currently, the Company and Karavos Holdings Limited have only entered into a Letter of Intent that is nonbinding as to the consummation of the proposed acquisition or its terms. Any binding obligation to proceed with the transaction would need to be included in a definitive agreement negotiated between the parties. Our management understands that a definitive agreement will be negotiated only after this Offering is completed with at least $14 million in net proceeds being raised.

Our common stock is subject to the SEC’s Penny Stock Regulations which may affect the liquidity for our stock, the ability of our stockholders to resell their shares through a broker-dealer, and their ability to obtain accurate price quotations.

Our common stock is subject to the SEC’s “penny stock” rules. These regulations define a “penny stock” to be any equity security that has a market price (as defined) of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, these rules require the delivery, prior to the transaction, of a disclosure schedule prepared by the SEC relating to the penny stock market. The broker-dealer also must disclose the commissions payable to the broker-dealer and the registered underwriter, current quotations for the securities, information on the limited market in penny stocks and, if the broker-dealer is the sole market-maker, the broker-dealer must disclose this fact and the broker-dealers’ presumed control over the market. In addition, the broker-dealer must obtain a written statement from the customer that such disclosure information was provided and must retain such acknowledgment for at least three years. Further, monthly statements must be sent disclosing current price information for the penny stock held in the account. The penny stock rules also require that broker-dealers engaging in a transaction in a penny stock make a special suitability determination for the purchaser and receive the purchaser’s written consent to the transaction prior to the purchase. The foregoing rules may materially and adversely affect the liquidity for the market of our common stock, if any such public market develops. Such rules may also affect the ability of broker-dealers to sell our common stock in any such public market, the ability of holders of such securities to obtain accurate price quotations and may therefore impede the ability of holders of our common stock to sell such securities in the secondary market.

Item 1B. Unresolved Staff Comments

Not applicable.

Item 2. Description of Property

We lease approximately 2,286 square feet of office space from a non-affiliated third party at 4870 South Lewis, Suite 250, Tulsa, OK 74105. Our monthly lease payment is $2,715. We currently lease this office on a month-to-month basis.

Item 3. Legal Proceedings

On or about January 24, 2012, our subsidiary, Staf*Tek Services, Inc. was served notice that Danny McGowan, a former employee hired and assigned to work for Staf*Tek’s client as a contractor, filed a lawsuit against Staf*Tek Services, Inc. and its client in the District Court in Tulsa County, Oklahoma, Case No. CJ-2011-7039, in connection with a wrongful termination complaint. Mr. McGowan alleges that he was terminated after one month of employment, but feels he had a guaranteed contract for six months. The wording in his employment agreement that he identifies as guaranteeing his employment for six months was inserted at the request of Staf*Tek’s client.

Staf*Tek’s client terminated Mr. McGowan for performance issues after one month of employment. Mr. McGowan filed a lawsuit against Staf*Tek and the client and subsequently filed a motion for default judgment, which was granted by the judge. On March 9, 2012, Staf*Tek filed a motion to vacate the default judgment and requested a new trial. Staf*Tek has engaged counsel and intends to vigorously defend this action. As of this date, the client that terminated Mr. McGowan has been dismissed from the lawsuit by the judge because they had not been served within six months of the original filing of the lawsuit by Mr. McGowan’s counsel. Mr. McGowan and his attorney were three weeks late responding to our request for discovery and we requested dismissal. However, the judge did not grant dismissal. Mr. McGowan is seeking damages against Staf*Tek in an amount in excess of $75,000, not to exceed $85,000. Management deems the suit to be without merit, however, the costs of defending against the complaint could be substantial. In the event judgment is made against the Company and payment deemed appropriate it may force the Company out of business.

Item 4. Mine Safety Disclosures

Not applicable.

PART II

Item 5. Market for Common Equity and Related Stockholder Matters

(a) Market Information

Our Class A common stock is quoted on the OTC Markets under the symbol “STJO”. The following table shows the high and low closing prices for the periods indicated.

Quarter ended	High		Low
March 31, 2013	$	0.88	$	0.80
June 30, 2013	$	0.85	$	0.75
September 30, 2013	$	0.43	$	0.43
December 31, 2013	$	0.49	$	0.49

Quarter ended	High		Low
March 31, 2012	$	0.70	$	0.70
June 30, 2012	$	0.53	$	0.53
September 30, 2012	$	1.00	$	1.05
December 31, 2012	$	1.20	$	1.10

The above information was obtained from Yahoo! Finance. Because these are over the counter market quotations, these quotations reflect inter-dealer prices, without retail mark-up, markdown or commissions and may not represent actual transactions. There is currently no public trading market for our preferred stock.

(b) Holders of Common Equity.

As of March 31, 2014, there were approximately 290 holders of record of our common stock. This figure does not take into account those shareholders whose certificates are held in the name of broker-dealers or other nominees.

(c) Dividend Information.

We have never paid any cash dividends on our common shares, and we do not anticipate that we will pay any dividends with respect to those securities in the foreseeable future. It is our present policy to not to pay cash dividends on our common stock but to retain earnings, if any, to fund growth and expansion. Any payment of cash dividends of the common stock in the future will be dependent upon our financial condition, results of operations, current and anticipated cash requirements, plans for expansion, as well as other factors the Board of Directors deems relevant.

(d) Sales of Unregistered Securities

In a private placement during the year ended December 31, 2013, the Company sold 410,000 shares of common stock to accredited investors at a price of $0.50 per share for gross proceeds totaling $205,000. No underwriters were used and no underwriting discounts or commissions were payable. The shares have been offered and sold by the Company in reliance upon the exemption from registration provided by Regulation D promulgated under the Securities Act of 1933, as amended. The shares were offered and sold only to accredited investors; as such term is defined by Rule 501 of Regulation D. All of the shares sold in the private placement are restricted securities pursuant to Rule 144.

In a private placement during the year ended December 31, 2012, the Company sold 190,000 shares of common stock to accredited investors at a price of $0.50 per share for gross proceeds totaling $95,000. No underwriters were used and no underwriting discounts or commissions were payable. The shares have been offered and sold by the Company in reliance upon the exemption from registration provided by Regulation D promulgated under the Securities Act of 1933, as amended. The shares were offered and sold only to accredited investors; as such term is defined by Rule 501 of Regulation D. All of the shares sold in the private placement are restricted securities pursuant to Rule 144.

During the year ended December 31, 2012, a Director of the Company exercised 7,500 shares of its common stock at a strike price of $1.05 per share for total consideration of $7,875.

The securities mentioned above were not registered under the Securities Act of 1933, as amended (the “Securities Act”), and qualified for exemption under Section 4(2) of the Securities Act because the issuance of the securities did not involve a public offering. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the transaction, size of the offering, manner of the offering and number of securities offered.

Transfer Agent

Our transfer agent is Corporate Stock Transfer, Inc. at 3200 Cherry Creek South Drive, Suite 430, Denver, Colorado 80209.

Item 6. Selected Financial Data

Not applicable.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Annual Report on Form 10-K and other reports filed by St. Joseph, Inc. (the “Company”) from time to time with the U.S. Securities and Exchange Commission (the “SEC”) contain or may contain forward-looking statements and information that are based upon beliefs of, and information currently available to, the Company’s management as well as estimates and assumptions made by Company’s management. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. When used in the filings, the words “anticipate,” “believe,” “estimate,” “expect,” “future,” “intend,” “plan,” or the negative of these terms and similar expressions as they relate to the Company or the Company’s management identify forward-looking statements. Such statements reflect the current view of the Company with respect to future events and are subject to risks, uncertainties, assumptions, and other factors, including the risks contained in the “Risk Factors” section of the this Annual Report on Form 10-K., relating to the Company’s industry, the Company’s operations and results of operations, and any businesses that the Company may acquire. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended, or planned.

Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results.

Our financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). These accounting principles require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented. Our financial statements would be affected to the extent there are material differences between these estimates and actual results. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require management’s judgment in its application. There are also areas in which management’s judgment in selecting any available alternative would not produce a materially different result. The following discussion should be read in conjunction with our consolidated financial statements and notes thereto appearing elsewhere in this report.

Business Description

St. Joseph, Inc. was organized under the laws of the State of Colorado on March 19, 1999 as Pottery Connection, Inc. Our Company was originally organized to produce and sell pottery of all forms, as well as arts and crafts through the Internet. On March 19, 2001, we changed our corporate name to St. Joseph Energy, Inc. in anticipation of changing our business purpose to the exploration and development of oil and gas properties. However, after unsuccessfully investing in two oil wells located in the State of Louisiana, we elected to abandon that endeavor and return to our original business purpose.

On November 6, 2003, we changed our corporate name to St. Joseph, Inc.

Staf*Tek Services, Inc.

Proposed Reverse Acquisition of Zone USA, Inc.

