FORM 10-K





UNITED
STATES SECURITIES AND EXCHANGE COMMISSION


Washington, D.C.
20549


þ
            
            ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934


For
the fiscal year ended December 31, 2008


OR


o
            
            TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934


For
the transition period from 
to





Commission
file number:  0-49936





ST.
JOSEPH, INC.


(Exact
name of Small Business Issuer as specified in its charter)





COLORADO
            
            CH90-0197648(State
      or other jurisdiction
            
            (IRS
      Employer Identification No.)of
      incorporation or organization)4870 S. Lewis, Suite 250, Tulsa,
      OK
            
            74105(Address
      of principal executive offices)
            
            (Zip
      Code)





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





Securities
registered under Section 12(b) of the Exchange
Act:   None





Securities
registered under Section 12(g) of the Exchange Act: Common Stock, par value
$0.001 per share





Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yeso  Noþ





Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Exchange Act. Yeso  Noþ





Indicate
by check mark 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. Yesþ 
Noo





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 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.o








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





Large
      accelerated filero
            Accelerated
      filer oNon-accelerated
      filer o
            Smaller
      reporting company þ(Do
      not check if a smaller reporting company)





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





Based
on the closing sale price of $0.15 of the registrant’s common stock on the last
business day of our most recently second fiscal quarter, June 30, 2008, 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 $588,841.





As
of March 25, 2009 there were 7,406,802 shares of the registrant’s Common Stock
issued and outstanding.







ST.
JOSEPH, INC.


Form
10-K


For
the Fiscal Year Ended December 31, 2008





TABLE
OF CONTENTS





PART
      I
                  
                  2ITEM
      1.  BUSINESS
                  
                  3ITEM
      1A RISK FACTORS
                  
                  5ITEM
      2.  PROPERTIES
                  
                  7ITEM
      3.  LEGAL PROCEEDINGS
                  
                  7ITEM
      4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY
      HOLDERS
                  
                  8PART
      II
                  
                  8ITEM
      5.  MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
      MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
                  
                  8ITEM
      6.  SELECTED FINANCIAL DATA
                  
                  10ITEM
      7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
      AND RESULTS OF OPERATIONS
                  
                  11ITEM
      7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
      RISK
                  
                  14ITEM
      8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
                  
                  14ITEM
      9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
      AND FINANCIAL DISCLOSURE
                  
                  15ITEM
      9A. CONTROLS AND PROCEDURES
                  
                  15ITEM
      9B.  OTHER INFORMATION.
                  
                  16PART
      III
                  
                  16ITEM
      10.  DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE
      GOVERNANCE
                  
                  16ITEM
      11.  EXECUTIVE COMPENSATION
                  
                  18ITEM
      12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
      MANAGEMENT AND RELATED STOCKHOLDER MATTERS
                  
                  21ITEM
      13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
      DIRECTOR INDEPENDENCE
                  
                  22ITEM
      14.  PRINCIPAL ACCOUNTING FEES AND SERVICES
                  
                  24ITEM
      15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES
                  
                  24




i


PART
I





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 slow
downs 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.




-2-


ITEM
1.  BUSINESS





Our
Background and Business Development





St.
Joseph, Inc. (“us,” “we,” “our” or the “Company”) 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.





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 unsuccessful 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.  We acquired Staf*Tek Services, Inc. (“Staf*Tek”) as a wholly
owned subsidiary on January 2, 2004.  We presently conduct all of our
business through Staf*Tek.




Acquisition
Strategy




In
January 2006, our Board decided to pursue suitable candidates for future
acquisition that potentially create value for our existing
shareholders.  The Company hopes to acquire other operating companies
as subsidiaries.  Acquisition targets may be in sectors other then the
Company’s current sector of providing employment agency
services.   Although not the Company’s goal, the Company would
also consider a reverse merger, if it were seen to be a growth opportunity for
our existing shareholders.





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




Staf*Tek
Services, 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.




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.   We paid $0 in Series A Stock dividends and
accrued $78,208 during the year ended December 31, 2008.