Results of Operations for the Years Ending December 31, 2013 and December 31, 2012

											Change			Change
	December 31, 2013					December 31, 2012					$			%

Net Revenues	$	215,589		100.0	%	$	427,376		100.0	%	$	(211,787	)		-49.56	%
Cost of Revenues		151,024		70.05	%		289,236		67.68	%		(138,212	)		-47.79	%
Gross Margin (loss)		64,565		29.95	%		138,140		32.32	%		(73,575	)		-53.26	%

Operating Expenses:
Selling, General and Administrative Expenses		681,304		316.02	%		627,726		146.88	%		53,578			8.54	%
Depreciation and Amortization		-		0.00	%		1,073		0.25	%		(1,073	)		-100.00	%
Total Operating Expenses		681,304		316.02	%		628,799		147.13	%		52,505			8.35	%
Income (Loss) from Operations		(616,739	)	-286.07	%		(490,659	)	-114.81	%		(126,080	)		25.70	%

OTHER INCOME AND (EXPENSE):
Other Income (expense)		-		0.00	%		867		0.20	%		(867	)		-100.00	%
Interest Expense		(66,900	)	-31.03	%		(29,361	)	-6.87	%		(37,539	)		127.85	%
Net Other Expense		(66,900	)	-31.03	%		(28,494	)	-6.67	%		(38,406	)		134.79	%
Loss before provision for income taxes		(683,639	)	-317.10	%		(519,153	)	-121.47	%		(164,486	)		31.68	%
Provision for Income Taxes		-		0.00	%		-		0.00	%		-			0.00	%
Net Income (Loss)		(683,639	)	-317.10	%		(519,153	)	-121.47	%		(164,486	)		31.68	%
Benefit from tax loss carryforward		-		0.00	%		-		0.00	%		-			0.00	%
Net Income (Loss)	$	(683,639	)	-317.10	%	$	(519,153	)	-121.47	%	$	(164,486	)		31.68	%

Revenues

Net Revenues for the twelve months ended December 31, 2013 decreased to $215,589 from $427,376 for the twelve months ended December 31, 2012. The decrease in net revenues of 211,787 or approximately 50%, below the 2012 period is due primarily to decreased revenues generated by the loss of contracted employees working for us and a decrease in hiring due to economic conditions since the prior period. If the Company continues to show a decrease in revenues it may force the Company out of business.

Cost of Revenues

Cost of Revenues for the twelve months ended December 31, 2013 decreased to $151,024 from $289,236 for the twelve months ended December 31, 2012. The overall decrease in cost of revenues of $138,212, or approximately 48%, below the 2012 period is directly attributable to the cost associated with the decrease in number of newly contracted employees described above.

Gross Profit

The overall gross margin for the twelve months ended December 31, 2013 increased to $64,565 from $138,140 for the twelve months ended December 31, 2012. The overall increase in gross margin of $73,575 or approximately 53% over the 2012 period is directly attributable to reduced costs in hiring and retaining our newly contracted employees.

Operating Expenses

Total operating expenses for the twelve months ended December 31, 2013 increased to $681,304 from $628,799 for the twelve months ended December 31, 2012. Reasons for the overall increase in operating expenses of $52,505 or approximately 8%, above the 2012 period is covered below in our discussions of General and Administrative Expenses and Stock-Based Compensation.

Stock-based Compensation – Grants and Modification of Stock Options

On August 10, 2011 the Company’s board of directors extended the deadline from August 24, 2011 to August 24, 2012 for the exercise of the 460,000 options set at $1.05 per share, previously granted to officers, directors and key personnel. The extension was considered a modification of the original stock options. Accordingly, the Company re-valued the stock options, which resulted in a charge to stock-based compensation totaling $156,067.

The Company further extended the deadline to December 31, 2012 in a board of directors meeting on August 23, 2012; and again extended the deadline to June 30, 2013 in a board meeting on December 12, 2012. The extensions were considered a modification of the original stock options. Accordingly, the Company revalued the stock options, which resulted in charges to share-based compensation totaling $214,563 for the year ended December 31, 2012.

On May 2, 2013 the Company’s board of directors extended the deadline for the exercise of the 452,500 options by six months from June 30, 2013 to December 31, 2013. The Company further extended the deadline to June 30, 2014 in a board meeting on December 21, 2013. The extensions are considered a modification of the original stock options. Accordingly, the Company revalued the stock options, which resulted in charges to share-based compensation totaling $193,997 for the year ended December 31, 2013.

On November 13, 2013, the Company granted options to one employee to purchase 50,000 shares of the Company’s common stock at an exercise price of $1.05 per share. The options vested on the date of grant. The quoted market price of the Company’s common stock was $0.70 per share on the grant date. The weighted average exercise price and weighted average fair value of these options on the date of grant were $1.05 per share. Stock option compensation totaling $16,719 was recognized during the quarter ended December 31, 2013.

Income (Loss) from Operations

Total operating losses for the twelve months ended December 31, 2013 increased to $616,739 from operating losses of $490,659 for the twelve months ended December 31, 2012. The overall increase in operating losses of $126,080 or approximately 26% above the 2012 period is primarily due to the increase in the charges for modification of stock options.

Other Income (Expense)

Net other expenses for the twelve months ended December 31, 2013 increased to $66,900 from $28,494 for the twelve months ended December 31, 2012. The overall increase in our other expenses of $38,406, or approximately 135% over the 2012 period is primarily due to an increase in interest expense.

Net Income (Loss)

Net loss for the twelve months ended December 31, 2013 increased to $683,639 from $519,153 for the twelve months ended December 31, 2012. This increase in net loss of $164,486 or approximately 32% above the 2012 period is due primarily to the increase in charges resulting from the modifications of stock options.

Liquidity and Capital Resources

	December 31, 2013			December 31, 2012
Net cash used in operating activities	$	(372,593	)	$	(82,546	)
Net cash provided by investing activities	$	-		$	-
Net cash provided by financing activities	$	366,505		$	86,352

For the year ended December 31, 2013, we had a cash balance of $527.

Cash Used in Operating Activities

Net cash used in our operating activities of $372,593 for the twelve months ended December 31, 2013 was primarily attributable to the net loss and offset by depreciation and stock-based compensation expenses, decreases in accounts receivable, and increases in accounts payable and accrued liabilities.

Cash Used in Investing Activities

Net cash used in our investing activities of $0 for the twelve months ended December 31, 2013.

Cash Provided by Financing Activities

Net cash provided by our financing activities of $366,505 for the twelve months ended December 31, 2013 primarily from proceeds of common stock sales and related party loans.

Internal Sources of Liquidity

For the year ended December 31, 2013, the funds generated from our operations were insufficient to fund our daily operations. For the year ended December 31, 2013, we had a gross margin of $64,565, and we were thus unable to meet our operating expenses of $681,304 for the same period. After accounting for our net other expenses (interest expense) of $66,900 for this period, we suffered a net loss of $683,639 for the period. We can provide no assurance that funds from our operations will increase sufficiently 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 their 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 years ended December 31, 2013 and 2012.

The Company originally had a $200,000 line of credit of with a bank. In August 2010, the Company converted its line of credit with the bank to a bank loan which is collateralized by all of assets of the Company’s subsidiary company, Staf*Tek, including all receivables and property and equipment. The bank loan agreement included the following provisions: 1) an agreement to provide insurance coverage for the collateralized assets in the amount of $180,000; 2) covenants to provide certain financial documents to the bank on a monthly and annual basis. The interest rate on the loan was 6.5 % and the monthly principal and interest payment was $2,698 with a final balloon payment in the amount of $117,937 due on the maturity date of August 31, 2013. On September 9, 2013, the Company received a default letter from the bank and since that time the bank requested information for consideration for an extension which terms have yet to be determined. The principal loan balance continues to bear 6.5% interest.

During the year ended December 31, 2013, we had a private offering(s) in which we sold 410,000 shares of common stock to accredited investors at a price of $0.50 per share for gross proceeds of $205,000.

We also borrowed $10,300 from related parties and $140,000 from third parties during the year ended December 31, 2013.

Preferred A Stock Dividends

Our Series A Shares have a stated value of $3.00 per share. Each holder of Series A Shares is entitled to receive a dividend equal 6.75% of the stated value of the Series A Shares payable on each anniversary of the date of issuance of such shares. The Company is currently delinquent in making dividend payments pursuant to the terms of a settlement agreement, as disclosed in an 8-K released on May 9, 2009. The accrued balance due on Series A Convertible Preferred Stock dividends total $42,047 and $42,047 as of December 31, 2013 and 2012, respectively. The Company will commence dividend payments pursuant to the terms of a settlement agreement as funds are available. The preferred A stock may be converted to the Company’s common stock at the rate of one share of e preferred A stock for one share of common stock at any time by the shareholder. The convertible preferred A stock can be called for redemption by the Company no sooner than two (2) years after the date of issuance, and only if the Company’s 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. In September 2009, the three largest holders of the Series A shares converted 380,500 shares of Series A shares to common stock on a one-to-one basis. Following this conversion, only 5,708 shares of Series A stock remain outstanding.

Critical Accounting Policies

The discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate these estimates, including those related to bad debts, inventory obsolescence, intangible assets, payroll tax obligations, and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of certain assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions.

We have identified below the accounting policies, revenue recognition and software costs, related to what we believe are most critical to our business operations and are discussed throughout Management’s Discussion and Analysis of Financial Condition or Plan of Operation where such policies affect our reported and expected financial results.

Off Balance Sheet Arrangements

During the year ended December 31, 2013, we did not engage in any material off-balance sheet activities or have any relationships or arrangements with unconsolidated entities established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. Further, we have not guaranteed any obligations of unconsolidated entities nor do we have any commitment or intent to provide additional funding to any such entities.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

We do not hold any derivative instruments and do not engage in any hedging activities.

Item 8. Financial Statements

Our financial statements are contained in pages F-2 through F-14 which appear at the end of this Annual Report.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

(a) Evaluation of Disclosure and Control Procedures

The Company’s Chief Executive Officer and the Company’s Chief Financial Officer evaluated the effectiveness of the Company’s disclosure controls and procedures as of December 31, 2013 and had concluded that the Company’s disclosure controls and procedures are effective. There have been no changes in our internal control over financial reporting during the year ended December 31, 2013, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. The term disclosure controls and procedures means controls and other procedures that are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

(b) Management’s Report on Internal Control over Financial Reporting

The Company’s management is responsible for establishing and maintaining an adequate system of internal control over financial reporting, as defined in Rule 13a-15(f) under the Exchange Act. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with Generally Accepted Accounting Principles (“GAAP”).

Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable assurance of such reliability and may not prevent or detect misstatements. Also, projection of any evaluation of effectiveness to future periods is subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management has conducted, with the participation of our Chief Executive Officer and our Principal Accounting Officer, an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2013. Management’s assessment of internal control over financial reporting used the criteria set forth in SEC Release 33-8810 based on the framework established by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control over Financial Reporting – Guidance for Smaller Public Companies. Based on this evaluation, Management concluded that our system of internal control over financial reporting was effective as of December 31, 2013, based on these criteria.

(c) Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information

None.

PART III

Item 10. Directors, Executive Officers, and Corporate Governance

The following table and biographical summaries set forth information, including principal occupation and business experience, about our directors and executive officers:

Name	Age	Position	Officer and/or Director Since

Gerald McIlhargey	66	President, Chief Executive Officer and Director	March 2004

Kenneth Johnson	54	Secretary, Treasurer and Director	April 2000

Bruce Schreiner	59	Director	October 2003

Donal Ford	58	Director	August 2006

Maureen O’Brien	65	Director	August 2006

John Blackmon	57	President of Staf*Tek Services, Inc.	June 2004

Gerald McIlhargey – President, Chief Executive Officer and Director

Mr. McIlhargey has served as President and CEO of St. Joseph, Inc. since August 2006 and as a member of the Board since 2004. For nearly three decades, he has served in senior executive roles with both public and private companies, including International Corona Resources, Collingwood Energy, Sense Technologies and Maple Leaf Petroleum. Mr. McIlhargey received a Bachelor of Education degree from Simon Fraser University in British Columbia, Canada in 1972.

Kenneth Johnson – Secretary, Treasurer and Director

Mr. Johnson has been a Director and Secretary and Treasurer of the Company since April of 2000. He has served as the Secretary, Treasurer and Director of Staf*Tek from December of 2003 to the present. For the past nine years, Mr. Johnson has been employed as a senior support representative with College Bookstore Management Systems (CMBS), a division of Nebraska Book Co., Inc. A provider of point of sale and inventory control computer software for the college bookstore industry. he is involved in product development, customer support and training. Mr. Johnson graduated from Hastings College in 1985, earning a Bachelor of Arts Degree in Business Administration.

Bruce E. Schreiner, CPA – Director

Mr. Schreiner, CPA, has been a Director of the Company since October of 2003. He has also served as a Director of Staf*Tek Services, Inc. since October, 2003 to the present. Mr. Schreiner is a partner in the accounting firm of Schroeder & Schreiner, P.C. He served as an Agent with the Internal Revenue Service for over five years, culminating in an appointment to the Technical and Review Staff of Omaha, Nebraska, for the Nebraska District. Mr. Schreiner is a member of the American Institute and Nebraska Society of Certified Public Accountants and the Grand Island Area Chamber of Commerce. He is currently on the Board of Directors of Sense Technologies, Inc., a public company. Mr. Schreiner graduated magna cum laude from Hastings College in 1975, earning a Bachelor of Arts Degree in both Economics and Business Administration with emphasis in Accounting.

Donal Kent Ford – Director

Mr. Ford has been a Director of the Company since August 24, 2006. For the past ten years, he has been President of Pinnacle Financial Services, Inc., a Third Party Administrator for Pension and Profit Sharing Plans located in Lantana, Florida. Mr. Ford is a credentialed member of the American Society of Pension Actuaries and is actively involved in the South Florida Benefits Council. Mr. Ford has a Bachelor of Science in Business Administration from the University of Florida and a Doctor of Chiropractic from Life University. He is also a Certified Pension Consultant with the American Society of Pension Professionals and Actuaries.

Maureen O’Brien – Director

Ms. O’Brien has been a Director of the Company since August 24, 2006. For the past seven years Ms. O’Brien has worked as Executive Assistant to David Core, CEO of Pinnacle Financial Services, Inc. For seven years prior to that Ms. O’Brien specialized in startup ventures with Real Applications, Inc. which included integrating an acquired programming services company.

John Blackmon – President, Staf*Tek Services, Inc.

Mr. Blackmon has been Staf*Tek’s President since August 24, 2006. Recently, he has expanded staffing services to include senior and entry-level finance and accounting services. Before joining Staf*Tek, Mr. Blackmon was a Senior Manager of IT with MCI/WorldCom. He joined MCI/WorldCom, now Verizon, in 1997 in the operations organization and was quickly moved to the IT organization where his responsibilities included operations management, management of both technical and support organizations, and progressing to lead the development and implementation of all E*Commerce application solutions for the Wholesale division of WorldCom.

Board of Directors’ Term of Office

Directors are elected at our annual meeting of shareholders and serve for one year until the next annual meeting of shareholders or until their successors are elected and qualified.

Family Relationships

There are no family relationships among the officers and directors, nor are there any arrangements or understanding between any of the Directors or Officers of our Company or any other person pursuant to which any Officer or Director was or is to be selected as an officer or director.

Involvement in Certain Legal Proceedings

During the last ten years, none of our Directors, persons nominated to become Directors, or executive officer were subject to any of the following events material to an evaluation of the ability or integrity of any such person:

	●	A petition under the Federal bankruptcy laws or any state insolvency law was filed by or against, or a receiver, fiscal agent or similar officer was appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing;

	●	Such person was convicted in a criminal proceeding or is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses);

	●	Such person was the subject of any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from, or otherwise limiting, the following activities:

	●	Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity;

	●	Engaging in any type of business practice; or

	●	Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of Federal or State securities laws or Federal commodities laws;

	●	Such person was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any Federal or State authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described in paragraph (f)(3)(i) Item 401 of Regulation S-K, or to be associated with persons engaged in any such activity;

	●	Such person was found by a court of competent jurisdiction in a civil action or by the Securities and Exchange Commission (the “Commission”) to have violated any Federal or State securities law, and the judgment in such civil action or finding by the Commission has not been subsequently reversed, suspended, or vacated;

	●	Such person was found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated;

	●	Such person was the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of:

	●	Any Federal or State securities or commodities law or regulation; or

	●	Any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or

	●	Any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or

●

Such person was the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

Committees of the Board of Directors; Meetings

During the year ended December 31, 2013, the Board met six times, and no director attended fewer than 17% of the aggregate number of meetings of the Board and committees on which such director served.

The Board has two standing committees, the Audit Committee and the Compensation Committee. The Board does not have a separate Nominating Committee and performs all of the functions of that committee.

Audit Committee

The Audit Committee has as its primary responsibilities the appointment of the independent auditor for the Company, the pre-approval of all audit and non-audit services, and assistance to the Board in monitoring the integrity of our financial statements, the independent auditor’s qualifications, independence and performance and our compliance with legal requirements. The Audit Committee has adopted a written charter, which was mailed to its shareholders in 2006. During the year ended December 31, 2013, the Audit Committee met three time(s). Bruce Schreiner, Donal Ford, and Maureen O’Brien are the current members of the Audit Committee.

Since we are not a “listed” company, we are not subject to rules requiring the members of our Audit Committee to be independent; however we use the rules of The NASDAQ Stock Market in determining whether directors are independent for disclosure purposes. Based on its review of the applicable rules of The NASDAQ Stock Market governing audit committee membership, the Board believes that all members of the Audit Committee are “independent” within the meaning of such rules. The Securities and Exchange Commission (“SEC”) requires a company to disclose whether it has an “Audit Committee Financial Expert” serving on its audit committee. Based on its review of the criteria of an Audit Committee Financial Expert under the rule adopted by the SEC, the Board believes that one member of the Audit Committee, Mr. Schreiner, qualifies as an Audit Committee Financial Expert. Each of the other current members have made significant contributions and provided valuable service to St. Joseph and its stockholders as members of the Audit Committee and the Board believes that each of them has demonstrated that he is capable of (i) understanding generally accepted accounting principles (“GAAP”) and financial statements, (ii) assessing the general application of GAAP principles in connection with the accounting for estimates, accruals and reserves, (iii) analyzing and evaluating our financial statements, (iv) understanding internal controls and procedures for financial reporting, and (v) understanding audit committee functions, all of which are attributes of an Audit Committee Financial Expert under the rule adopted by the SEC. Given the business experience and acumen of these individuals and their service as members of the Audit Committee, the Board believes that each of them is qualified to carry out all duties and responsibilities of the Audit Committee.

AUDIT COMMITTEE REPORT

The following is the Audit Committee’s report submitted to the Board of Directors for the fiscal year ended December 31, 2013. The Audit Committee has:

●	reviewed and discussed the Company’s audited financial statements with BF Borgers CPA PC, the Company’s independent registered accounting firm;

●	discussed with BF Borgers CPA PC the matters required to be discussed by Statement on Auditing Standards No. 114, as may be modified or supplemented; and

●	received from BF Borgers CPA PC, the written disclosures and the letter regarding their independence as required by Independence Standards Board Standard No. 1, as may be modified or supplemented, and discussed the auditors’ independence with them.

Based on the review and discussions referred to above, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013, for filing with the Securities and Exchange Commission.

AUDIT COMMITTEE

Bruce Schreiner

The Audit Committee report shall not be deemed incorporated by reference by any general statement incorporating by reference this Annual Report on Form 10-K into any filing under the Securities Act of 1933, as amended or the Securities Exchange Act of 1934, as amended, and shall not otherwise be deemed filed under these acts.

Compensation Committee

The Compensation Committee recommends to the Board annual salaries for senior management and reviews all company benefit plans. During the year ended December 31, 2013, the Compensation Committee met three times and reviewed the compensation of all St. Joseph employees. The current members of the Compensation Committee are Bruce Schreiner, Kenneth Johnson and Donal Ford.

Compliance with Section 16(A) of the Exchange Act

Section 16(a) of the Exchange Act requires the Company’s directors, executive officers and persons who beneficially own 10% or more of a class of securities registered under Section 12 of the Exchange Act to file reports of beneficial ownership and changes in beneficial ownership with the SEC. Directors, executive officers and greater than 10% stockholders are required by the rules and regulations of the SEC to furnish the Company with copies of all reports filed by them in compliance with Section 16(a).

Based solely on our review of certain reports filed with the Securities and Exchange Commission pursuant to Section 16(a) of the Securities Exchange Act of 1934, as amended, the reports required to be filed with respect to transactions in our common stock during the fiscal year ended December 31, 2013, were timely.

Code of Ethics

The Company has adopted a Code of Ethics for adherence by its Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer and Controller to ensure honest and ethical conduct; full, fair and proper disclosure of financial information in the Company’s periodic reports filed pursuant to the Securities Exchange Act of 1934; and compliance with applicable laws, rules, and regulations. Any person may obtain a copy of our Code of Ethics by mailing a request to the Company at the address appearing on the front page of this Annual Report on Form 10-K or by viewing it on our website found at www.stjosephinc.com.

Item 11. Executive Compensation

The following table sets forth compensation information for services rendered by certain of our executive officers in all capacities during the last two completed fiscal years. The following information includes the dollar value of base salaries and certain other compensation, if any, whether paid or deferred. The executive officers of the company did not receive any stock award, option award, non-equity incentive plan compensation, or nonqualified deferred compensation earnings during the last two completed years.

Summary Compensation Table

Name and Position(s)	Year	Salary($)		Bonus	Stock Awards	Option Awards¹	Total Compensation
Gerald McIlhargey	2013
President, CEO and Director	2012

Kenneth L. Johnson	2013
Secretary, Treasurer and Director	2012

John Blackmon	2013	$	77,000
President, Staf*Tek Services, Inc.	2012	$	77,000

Compensation Summary

Gerald McIlhargey – Mr. McIlhargey was appointed President and Chief Executive Officer of our Company on May 17, 2006. Mr. McIlhargey has served as a Director of our Company since March of 2004. We do not have an employment agreement with Mr. McIlhargey and he is not receiving any compensation for serving as our Acting President. On August 24, 2006, he received options to purchase 100,000 shares of our common stock for agreeing to serve as a Director on our Board. The options have an exercise price of $1.05 per share and expire on June 30, 2014.

Kenneth L. Johnson – We do not have an employment agreement with Mr. Johnson and he is not receiving any compensation for serving as our Secretary and Treasurer. On August 24, 2006, he received options to purchase 50,000 shares of our common stock for agreeing to serve as a Director on our Board. In December 2009 Mr. Johnson exercised 25,000 options. His remaining 25,000 options have an exercise price of $1.05 per share and expire on June 30, 2014.

John Blackmon – Mr. Blackmon is the President of our wholly-owned subsidiary, Staf*Tek Services, Inc. We do not have an employment agreement with Mr. Blackmon. He receives an annual salary of $77,000 as compensation for serving as Staf*Tek Services, Inc.’s President. On August 24, 2006, he received options to purchase 50,000 shares of our common stock for agreeing to serve as President of Staf*Tek Services, Inc. The options have an exercise price of $1.05 per share and expire on June 30, 2014.

Outstanding Equity Awards at Fiscal Year end

The Company granted 50,000 share of our common stock options with an exercise price of $1.05 per share during the most recent completed fiscal year.

Compensation of Directors

The directors receive no annual compensation other than the options they received for serving on the board of directors of St. Joseph; however, they are reimbursed for out-of-pocket expenses incurred in connection with the Company’s business. On August 24, 2006, each of the directors listed below received fully vested options to purchase up to 50,000 shares of our common stock for

agreeing to serve as our Directors. The options have an exercise price of $1.05 and expired on June 30, 2014. 502,500 of these options remained outstanding and unexercised as of December 31, 2013.

As shown by the following table, none of our directors who are not executive officers received any compensation during our fiscal year ended December 31, 2013:

The following schedule summarizes the changes in the Company’s equity awards for the year ended December 31, 2013.

					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, 2013		452,500	$	1.05	$	1.05		1.50 yrs.	$	-
Granted		50,000	$	1.05	$	1.05
Exercised		-	$	-	$	-
Cancelled/Expired		-	$	-	$	-
Outstanding and exercisable at December 31, 2013		502,500	$	1.05	$	1.05		0.50 yrs.	$	-

Item 12. Security Ownership of Certain Beneficial Owners and Management

The following table sets forth information as of March 31, 2014 based on information obtained from the persons named below, with respect to the beneficial ownership of our common and preferred stock by (i) each person (including groups) known to us to be the beneficial owner of more than five percent (5%) of our common stock, and (ii) each Director and Officer, and (iii) all Directors and Officers of the Company, as a group. Except as otherwise indicated, all stockholders have sole voting and investment power with respect to the shares listed as beneficially owned by them, subject to the rights of spouses under applicable community property laws.

Name of Beneficial Owner ⁽¹⁾	Number of Shares of Common Stock ⁽²⁾			Percent Outstanding			Number of Shares of Series A Preferred Stock ⁽²⁾		Percent Outstanding
Gerald McIlhargey, President, Chief Executive Officer and Director		889,923	(3)		6.55	%		0		0.00	%

Kenneth L. Johnson, Secretary, Treasurer and Director		150,000	(4)		1.17	%		0		0.00	%

Bruce Schreiner, Director		100,000	(3)		0.78	%		0		0.00	%

Maureen O’Brien, Director		75,000	(6)		0.59	%		0		0.00	%

Donal Ford, Director		75,000	(5)		0.59	%		0		0.00	%

John Blackmon, President, Staf*Tek Services, Inc.		89,954	(5)		0.70	%		0		0.00	%

All Executive Officers and Directors as a Group (Five Individuals)		1,319,877			10.38	%		0		0.00	%

Hong Kong Base, Ltd.		1,450,000	(7)		11.82	%		0		0.00	%

Desert Projects, Inc.		824,967	(8)		6.72	%		0		0.00	%

Camille Quinn		8,994	(9)		0.03	%		5,708		100.00	%

(1)	The address for Messrs. McIlhargey, Johnson, Schreiner, Ford, and Ms. O’Brien is: c/o St. Joseph, Inc., 4870 S. Lewis, Suite 250, Tulsa, Oklahoma 74105. The address for Hong Kong Base, Ltd. is Unit C, 26th Floor, CNT Tower, 338 Hennessey Road, Wanchai, Hong Kong, China. The address for Ms. Bell is Route 1 Box 650, Haskell, Oklahoma 74436. The address for Ms. Quinn is 5800 E. Skelly Drive, Suite 1230, Tulsa, Oklahoma 7413. Except as indicated by footnote, and subject to applicable community property laws, the persons named in the table have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them.

(2)	Based upon 12,705,341 shares of common stock and 5,702 shares of Series A Preferred Stock issued and outstanding on March 31, 2014. Percentages are rounded to the nearest one hundredth of a percent. As required by Item 403 of Regulation S-B, calculated on the basis of the amount of outstanding securities plus, for each person or group, any securities that person or group has the right to acquire within 60 days pursuant to options, warrants, conversion privileges or other rights. The percentage of the person holding such option or warrant but are not deemed outstanding for computing the percentage of any other person.

(3)	Includes fully vested options to purchase 100,000 shares of our common stock at an exercise price of $1.05 per share.

(4)	Includes fully vested options to purchase 25,000 shares of our common stock at an exercise price of $1.05 per share.

(5)	Includes fully vested options to purchase 50,000 shares of our common stock at an exercise price of $1.05 per share.

(6)	Includes fully vested options to purchase 42,500 shares of our common stock at an exercise price of $1.05 per share.

(7)	Hong Kong Base Ltd is a corporation organized under the laws of Hong Kong and is beneficially owned by Yvonne Chun Siu Fun.

(8)	Desert Projects, Inc. is a corporation organized under the laws of the State of Nevada and is beneficially owned by James Ralph Houston.

(9)	Includes 5,708 shares of common stock, which would be issuable on conversion of the 5,702 shares of Series A Preferred Stock held by Ms. Quinn.

Equity Compensation Plans

The following table sets forth information as of December 31, 2013 with respect to compensation plans under which we are authorized to issue shares of our common stock, aggregated as follows:

	●	All compensation plans previously approved by security holders; and

	●	All compensation plans not previously approved by security holders.

	Equity Compensation Plan Information
Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights			Weighted-average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans [excluding securities reflected in column (a)]
		(a)			(b)		(c)
Equity compensation plans approved by security holders		502,500	⁽¹⁾	$	1.05		590,000

Equity compensation plans not approved by security holders		0		$	0.00		0

Total		502,500		$	1.05		590,000

(1)

On August 24, 2006, we adopted our 2006 Stock Option Plan, which reserved 1,125,000 shares of our common stock for issuance pursuant to the plan. On August 24, 2006, our Board of Directors granted stock options to our officers, directors and employees pursuant to the plan to purchase 410,000 share of our common stock at an exercise price of $1.05 per share and a term that ends on August 24, 2012. On December 1, 2010, and November 13, 2013 there were 75,000 and 50,000 options granted respectively which expired on June 30, 2014.