The
convertible preferred A stock may be converted to the Company's common stock at
the rate of one share of convertible 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.  As of December 31, 2008,
the Company had paid the $200,000 cash, which was owed under the terms of the
Agreement.




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 over50 skill
sets.




-3-




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:




o
            More
      flexible hours and work arrangements, coupled with competitive wages and
      benefits; and


o
            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: getsmartonline.com,
staftek.com, stafmedglobal.com, confidentialsearch.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 experienceand
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.




-4-




Major
Clients




We are
dependent on a small number of clients for a majority of our revenues. During
our year ended December 31, 2008, approximately 73% of our revenues were derived
from our largest client and all of our revenues were derived from a total of
nine clients.




Employees and Revenue
Generating




We
currently have five paid employees, and no part-time employees.




Reports to Security
Holders





We are
subject to the informational requirements of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and in accordance with the Exchange Act
we file reports, proxy statements and other information with the Securities and
Exchange Commission (the "Commission").  Our security holders or any
member of the public may inspect and copy the reports, proxy statements and
other information filed by us with the Commission at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, as well as the Commission's Regional
Offices.  Our security holder or any member of the public may also
call the Commission at 1-800-SEC-0330 for more information about the public
reference room, how to obtain copies of documents by mail or how to access
documents electronically on the Commission's Web site at (http://www.sec.gov).





ITEM
1A.  RISK FACTORS





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, 2007 and 2008 contains an explanatory
paragraph indicating that we have incurred recurring losses, and as of December
31, 2008, 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.





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.


We have
taken steps to increase the placement of employees.  However, 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.




-5-




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





We expect
our business to grow, and 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 have 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 the 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 increase 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.


-6-




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.





73%
of our revenues come from one client.





During
our year ended December 31, 2008, approximately 73% 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 clients operations or financial performance may also create a material
adverse effect on our revenues and profits.





Our
revenues are generated by only nine clients.





At the
present time, our revenues come from only nine clients.  The loss of
any of these clients or the decline in business from any of these clients will
have a material adverse effect on our revenues and profits.





ITEM
2.  PROPERTIES





We lease
approximately 3486 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 $3869.  The lease commenced May 1, 2004 and expires April
30, 2012.





ITEM
3.  LEGAL PROCEEDINGS





As
previously disclosed in a current report on Form 8-K, filed with the SEC on June
20, 2007, on June 8, 2007, we filed a complaint against our former President,
CEO and Director John H. Simmons in the United States District Court for the
District of Colorado, Civil Action No. 07-CV-01208. The complaint alleged, among
other things, that Mr. Simmons breached his fiduciary duties by diverting
Company funds for personal and recreational use and acquiring shares of our
common stock without adequate consideration. We are seeking damages against Mr.
Simmons of not less than $75,000, attorneys’ fees, costs of litigation, interest
and tremble damages. On August 27, 2007, this suit was dismissed due to
jurisdictional reasons and the parties agreed to move the case to
Texas.





On
October 11, 2007, we re-filed this lawsuit United States District Court,
Northern District of Texas, Dallas Division, Civil Action No. 307CV1718-R for
the same causes of action and asking for the same relief. Although we believe
that our claims against Mr. Simmons are meritorious, there can be no assurance
that we will prevail in this litigation. At this time, we cannot estimate any
possible loss from this litigation in the event that we do not
prevail.


On
October 3, 2007, Mr. Simmons filed a lawsuit in United States District Court,
Dallas County, Civil Action No. DC-07-11801 against the Company, its officers,
and other individuals.  The complaint alleged, among other things, that the
Mr. Simmons 1,900,000 options were converted and that the Company failed to
repay a $96,000 promissory note and breached a duty to indemnify Mr. Simmons in
relation to previously filed litigation. The complaint also makes a variety of
accusations against Company’s officers and other individuals, including
accusations that these individuals breached fiduciary duties with regard to Mr.
Simmons, engaged in fraud and conspiracy to commit fraud, and converted shares
and options owned by him. Mr. Simmons seeks unspecified damages, both
actual and exemplary, against the Company and the other defendants.  During
the quarter ended March 31, 2008, Gerald McIlhargey, Maureen O’Brien, Donal Ford
and Bruce Schreiner, and David Core were all released from the suit as
defendants. A trial date is set for June 1, 2009 in United States District
Court, Dallas County.  The Company believes that Mr. Simmons
accusations are without factual basis and intends to vigorously defend against
the lawsuit.   The costs of defending against the complaint could be
substantial; however we are unable to predict an exact amount, or even a
meaningful estimate, at this time.




-7-




As
previously disclosed in a quarterly report on Form 10-QSB, filed with the SEC on
November 20, 2006, on July 28, 2006, Zachary Karo, a former employee, filed a
lawsuit against the Company and its subsidiary Staf*Tek Services, Inc. in the
district court in Tulsa County, Oklahoma, Case No. CJ 2006 04713, in connection
with stock options allegedly granted to Mr. Karo. Mr. Karo alleges that he was
granted an option to purchase up to 25,000 shares of the Company’s common stock
at $0.10 per share but that management refused to issue Mr. Karo such shares
upon his attempt toexercise of the alleged
option. A motion was made by the Companyand granted with
prejudice to dismiss the case. Mr. Karo re-filed to
vacate the dismissal, which was subsequently vacated, and in a hearing on April
2, 2008 the motion for dismissal was approved. At this time there has not been a
date set for a pretrial. Mr. Karo is seeking damages, actual and exemplary,
against the Company in an amount in excess of $10,000. Management denies that
Mr. Karo was owed such stock options. The Company has engaged local counsel and
intends to vigorously defend this action on the basis brought by the plaintiffs.
The costs of defending against the complaint could be substantial; however
management is unable to estimate an amount at this time.





On
September 4, 2008, Phyllis L. Bell and Paul D. Aelmore filed a lawsuit in United
States District Court, Northern District of Oklahoma, Case No.
08-CF-00470-TCK-SAJ against the Company, and officers and directors of the
Company. Ms. Bell and Mr. Aelmore are holders of the Company’s Series A
Convertible Preferred Stock which they received for selling Staf*Tek Services,
Inc. to the Company in January 2004 pursuant to an Agreement of Share Exchange
and Purchase and Sale (the “Purchase Agreement”). The complaint alleged, among
other things, that the Company breached the Share Purchase Agreement by failing
to pay dividends on the Series A Convertible Preferred Stock. The Company has
been accruing the dividends following a determination by its management that the
Company did not have funds legally available for distribution. The complaint
also alleges that the Company made misrepresentations that under circumstances
that constituted fraudulent inducement, fraud and/or constructive fraud, and
breached its duty to deal in good faith with the plaintiffs. The plaintiffs seek
unspecified damages against the Company and the other defendants for
compensatory and punitive damages in excess of $75,000, costs, and pre-judgment
interest. The costs of defending against the complaint could be substantial;
however we are unable to predict an exact amount, or even a meaningful estimate,
at this time.  As of the date of this report, the Company and the
plaintiffs are involved in settlement negotiations.





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





No matter
was submitted to a vote of our shareholders during the fourth quarter of the
fiscal year covered by this report.




PART
II





ITEM
5.  MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES





Our
common stock is traded on the OTC Bulletin Board under the symbol
STJO.OB.





The
following table shows the high and low bid information for our common stock for
each quarter during 2007 - 2008.




QUARTER
                          
                          LOW
      BID
                          
                          
                          HIGH
      BIDQuarter
      ending December 31, 2008
                          
                          $
                          0.10
                          
                          
                          $
                          0.15Quarter
      ending September 30, 2008
                          
                          $
                          0.10
                          
                          
                          $
                          0.22Quarter
      ending June 30, 2008
                          
                          $
                          0.10
                          
                          
                          $
                          0.20Quarter
      ending March 31, 2008
                          
                          $
                          0.20
                          
                          
                          $
                          0.55Quarter
      ending December 31, 2007
                          
                          $
                          0.25
                          
                          
                          $
                          0.35Quarter
      ending September 30, 2007
                          
                          $
                          0.26
                          
                          
                          $
                          1.00Quarter
      ending June 30, 2007
                          
                          $
                          0.70
                          
                          
                          $
                          1.15Quarter
      ending March 31, 2007
                          
                          $
                          0.86
                          
                          
                          $
                          1.55


-8-





The above
information was obtained from the NASD. 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.