Description of Securities

St. Joseph, Inc. has 100,000,000 Common Stock authorized for issuance and 25,000,000 Preferred Stock authorized for issuance. As of March 31, 2014, there are 12,705,341 shares of Common Stock issued and outstanding. There are 5,708 shares of Series A Preferred Stock that are issued and outstanding; and zero shares of Series B Preferred Stock have been issued.

The holders of the outstanding series of Preferred Stock have the following rights:

Voting Rights. Holders of the Series A Preferred Stock have no voting rights.

Conversion Rights. Holders of the Series A Preferred Stock may convert their shares at any time into an equal number of shares of our Common Stock by delivering to the Corporation a completed and signed conversion notice. The Series A and Series B Preferred Stock are convertible into Common Stock on a one-for-one basis but only shares of Series A stock are issued and outstanding as of the date of this Memorandum.

Dividend Rights. Our Series A Shares have a stated value of $3.00 per share. Each holder of Series A Shares is entitled to receive a dividend equal 6.75% of the stated value of the Series A Shares payable on each anniversary of the date of issuance of such shares. The accrued balance due on Series A Convertible Preferred Stock dividends total $42,047 and $42,047 as of December 31, 2013 and 2012, respectively. The Series A dividend payments schedule was determined from a settlement agreement, as disclosed in a Form 8-K that was released on May 9, 2010.

Liquidation: In the event of any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, the holders of the Series A and Series B Preferred Stock, shall be entitled to receive, prior and in preference to any distribution of any of the assets or funds of the Company to the holders of Common Stock, an amount on such date equal to the stated value multiplied by the shares of Series A Preferred Stock or Series B Stock (as the case may be) owned of record by such holder plus an amount equal to any accrued and unpaid dividends as of such date, less the amount of any distributions previously made to the holder in respect of such shares of Series A Preferred Stock or Series B Preferred Stock (as the case may be). A payment to a Holder of Series A Preferred Stock or Series B Preferred Stock due to liquidation shall be made before any payment shall be made or any assets distributed to the holders of any junior stock. If upon any liquidation, the amounts payable with respect to the Series A Preferred Stock and Series B Preferred Stock are not paid in full, holders of the Series A and Series B Preferred Stock will share ratably in any distribution of the assets of the Corporation in proportion to the respective amounts that would be payable per share of Series A Preferred Stock and Series B Preferred Stock (as the case may be), if the assets of the Corporation were sufficient for all such amounts to be paid in full. Neither the consolidation nor merger of the Corporation into or with any other entity, nor the sale or transfer by the Corporation of all or any part of its assets, nor the reduction of the capital stock of the Corporation, shall be deemed to be a liquidation. Any assets to be delivered to the holders of the Series A Preferred Stock and/or to the Holders of Series B Preferred Stock pursuant to the foregoing as a consequence of a liquidation shall be valued at their fair market value as determined in good faith by the Board of Directors of the Corporation, whose determination shall be conclusive and binding absent manifest error. The Series A Preferred Stock shall rank pari passu with respect to liquidation with Series B Preferred Stock.

Redemption Provisions. The Series A Preferred Stock can be called for redemption by the Company no sooner than two (2) years after the date of issuance, and only if the Company’s 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 the date of this Memorandum, the stock has not traded at that amount. The Series B Preferred Stock, of which none are issued and outstanding as of the date of this Memorandum, may be redeemed by the Corporation, in whole or in part, at any time and from time to time beginning on the sixth (6th) month anniversary of the Issue Date for cash at a redemption price equal to the stated value plus the total of all accrued but unpaid Dividends on such Series B Preferred Stock.

Additionally, there are outstanding options for the purchase of 502,500 shares of Common Stock that are all fully vested. On August 24, 2006, St. Joseph adopted its 2006 Stock Option Plan, which reserved 1,125,000 shares of the Company’s common stock for issuance pursuant to the plan. On August 24, 2006, the Company’s Board of Directors granted stock options to our officers, directors and employees pursuant to the plan to purchase 410,000 share of our common stock at an exercise price of $1.05 per share, which were all deemed effective on August 24, 2006. 25,000 of these stock options were exercised. On December 1, 2010, a further 75,000 options were granted which expired on June 30, 2014.

Item 13. Certain Relationships and Related Transactions; DIRECTOR INDEPENDENCE

Other than disclosed below, none of the directors or executive officers of the Company nor any person who beneficially owns, directly or indirectly, shares carrying more than 10% of the voting rights attached to all outstanding shares of the Company, nor any promoter of the Company, nor any relative or spouse of any of the foregoing persons has any material interest, direct or indirect, in any transaction since the beginning of the Company’s 2013 fiscal year or in any presently proposed transaction which, in either case, has or will exceed one percent of the average of the Company’s total assets at year end for the last two completed fiscal years. The Company has not entered into transactions with any member of the immediate families of the foregoing persons, nor is any such transaction proposed.

Gerald McIlhargey

COLEMC Investments, LTD., a Canadian company owned by Gerry McIlhargey, President and Director of the Company, advanced the Company a total of $45,000 for working capital in exchange for three promissory notes. The notes matured on December 31, 2011 and December 2010 and did not bear any interest. The notes have been extended until December 31, 2014.

During the years ended December 31, 2013 and 2012, our officer advanced the Company $10,300 and $7,500, respectively, for working capital in exchange for two promissory notes. The notes matured on December 31, 2013 and 2012, and did not bear any interest. The notes have been extended until December 31, 2014.

Director Independence

Although we are not “listed” by any exchange with established criteria for determining director independence, we use the criteria established by The NASDAQ Stock Market governing audit committee membership for making such determination for disclosure purposes. Based on its review of the applicable rules of The NASDAQ Stock Market governing audit committee membership, the Board believes that Bruce Schreiner, Donal Ford, and Maureen O’Brien would be deemed “independent” within the meaning of such rules.

As Bruce Schreiner, Donal Ford, and Maureen O’Brien are the only directors on our audit and compensation committees, such committees have no directors who are not independent.

Because we do not have a nominating committee, our entire Board acts in such capacity, including our two directors who are not independent, Gerald McIlhargey and Kenneth L. Johnson.

Item 14. Principal Accountant Fees and Services

Our financial statements for the fiscal years ended December 31, 2012 and December 31, 2011, along with the related statements of operations, stockholders’ equity and cash flows have been audited by BF Borgers PC and Borgers & Cutler CPA’s PLLC both CPA’s of Denver, Colorado, independent registered public accounting firms, to the extent and for the period set forth in their report, and are set forth in reliance upon such report given upon the authority of them as experts in auditing and accounting.

Audit Fees

Our independent auditor, BF Borgers CPA PC, billed an aggregate of $22,500 and $22,500 for the years ended December 31, 2013 and 2012 audits. Our independent auditor also billed an aggregate of $12,500 and $12,500 in connection with the reviews of the Company’s unaudited quarterly financial statements for the years ended December 31, 2013 and 2012.

Audit Fees and Audit Related Fees consist of fees billed for professional services rendered for auditing our Financial Statements, reviews of interim Financial Statements included in quarterly reports, services performed in connection with other filings with the Securities & Exchange Commission and related comfort letters and other services that are normally provided by our independent auditors in connection with statutory and regulatory filings or engagements.

Tax Fees

2013				2012
$	0.00			$	0.00

Tax Fees consists of fees billed for professional services for tax compliance, tax advice and tax planning. These services include assistance regarding federal, state and local tax compliance and consultation in connection with various transactions and acquisitions.

All Other Fees

2013				2012
$	0.00			$	0.00

Item 15. Exhibits, FINANCIAL STATEMENT SCHEDULES.

EXHIBIT NO.		DESCRIPTION OF DOCUMENT

2.1 (5)		Agreement of Share Exchange and Purchase and Sale dated January 2, 2004 between St. Joseph, Inc. and Phyllis L. Bell, and Paul D. Aelmore and Staf-Tek Services, Inc.

3.1 (1)		Articles of Incorporation of Pottery Connection, Inc.

3.2 (1)		Articles of Amendment to Articles of Incorporation as filed with the Colorado Secretary of State on January 19, 2001.

3.3 (5)		Articles of Amendment to Articles of Incorporation as filed with the Colorado Secretary of State on November 6, 2003.

3.4 (6)		Articles of Amendment to Articles of Incorporation as filed with the Colorado Secretary of State on September 29, 2006.

3.5 (7)		Articles of Amendment to the Articles of Incorporation filed with the Colorado Secretary of State on May 18, 2007.

3.6 (7)		Articles of Amendment to the Articles of Incorporation filed with the Colorado Secretary of State on May 23, 2007.

3.5 (3)		Bylaws of St. Joseph, Inc. (formerly known as Pottery Connection, Inc.)

4.1 (1)		Specimen form of St. Joseph’s stock certificate for shares of its common stock.

4.2 (10)		2006 Stock Option Plan.

10.1 (3)		Exclusive Agreement between St. Joseph Energy, Inc. and David Johnson.

10.2 (2)		Form of User Agreement for St. Joseph, Inc.

10.3 (9)		Promissory Note dated June 16, 2005 for $96,000 issued by St. Joseph, Inc. to John H. Simmons.

10.4 (9)		Promissory Note dated December 28, 2006 for $25,000 issued by Staf*Tek Services, Inc. to Gerry McIlhargey.

10.5 (8)		Form of Letter Agreement for conversion of Series B Stock to common stock on December 31, 2007.

10.6 (8)		Form of Letter Agreement for conversion of promissory notes to common stock on December 31, 2007.

14.1 (9)		Code of Ethics.

21.1 (9)		Subsidiaries of St. Joseph, Inc.

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.