As of
December 31, 2008, representing the last trading day of our most recently
completed fiscal quarter, there were 7,406,802 shares of common stock issued and
outstanding, held by approximately 210 shareholders of record.  Within
the holders of record of our common stock are depositories, such as Cede &
Co., that hold shares of stock for several brokerage firms which, in turn, hold
shares of stock for a multitude of additional beneficial
owners.  Accordingly, it is impossible for us to determine exactly how
many beneficial stockholders we actually have.  As of December 31,
2008, there were 386,208 shares of our Series A Convertible Preferred Stock
issued and outstanding, held by four shareholders of record.





As of
December 31, 2008, there were 560,000 outstanding options or warrants to
purchase shares, and 386,208 securities convertible into, shares of the
Company's Common Stock.  The options may be converted into common
shares at a weighted average exercise price of $0.80 per share and the preferred
shares may be converted into common shares on a one for one basis.





Dividend
Policy





We have
never paid a cash dividend on our common stock nor do we anticipate paying cash
dividends on our common stock in the near 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.





Penny
Stock





Our
common stock is subject to the provisions of Section 15(g) and Rule 15g-9 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), commonly
referred to as the "penny stock rule." Section 15(g) sets forth certain
requirements for transactions in penny stocks, and Rule 15g-9(d) (1)
incorporates the definition of "penny stock" that is found in Rule 3a51-1 of the
Exchange Act. The Securities and Exchange Commission ("SEC") generally defines
"penny stock" to be any equity security that has a market price less than $5.00
per share, subject to certain exceptions. If our Common Stock is deemed to be a
penny stock, trading in the shares will be subject to additional sales practice
requirements on broker-dealers who sell penny stocks to persons other than
established customers and accredited investors. "Accredited investors" are
persons with assets in excess of $1,000,000 or annual income exceeding $200,000,
or $300,000 together with their spouse. For transactions covered by these rules,
broker-dealers must make a special suitability determination for the purchase of
such security and must have the purchaser's written consent to the transaction
prior to the purchase. Additionally, for any transaction involving a penny
stock, unless exempt, the rules require the delivery, prior to the first
transaction, of a risk disclosure document, prepared by the SEC, relating to the
penny stock market. A broker-dealer also must disclose the commissions payable
to both the broker-dealer and the registered representative, and current
quotations for the securities. Finally, monthly statements must be sent
disclosing recent price information for the penny stocks held in an account and
information on the limited market in penny stocks. Consequently, these rules may
restrict the ability of broker-dealers to trade and/or maintain a market in our
Common Stock and may affect the ability of our shareholders to sell their
shares.





Equity
Compensation Plans





The
following table sets forth information as of December 31, 2008 with respect to
compensation plans under which we are authorized to issue shares of our common
stock, aggregated as follows:


o     all
compensation plans previously approved by security holders; and


o     all
compensation plans not previously approved by security holders.




-9-




Equity Compensation Plan InformationPlan 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
                        
                        
                        410,000
                        (1)
                        
                        $
                        1.05
                        
                        
                        
                        715,000Equity
      compensation plans not approved by security holders
                        
                        
                        150,000
                        (2)
      (3)
                        
                        $
                        0.10
                        
                        
                        
                        0




(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, 2011.





(2)
            On
      August 24, 2006, our Board of Directors ratified the issuance and grant of
      previously-approved non-qualified stock options to purchase 700,000 shares
      of our common stock with an exercise price of $0.10 per share and a term
      that ends on March 23, 2009 to various individuals who were board members
      at the time of the grant of the options and cancelled options to purchase
      1,900,000 shares of our common
stock.





(3)
            On
      October 28, 2003, our Board of Directors granted stock options to purchase
      200,000 shares of our common stock at an exercise price of $0.10 per share
      and a term that ends on October 28, 2008; and on March 23, 2004, our Board
      of Directors granted stock options to purchase 150,000 shares of our
      common stock at an exercise price of $0.10 per share and a term that ends
      on March 23, 2009.





Cancellation
of Stock Options





Between
October 28, 2003 and March 23, 2004, our Board of Directors approved the grant
of stock options to each of our then Directors, John H. Simmons, Bruce E.
Schreiner, Kenneth L. Johnson, Dr. Milton Harbuck, Kimberly Samon, Gerald
McIlhargey and Jerry Malone (each, an “Optionee”) in consideration for services
provided to our Company as Directors. Each option was exercisable immediately at
the exercise price of $0.10 per share and expires on the tenth day after an
Optionee’s removal from our Board of Directors for reasons other than for a
voluntary resignation.





As
disclosed in the Current Report on Form 8-K filed by the Company on August 30,
2006, at the annual meeting of our Board of Directors on August 24, 2006, our
Directors reviewed the options previously granted by our Board Directors to the
Optionees in consideration for services provided to our Company as Directors.
After careful and exhaustive deliberation, our Directors concluded that the
options granted to Mr. Simmons as consideration for providing the same
directorial services as the other Optionees was not fair and reasonable to our
shareholders. Specifically, our Board of Directors concluded that the amount of
options granted to Mr. Simmons, which was 2,000% more than the amount of options
granted the other Optionees individually, and 333% more than the amount of
options granted to the other Optionees in the aggregate was unduly excessive,
unreasonable, and unfair to our shareholders. Therefore, our Board of Directors
resolved to void 1,900,000 options previously granted to Mr.
Simmons.





In
connection with the cancellation of the options previously granted to Mr.
Simmons, our Board of Directors cancelled 250,000 shares of our common stock
that were previously issued to Mr. Simmons pursuant to the exercise of these now
cancelled options.





In the
same meeting, our Directors concluded that the grant of 100,000 options to each
Optionee was fair and reasonable, and accordingly ratified the issuance of
100,000 options to each Optionee, including Mr. Simmons.  To the
extent that the issuance of the 1,900,000 options which have been voided by
resolution of our Board of Directors is deemed fair, we may have contingent
liability for cancelling Mr. Simmons’ options and shares.





ITEM
6.  SELECTED FINANCIAL DATA





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





-10-





ITEM
7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS





GENERAL





The
following discussion should be read in conjunction with our audited Consolidated
Financial Statements and accompanying Notes, included herein.  Except
for the historical information contained herein, the discussion in this report
contains certain forward-looking statements that involve risks and
uncertainties, such as statements of our business plans, objectives,
expectations and intentions as of the date of this filing. The cautionary
statements about reliance on forward-looking statements made earlier in this
document should be given serious consideration with respect to all
forward-looking statements wherever they appear in this report, notwithstanding
that the "safe harbor" protections available to some publicly reporting
companies under applicable federal securities law do not apply to us as an
issuer of penny stocks. Our actual results could differ materially from the
results anticipated in these statements as a result of a variety of factors,
including those discussed in our filings with the Securities and Exchange
Commission and as discussed in the sections under the heading "Risk Factors" in
this Report.





Any
reference to "we," "us" and "our" herein shall mean St. Joseph, Inc., together
with its consolidated subsidiary, Staf*Tek Services, Inc.





Overview





The
Company's ability to continue as a going concern is contingent upon the
successful completion of additional financing arrangements, and the development
of operational solutions to achieve and maintain profitable operations.
Management plans to finance the operating and capital requirements of the
Company through business alliances, such as strategic or financial transactions
with third parties, the sale of securities, or other financing arrangements.
Amounts raised will be used for working capital purposes, to further develop the
Company's services, and to provide financing for marketing and promotion of the
Company's business. While the Company is expending its best efforts to achieve
the above plans, there is no assurance that any such activity will generate
funds that will be available for operations.