*		Filed herewith

(1)		Filed on July 23, 2002 as an exhibit to St. Joseph’s registration statement on Form 10SB and incorporated herein by reference.
(2)		Filed on April 15, 2003 as an exhibit to St. Joseph’s annual report on Form 10-KSB for the fiscal year ended December 31, 2002 and incorporated herein by reference.
(3)		Filed on June 3, 2003 as an exhibit to St. Joseph’s amendment to registration statement on Form 10SB12G/A and incorporated herein by reference.
(4)		Filed on April 15, 2004 as an exhibit to St. Joseph’s annual report on Form 10-KSB for the fiscal year ended December 31, 2003 and incorporated herein by reference.
(5)		Filed on May 5, 2004 as an exhibit to St. Joseph’s report on Form 8-K dated April 30, 2004 and incorporated herein by reference.
(6)		Filed on November 20, 2006 as an exhibit to St. Joseph’s quarterly report on Form 10-QSB for the quarterly period ended September 30, 2006 and incorporated herein by reference.
(7)		Filed on May 23, 2007 as an exhibit to St. Joseph’s report on Form 8-K dated May 18, 2007 and incorporated herein by reference.
(8)		Filed on January 28, 2008 as an exhibit to St. Joseph’s report on Form 8-K dated December 31, 2007 and incorporated herein by reference.
(9)		Filed on April 20, 2007 as an exhibit to St. Joseph’s amendment 1 to annual report on Form 10-KSB for the fiscal year ended December 31, 2006 and incorporated herein by reference.
(10)		Filed on August 3, 2006 as an exhibit to St. Joseph’s proxy statement on Schedule and incorporated herein by reference.

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	ST. JOSEPH, INC.

Dated: March 31, 2014	By:	/s/ Gerald McIlhargey
		Gerald McIlhargey
		President and Chief Executive Officer

Dated: March 31, 2014	By:	/s/ Kenneth L. Johnson
		Kenneth L. Johnson
		Secretary and Treasurer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature and Title		Date

/s/ Gerald McIlhargey		31-Mar-14
Gerald McIlhargey
President, Chief Executive Officer and Director

/s/ Kenneth L. Johnson		31-Mar-14
Kenneth L. Johnson
Secretary, Treasurer and Director

/s/ Bruce Schreiner		31-Mar-14
Bruce Schreiner
Director

/s/ Donal Ford		31-Mar-14
Donal Ford
Director

/s/ Maureen O’Brien		31-Mar-14
Maureen O’Brien
Director

ST. JOSEPH, INC.

Index to Consolidated Financial Statements

		Page

Report of Independent Registered Public Accounting Firm		F-2

Consolidated Balance Sheet at December 31, 2013 and 2012		F-3

Consolidated Statements of Operations for the years ended December 31, 2013 and 2012		F-4

Consolidated Statement of Changes in Stockholders’ Deficit for the years ended December 31, 2013 and 2012		F-5

Consolidated Statements of Cash Flows for the years ended December 31, 2013 and 2012		F-6

Notes to Consolidated Financial Statements		F-7 - F-14

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of St. Joseph, Inc.:

We have audited the accompanying balance sheets of St. Joseph, Inc. (“the Company”) as of December 31, 2013 and 2012 and the related statements of operations, stockholders’ equity (deficit) and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of St. Joseph, Inc., as of December 31, 2013 and 2012, and the results of its operations and its cash flows for the years then ended, in conformity with generally accepted accounting principles in the United States of America.

The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company’s significant operating losses raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ B F Borgers CPA PC
B F Borgers CPA PC
Denver, CO

March 31, 2014

F-2

ST. JOSEPH, INC.

CONSOLIDATED BALANCE SHEETS

	December 31, 2013			December 31, 2012
ASSETS

CURRENT ASSETS:
Cash	$	527		$	6,615
Accounts receivable, net of allowance for doubtful accounts of $2,208 and $2,208, respectively		1,092			29,700
Prepaid Expenses		60,000			-
Total current assets		61,619			36,315

Property and equipment, net of accumulated depreciation of $154,202 and $153,053, respectively		-			-
Deposits		1,230			1,230

Total Assets	$	62,849		$	37,545

LIABILITIES AND STOCKHOLDERS’ DEFICIT

CURRENT LIABILITIES:
Accounts payable	$	404,700		$	310,291
Accrued liabilities		167,121			129,808
Accrued preferred dividend		42,047			42,047
Notes payable:
Bank loan, current maturities (Note 4)		118,202			131,997
Advance from officer (Note 2)		29,700			24,200
Loan from officer (Note 2)		49,800			45,000
Notes payable, other (Note 4)		140,000			-

Total current liabilities		951,570			683,343


STOCKHOLDERS’ DEFICIT (Note 7):
Stock subscription receivable		-			25,000
Preferred stock, Series A, $0.001 par value. 25,000,000 shares authorized, 5,708 shares issued and outstanding		6			6
Common stock, $0.001 par value; 100,000,000 shares authorized, 2013 – 12,219,802 and 2012 - 11,809,802 issued and outstanding respectively		12,220			11,810
Additional paid-in capital		3,414,239			2,998,993
Retained deficit		(4,315,186	)		(3,631,547	)

Total Stockholders’ Deficit		(888,721	)		(645,798	)

Total Liabilities and Stockholders’ Deficit	$	62,849		$	37,545

The accompanying footnotes are an integral part of these financial statements.

F-3

ST. JOSEPH, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

	Year ended
	December 31,
	2013			2012

REVENUES:	$	215,589		$	427,376

COST OF REVENUES		151,024			289,236

Gross Margin		64,565			138,140

COSTS AND EXPENSES:
General and Administrative Expenses		681,304			627,726
Depreciation and Amortization		-			1,073
Total Costs and Expenses		681,304			628,799

Operating Income (Loss)		(616,739	)		(490,659	)

OTHER INCOME AND (EXPENSE):
Other Income (expense)		-			867
Interest Expense		(66,900	)		(29,361	)

Net Other Expense		(66,900	)		(28,361	)

Loss before provision for income taxes		(683,639	)		(519,153	)

PROVISION FOR INCOME TAXES:
Provision for Federal income tax		-			-
Provision for State income tax		-			-

Total provision for income taxes		-			-

Loss before benefit from tax loss carryforward		(683,639	)		(519,153	)

Benefit from tax loss carryforward		-			-

Net Loss	$	(683,639	)	$	(519,153	)

Loss applicable to common stockholders	$	(683,639	)	$	(519,153	)

Basic and diluted loss per common share	$	(0.057	)	$	(0.045	)

Weighted average common shares outstanding		12,006,766			11,641,045

The accompanying footnotes are an integral part of these financial statements.

F-4

ST. JOSEPH, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

	Preferred Stock-Series A				Common Stock				Additional
	Shares		Par value		Shares		Par value		Paid-in Capital		Retained Deficit			Subscription Receivable			Total
Balance December 31, 2011		5,708	$	6		11,172,302		11,172		2,306,066		(2,666,815	)		(25,000	)		(374,571	)

Collection of stock subscription receivable		-		-		-		-		-		-			(25,000	)		(25,000	)
Sale of common stock @ $0.50 per share		-		-		190,000		190		94,310		-			-			95,000
Exercise of stock options @ $1.05 per share		-		-		7,500		8		7,867		-			-			7,875
Modification of stock options		-		-		-		-		214,563		-			-			214,563
Net loss for the year ended December 31, 2012		-		-		-		-		-		(519,153	)		-			(519,153	)

Balance December 31, 2012		5,708	$	6		11,809,802	$	11,810	$	2,998,933	$	(3,631,547	)	$	(25,000	)	$	(645,798	)
Collection of stock subscription receivable		-		-		-		-		-		-			25,000			25,000
Sale of common stock @ $0.50 per share		-		-		410,000		410		204,590		-			-			205,000
Issuance of stock options @ $1.05 per share		-		-		-		-		16,719		-			-			16,719
Modification of stock options		-		-		-		-		193,997		-			-			193,997
Net loss for the year ended December 31, 2013		-		-		-		-		-		(683,639	)		-			(683,639	)

Balance December 31, 2013		5,708	$	6		12,219,802	$	12,220	$	3,406,100	$	(4,607,047	)	$	-		$	(888,721	)

The accompanying footnotes are an integral part of these financial statements.

F-5

ST. JOSEPH, INC.

CONSOLIDATED STATEMENTS OF CASH FLOW

	Years Ended
	December 31,
	2013			2012
OPERATING ACTIVITIES

Net income (loss)	$	(683,639	)	$	(519,153	)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization		-			1,073
Stock-based compensation		210,716			214,563
Changes in operating assets and liabilities:
(Increase)/decrease in accounts receivable		28,608			51,741
(Increase)/decrease in prepaid expenses		(60,000	)		-
Increase/(decrease) in accounts payable		94,409			56,840
Increase/(decrease) in accrued liabilities		37,313			112,390

Net cash provided by (used in) operating activities		(372,593	)		(82,546	)

INVESTING ACTIVITIES
INVESTING ACTIVITIES		-			-

		-			-

FINANCING ACTIVITIES
Repayment on bank loan		(13,795	)		(23,023	)
(Increase)/decrease of stock subscription receivable		25,000			(25,000	)
Proceeds from related party		5,500			7,500
Proceeds from officer loan and notes payable		144,800			24,000
Payments on preferred stock dividends		-			-
Proceeds from sale of common stock		205,000			102,875

Net cash provided by (used in) financing activities		366,505			86,352

INCREASE (DECREASE) IN CASH		(6,088	)		3,806

CASH AT BEGINNING OF PERIOD		6,615			2,809

CASH AT END OF PERIOD	$	527		$	6,615

SUPPLEMENTAL NON-CASH INVESTING AND FINANCING INFORMATION:
Conversion of bank line of credit into loan	$	-		$	-

SUPPLEMENTAL INFORMATION:
Cash paid for taxes	$	-		$	-
Cash paid for interest	$	66,900		$	29,361

The accompanying footnotes are an integral part of these financial statements.

F-6

ST. JOSEPH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Basis of Presentation

St. Joseph, Inc. (the “Company”) was incorporated in Colorado on March 19, 1999 as Pottery Connection, Inc. On March 19, 2001, the Company changed its name to St. Joseph Energy, Inc. and on November 6, 2003, the Company changed its name to St. Joseph, Inc.

The Company, through its wholly-owned subsidiary, specializes in the recruitment and placement of professional data processing and technical personnel for clients on both a permanent and contract basis.

Principles of Consolidation

The consolidated financial statements for the years ended December 31, 2013 and 2012 include the activities of St. Joseph, Inc. and its wholly-owned subsidiary, Staf*Tek Services, Inc. (“Staf*Tek”). All significant intercompany balances and transactions have been eliminated in consolidation.

Going Concern

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. As shown in the accompanying financial statements, the Company has incurred recurring losses and has negative working capital and a net stockholders’ deficiency at December 31, 2013 and 2012. In our financial statements for the fiscal years ended December 31, 2013 and 2012, the Report of the Independent Registered Public Accounting Firm includes an explanatory paragraph that describes substantial doubt about our ability to continue as a going concern. These factors, among others, may indicate that the Company will be unable to continue as a going concern.

The financial statements do not include any adjustments relating to the recoverability of assets and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company’s continuation as a going concern is dependent upon its ability to generate sufficient cash flow to meet its obligations on a timely basis and ultimately to attain profitability. The Company plans to generate the necessary cash flows with increased sales revenue and a reduction of general and administrative expenses over the next 12 months. However, should the Company’s operations not provide sufficient cash flow; the Company has plans to raise additional working capital through debt and/or equity financings. Insiders have loaned working capital to the Company on an as-needed basis over the past two years; however, there are no formal committed financing arrangements to provide the Company with working capital. There is no assurance the Company will be successful in producing increased sales revenues, attaining profitability, or obtaining additional funding through debt and equity financings.

Cash Equivalents and Fair Value of Financial Instruments

For the purposes of the statements of cash flows, the Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. The Company had no cash equivalents at December 31, 2013 and 2012.

The carrying amounts of cash, receivables and current liabilities approximate fair value due to the short-term maturity of the instruments.

The Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. It also requires disclosure about how fair value is determined for assets and liabilities and establishes a hierarchy for which these assets and liabilities must be grouped, based on significant levels of inputs as follows:

F-7

ST. JOSEPH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

	Level 1:	Quoted prices in active markets for identical assets or liabilities.

	Level 2:	Quoted prices in active markets for similar assets and liabilities and inputs that are observable for the asset or liability.

	Level 3:	Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

The determination of where assets and liabilities fall within this hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The valuations of the majority of the assets are considered Level 1 fair value measures under ASC 820.

Accounts Receivable

Accounts receivable consists of amounts due from customers related to the Company’s employee placement services. The Company considers accounts more than 30 days old to be past due. The Company uses the allowance method for recognizing bad debts. When an account is deemed uncollectible, it is written off against the allowance. The Company generally does not require collateral for its accounts receivable.

Property, Equipment and Depreciation

Property and equipment are stated at cost. Property and equipment are depreciated using the straight-line method over the estimated useful lives of the assets as follows:

Furniture and fixtures	7 years
Office equipment	5 years
Computer equipment	3 years

Upon retirement or disposition of an asset, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in operations. Repairs and maintenance are charged to expense as incurred and expenditures for additions and improvements are capitalized.

Impairment and Disposal of Long-lived Assets

The Company evaluates the carrying value of its long-lived assets when indicators of impairment are present. Impairment is assessed when the undiscounted future cash flows estimated to be generated by those assets are less than the assets’ carrying amount. If such assets are impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying value or fair value, less costs to sell. There were no impairments recognized for the years ended December 31, 2013 and 2012.

Revenue Recognition

Staffing service revenues are recognized when the services are rendered by the Company’s contract employees and collection is probable. Permanent placement revenues are recognized when employment candidates accept offers of permanent employment.

Direct Costs of Services

Direct costs of staffing services consist of payroll, payroll taxes, contract labor, and insurance costs for the Company’s contract employees. There are no direct costs associated with permanent placement staffing services.

Advertising Costs

The Company expenses all advertising as incurred. The Company incurred advertising costs totaling $905 and $902 for the years ended December 31, 2013 and 2012, respectively.

F-8

ST. JOSEPH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Loss Per Common Share

The Company reports earnings (loss) per share using a dual presentation of basic and diluted earnings per share. Basic loss per share excludes the impact of common stock equivalents. Diluted loss per share utilizes the average market price per share when applying the treasury stock method in determining common stock equivalents. Preferred stock and common stock options outstanding at December 31, 2013 were not included in the diluted loss per share as all 5,708 preferred shares and all 502,500 options were anti-dilutive as the Company incurred losses during the year. Preferred stock and common stock options outstanding at December 31, 2012 were not included in the diluted loss per share as all 5,708 preferred shares and all 452,500 options were anti-dilutive as the Company incurred losses during the year. Therefore, basic and diluted losses per share at December 31, 2013 and 2012 were equal.

Income Taxes

Income taxes are provided for the tax effects of transactions reported in the consolidated financial statements and consist of taxes currently due plus deferred taxes related primarily to differences between the recorded book basis and the tax basis of assets and liabilities for financial and income tax reporting. The deferred tax assets and liabilities represent the deductible when the assets and liabilities are recovered or settled. Deferred taxes are also recognized for operating losses that are available to offset future taxable income and tax credits that are available to offset future federal income taxes.

The Company has analyzed filing positions in all of the federal and state jurisdictions where it is required to file income tax returns, as well as all open tax years in these jurisdictions. The Company has identified its federal tax return and its state tax return in Oklahoma as “major” tax jurisdictions, as defined. The Company believes that its income tax filings positions and deductions will be sustained on audit and does not anticipate any adjustments that will result in a material adverse effect on the Company’s financial conditions, results of operations, or cash flow. Therefore, no reserves for uncertain income tax positions have been recorded pursuant to ASC 740.

Stock-Based Compensation:

The Company recognizes share-based compensation based on the options’ fair value, net of estimated forfeitures on a straight line basis over the requisite service periods, which is generally over the awards’ respective vesting period, or on an accelerated basis over the estimated performance periods for options with performance conditions. The stock option fair value is estimated on the grant date using the Black-Scholes option pricing model based on the underlying common stock closing price as of the date of grant, the expected term, stock price volatility, and risk-free interest rates. The Company has modified its outstanding stock options several times over the prior three years resulting in recognition of additional expenses (see Note 7).

Use of Estimates

The preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities; disclosure of contingent assets and liabilities at the date of the consolidated financial statements; and the reported amounts of revenues and expenses during the reporting period. Accordingly, actual results could differ from those estimates.

NOTE 2 – RELATED PARTY TRANSACTIONS

On September 6, 2013, COLEMC Investments, LTD. (COLEMC), a Canadian company owned by Gerry McIlhargey, President and Director of the Company, advanced the Company $4,800 for working capital in exchange for a promissory note. The note matured on December 31, 2013, does not bear interest and has been extended until December 31, 2014.

In prior years, COLEMC advanced the Company a total of $45,000 for working capital in exchange for three promissory notes. The notes matured on December 31, 2011 and December 2010 and did not bear any interest. The notes have been extended until December 31, 2014.

F-9

ST. JOSEPH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

During the years ended December 31, 2012 and 2011, an officer advanced the Company $7,500 and $16,700, respectively, for working capital in exchange for two promissory notes. During the year ended December 31, 2013, the officer advanced the Company an additional $5,500. The total balance of the notes is $29,700 and do not bear any interest. The notes matured on December 31, 2013 and have been extended until December 31, 2014.

During the year ended December 31, 2012, a Director of the Company exercised 7,500 shares of its common stock at a strike price of $1.05 per share (see Note 7) for total consideration of $7,875.

During the year ended December 31, 2011, the Company sold 20,000 shares of its common stock in a private placement for $0.50 per share to an officer of the Company’s subsidiary for total consideration of $10,000.

NOTE 3 – PROPERTY AND EQUIPMENT

Property and equipment consisted of the following at December 31, 2012 and 2011:

	2012			2012
Furniture and fixtures	$	35,447		$	35,447
Office equipment		61,465			61,465
Computer equipment		37,629			37,629
Leasehold improvements		19,585			19,585
Total property and equipment		154,126			154,126
Less accumulated depreciation		(154,126	)		(154,126	)
Property and equipment, net	$	-		$	-

Depreciation expense totaled $-0- and $1,073, respectively, for the years ended December 31, 2013 and 2012.

NOTE 4 – NOTES PAYABLE

Bank Loan

The Company originally had a $200,000 line of credit of with the bank. In August 2010, the Company converted its line of credit with the bank to a bank loan which is collateralized by all of assets of the Company’s subsidiary company, Staf*Tek, including all receivables and property and equipment. The bank loan agreement included the following provisions 1) an agreement to provide insurance coverage for the collateralized assets in the amount of $180,000; 2) covenants to provide certain financial documents to the bank on a monthly and annual basis. On September 9, 2013, the Company received a default letter from the bank. Since that time the bank has requested the company bring the loan current by making monthly payments of $2,698 plus late fees of $50 per month for the nine months which the Company is delinquent, for the total amount as of March 31, 2014 of $24,732, which includes principal, interest and fees. At such time the Company is able to bring the loan current the bank has stated the remaining balance will be refinanced, which terms are yet to be determined. The loan is in default at December 31, 2013 and the principal loan balance continues to bear 6.5% interest. In the event the Company is unable to bring the bank loan current the bank may foreclose which would likely force the Company out of business.