These
conditions raise substantial doubt about the Company's ability to continue as a
going concern. The Company's financial statements do not include any adjustments
related to the recoverability and classification of recorded asset amounts or
the amounts and classification of liabilities that may be necessary should the
Company be unable to continue in existence. (See "Risk Factors" and "Financial
Statements Footnote 1.")





For the
year ended December 31, 2008, St. Joseph, Inc. had generated revenues of
$2,432,778, which is down from $2,485,279 for the year ended December 31,
2007.  The decrease is primarily due to the decrease in revenues due
the loss in Staf*Tek’s contracted employees.  For the year ending
December 31, 2008, Staf*Tek's total service revenues decreased by $52,501 when
compared to the total service revenues for 2007.





Since
inception Staf*Tek business has been the recruiting and the placement of
professional technical personnel on a temporary and permanent basis in the
Tulsa, Oklahoma area. Staf*Tek assists their clients with projects that require
specialized expertise ranging from multiple platform systems integration to
end-user support, including specialists in programming, networking, systems
integration, database design and help desk support, as well as providing
qualified candidates in senior and entry level finance and
accounting.




-11-





Results
of Operations for the Twelve Months Ended December 31, 2008 and
2007





For the Year EndedDecember 31, 2008
                        
                        
                        December 31, 2007% of
                        
                        
                        
                        
                        
                        % of
                        
                        
                        Change
                        
                        
                        Change$
                        
                        
                        Revenue
                        
                        
                        
                        $
                        
                        
                        Revenue
                        
                        
                        
                        $
                        
                        
                        
                        %Net
      Revenues
                        
                        $
                        2,432,778
                        
                        
                        
                        100.00
                        %
                        
                        $
                        2,485,279
                        
                        
                        
                        100.00
                        %
                        
                        $
                        (52,501
                        )
                        
                        
                        (2.11
                        )
      %Cost
      of Revenues
                        
                        
                        1,870,063
                        
                        
                        
                        76.87
                        %
                        
                        
                        1,994,271
                        
                        
                        
                        80.24
                        %
                        
                        
                        (124,208
                        )
                        
                        
                        (6.23
                        )
      %Gross
      Margin (Loss)
                        
                        
                        562,715
                        
                        
                        
                        23.13
                        %
                        
                        
                        491,008
                        
                        
                        
                        19.76
                        %
                        
                        
                        71,707
                        
                        
                        
                        14.60
                        %Operating
      Expenses Selling, General and Administrative Expenses
                        
                        
                        535,469
                        
                        
                        
                        22.01
                        %
                        
                        
                        494,459
                        
                        
                        
                        19.90
                        %
                        
                        
                        41,010
                        
                        
                        
                        8.29
                        %Depreciation
      and Amortization
                        
                        
                        1,123
                        
                        
                        
                        0.05
                        %
                        
                        
                        3,100
                        
                        
                        
                        0.12
                        %
                        
                        
                        (1,977
                        )
                        
                        
                        (63.77
                        )
      %Loss
      on goodwill impairment
                        
                        
                        -
                        
                        
                        
                        0.00
                        %
                        
                        
                        258,525
                        
                        
                        
                        10.40
                        %
                        
                        
                        (258,525
                        )
                        
                        
                        (100.00
                        )
      %Total
      Operating Expenses
                        
                        $
                        536,592
                        
                        
                        
                        22.06
                        %
                        
                        $
                        756,084
                        
                        
                        
                        30.42
                        %
                        
                        $
                        (219,492
                        )
                        
                        
                        (29.03
                        )
      %Income
      (Loss) from Operations
                        
                        $
                        26,123
                        
                        
                        
                        1.07
                        %
                        
                        
                        (265,076
                        )
                        
                        
                        (10.67
                        )
      %
                        
                        
                        291,199
                        
                        
                        
                        (109.85
                        )
      %Other
      Income (Expense) Interest Income
                        
                        
                        (1
                        )
                        
                        
                        (0.00
                        )
      %
                        
                        
                        1
                        
                        
                        
                        0.00
                        %
                        
                        
                        (2
                        )
                        
                        
                        (200.00
                        )
      %Other
      Income (Expense)
                        