As of December 31, 2013 and 2012, the Company owed the bank $118,202 and $131,997, respectively.

Interest expense on the Company’s bank borrowing was $8,332 and $9,538, during the years ended December 31, 2013 and 2012, respectively.

F-10

ST. JOSEPH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Other Notes Payable

On July 31, 2013, an individual loaned the Company $25,000 for working capital in exchange for a promissory note. The note matures on July 31, 2014 and bears interest at seven percent. Accrued interest on the note totaled $730 at December 31, 2013.

On October 1, 2013, two individuals loaned the Company $30,000 for working capital in exchange for promissory notes. The notes mature on October 1, 2014 and bear interest at seven percent. Accrued interest on the note totaled $525 at December 31, 2013.

On November 15, 2013, an individual loaned the Company $50,000 for working capital in exchange for a promissory note. The note matures on November 15, 2014 and bears interest at seven percent. Accrued interest on the note totaled $438 at December 31, 2013.

On November 18, 2013, an individual loaned the Company $25,000 for working capital in exchange for a promissory note. The note matures on November 18, 2014 and bears interest at seven percent. Accrued interest on the note totaled $63 at December 31, 2013.

On December 13, 2013, an individual loaned the Company $10,000 for working capital in exchange for a promissory note. The note matures on December 13, 2014 and bears interest at seven percent. Accrued interest on the note totaled $35 at December 31, 2013.

NOTE 5 – CONCENTRATION OF CREDIT RISK

The Company conducts a significant portion of its operations with one customer. During the year ended December 31, 2013 and 2012 approximately 86.4% and 80% of the Company’s service revenues were conducted with this one customer, respectively.

NOTE 6 – INCOME TAXES

A reconciliation of U.S. statutory federal income tax rate to the effective rate is as follows:

	Years Ended
	December 31,
	2013			2012
U.S. Federal statutory rate		34.00	%		34.00	%
State income tax, net of federal benefit		3.96	%		3.96	%
Permanent book-to-tax differences		-0.00	%		-0.00	%
Timing Differences		-0.00	%		-0.00	%
Net operating loss for which no tax benefit is currently available		-37.96	%		-37.96	%
		0.00	%		0.00	%

At December 31, 2013, the Company’s current tax benefit consisted of a net tax asset of $957,327 due to operating loss carryforwards of approximately $3,070,916 which have been fully provided against in the valuation allowance of $957,327. The valuation allowance results in deferred tax expense, which offsets the net deferred tax asset for which there is no assurance of recovery. The changes in the valuation allowance for the years ended December 31, 2013 and 2012 were $259,509 and $153,583, respectively. Net operating loss carry forwards will expire through 2033.

The valuation allowance will be evaluated at the end of each year, considering positive and negative evidence about whether the asset will be realized. At that time, the allowance will either be increased or reduced; reduction could result

F-11

ST. JOSEPH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

in the complete elimination of the allowance if positive evidence indicates that the value of the deferred tax asset is no longer impaired and the allowance is no longer required.

Should the Company undergo an ownership change, as defined in the Internal Revenue Code, the Company’s tax net operating loss carry forwards generated prior to the ownership change may be subject to an annual limitation, which could reduce or defer the utilization of those losses.

NOTE 7 – SHAREHOLDERS’ EQUITY

Preferred Stock

The Board of Directors is authorized to issue shares of Series A Convertible Preferred Stock and to fix the number of shares in such series as well as the designation, relative rights, powers, preferences, restrictions, and limitations of all such series. In December 2003, the Company issued 386,208 shares of Series A Convertible Preferred Stock and 5,708 have not been converted to common stock at December 31, 2013. During the year ended December 31, 2013, the Company did not issue any Series A Convertible Preferred Stock. Series A Convertible Preferred Stock is convertible to one share of common stock and has a yield of 6.75% dividend per annum, which is paid quarterly on a calendar basis for a period of 5 years.

The Company is currently delinquent in making dividend payments pursuant to the terms of a settlement agreement, as disclosed in an 8-K released on May 9, 2009. The accrued balance due on Series A Convertible Preferred Stock dividends total $42,047 and $42,047 as of December 31, 2013 and 2012, respectively. The Company will commence dividend payments pursuant to the terms of a settlement agreement as funds are available.

Common Stock

During the year ended December 31, 2012, a Director of the Company exercised 7,500 shares of its common stock at a strike price of $1.05 per share (see Note 7) for total consideration of $7,875.

Equity Awards Granted to Employees

F-12

ST. JOSEPH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following schedule summarizes the changes in the Company’s equity awards for the year ended December 31, 2012.

					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, 2013		452,500	$	1.05	$	1.05	1.50 yrs.	$	-
Granted		50,000	$	1.05	$	1.05
Exercised		-	$	-	$	-
Cancelled/Expired		-	$	-	$	-
Outstanding and exercisable at December 31, 2013		502,500	$	1.05	$	1.05	0.50 yrs.	$	-

On August 10, 2011 the Company’s board of directors extended the deadline for the exercise of the 460,000 options by one year from August 24, 2011 to August 24, 2012. The Company further extended the deadline to December 31, 2012 in a board of directors meeting on August 23, 2012; and most recently extended the deadline to June 30, 2013 in a board meeting on December 12, 2012. The extensions were considered a modification of the original stock options. Accordingly, the Company revalued the stock options, which resulted in a charge to share-based compensation totaling $214,563 for the year ended December 31, 2012.

All stock options were fully vested as of December 31, 2013 and 2012. Aggregate intrinsic value is calculated by determining the amount by which the market price of the stock exceeds the exercise price of the options on December 31, 2013, and then multiplying that amount by the number of options. The exercise price exceeds the market value of the stock on December 31, 2013; therefore the aggregate intrinsic value is zero.

Upon the exercise of stock options, the Company issues new shares that are authorized and not issued or outstanding. The Company does not plan to repurchase shares to meet stock option requirements.

The Black-Scholes options valuation model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company’s stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its stock options.

NOTE 8 – LETTER OF INTENT

On August 8, 2012, St. Joseph, Inc. filed an 8-K current report in connection with the signing of a nonbinding Letter of Intent with Karavos Holdings Limited, for the arrangement of an acquisition of 100% of a holding company which owns 50% interest in a domestic telecommunications operating company. The 8-K current report can be viewed at the SEC’s website; http://www.sec.gov/Archives/edgar/data/1177135/000149315212000866/form8k.htm.

NOTE 9 – LEGAL PROCEEDINGS

On or about January 24, 2012, our subsidiary, Staf*Tek Services, Inc. was served notice that Danny McGowan, a former employee hired and assigned to work for Staf*Tek’s client as a contractor, filed a lawsuit against Staf*Tek Services, Inc. and it’s client in the district court in Tulsa County, Oklahoma, Case No. CJ-2011-7039, in connection with a wrongful termination complaint. Mr. McGowan alleges that he was terminated after one month of employment, but feels he had a guaranteed contract for six months. The wording in his employment agreement that he identifies as guaranteeing his employment for six months was inserted at the request of Staf*Tek’s client.

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ST. JOSEPH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Staf*Tek’s client terminated Mr. McGowan for performance issues after one month of employment. Mr. McGowan filed a lawsuit against Staf*Tek and the client and subsequently filed a motion for default judgment, which was granted by the judge. On March 9, 2012, Stat*Tek filed a motion to vacate the default judgment and requested a new trial. Staf*Tek has engaged counsel and intends to vigorously defend this action. As of this date the client that terminated Mr. McGowan has been dismissed from the lawsuit by the judge because they had not been served within a 6 months of the original filing of the lawsuit by Mr. McGowan’s counsel. Mr. McGowan and his attorney were three weeks late responding to our request for discovery and we requested dismissal. However, the judge did not grant dismissal. Mr. McGowan is seeking damages against Staf*Tek in an amount in excess of $75,000. Management deems the suit to be without merit, however, the costs of defending against the complaint could be substantial. In the event judgment is made against the Company and payment deemed appropriate it may force the Company out of business.

NOTE 10 – COMMITMENT

The Company leases office space in Tulsa, Oklahoma under operating lease which expired in April 2012, the Company is currently leasing the office space on a month to month basis.

Rent expense during the years ended December 31, 2013 and 2012 were $36,327 and $35,990, respectively.

NOTE 11 - SUBSEQUENT EVENT

The Company has evaluated subsequent events through March 31, 2014. Other than those described below, there have been no subsequent events after December 31, 2013 for which disclosure is required.

In a private placement(s) conducted subsequent to December 31, 2013, the Company sold 190,000 shares of common stock to accredited investors at a price of $0.50 per share for gross proceeds totaling $95,000. No underwriters were used and no underwriting discounts or commissions were payable. The shares have been offered and sold by the Company in reliance upon the exemption from registration provided by Regulation D promulgated under the Securities Act of 1933, as amended. The shares were offered and sold only to accredited investors; as such term is defined by Rule 501 of Regulation D. All of the shares sold in the private placement are restricted securities pursuant to Rule 144.

Subsequent to December 31, 2013, the Company converted loans and related accrued interest totaling $157,580 into 315,160 shares of common stock at a value of $0.50 per share.

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