                        
                        -
                        
                        
                        
                        0.00
                        %
                        
                        
                        (41,608
                        )
                        
                        
                        (1.67
                        )
      %
                        
                        
                        41,608
                        
                        
                        
                        (100.00
                        )
      %Interest
      Expense
                        
                        
                        (29,295
                        )
                        
                        
                        (1.20
                        )
      %
                        
                        
                        (28,880
                        )
                        
                        
                        (1.16
                        )
      %
                        
                        
                        (415
                        )
                        
                        
                        1.44
                        %Net
      Other Expense
                        
                        $
                        (29,296
                        )
                        
                        
                        (1.20
                        )
      %
                        
                        $
                        (70,487
                        )
                        
                        
                        (2.84
                        )
      %
                        
                        $
                        41,191
                        
                        
                        
                        (58.44
                        )
      %Loss
      before provision for income tax
                        
                        
                        (3,173
                        )
                        
                        
                        (0.13
                        )
      %
                        
                        
                        (335,563
                        )
                        
                        
                        (13.50
                        )
      %
                        
                        
                        332,390
                        
                        
                        
                        (99.05
                        )
      %Provision
      for Income Taxes
                        
                        
                        0
                        
                        
                        
                        0.00
                        %
                        
                        
                        0
                        
                        
                        
                        0.00
                        %
                        
                        
                        0
                        
                        
                        
                        0.00
                        %Net
      Income (Loss)
                        
                        $
                        (3,173
                        )
                        
                        
                        (0.13
                        )
      %
                        
                        $
                        (335,563
                        )
                        
                        
                        (13.50
                        )
      %
                        
                        $
                        332,390
                        
                        
                        
                        (99.05
                        )
      %




Net
Revenues





Net
Revenues for the twelve months ended December 31, 2008 decreased to $2,432,778
from $2,485,279 for the twelve months ended December 31, 2008. The decrease in
net revenues of $52,501 or approximately 2.11%, over the 2008 period is due
primarily to decreased revenues generated by the loss of contracted employees
since the prior period.





Cost of
Revenues





Cost of
Revenues for the twelve months ended December 31, 2008 decreased to $1,870,063
from $1,994,271 for the twelve months ended December 31, 2007. The overall
decrease in cost of revenues of $124,208, or approximately 6.23%, over the 2008
period is directly attributable to the cost associated with the decrease in
number of newly contracted employees described above.





Gross
Margin





The
overall gross margin for the twelve months ended December 31, 2008 increased to
$562,715 from $491,008 for the twelve months ended December 31, 2007. The
overall increase in gross margin of $71,707 or approximately 14.60% over the
2008 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, 2008 decreased to
$536,592 from $756,084 for the twelve months ended December 31,
2007.  Reasons for the overall decrease in operating expenses of
$219,492 or approximately 29.03%, over the 2008 period is covered below in our
discussions of General and Administrative Expenses and Stock-Based
Compensation.


-12-


General and Administrative
Expenses





General
and administrative expenses for the twelve months ended December 31, 2008
increased to $535,469 from $494,459 for the twelve months ended December 31,
2007. The increase in general and administrative expenses of $41,010 or
approximately 8.29%, over the 2008 period is due primarily to the increase in
administrative staff salaries.





Stock-Based Compensation –
Common Stock Options Granted





We did
not grant any common stock options in the twelve months ended December 31,
2008.





Loss on Goodwill
Impairment





The
Company recorded a non-cash goodwill impairment charge of $0 in the accompanying
consolidated financial statements for the year ended December 31, 2008.
Following the impairment charge, there is no goodwill balance remaining at
December 31, 2008.





Total Operating Income and
Losses





Total
operating income for the twelve months ended December 31, 2008 increased to
$26,123 from operating losses of $265,076 for the twelve months ended December
31, 2007. The overall increase in operating income of $291,199 or approximately
109.85% over the 2008 period is due reduction in goodwill.





Net Other
Expenses





Net other
expenses for the twelve months ended December 31, 2008 decreased to $29,296 from
$70,487 for the twelve months ended December 31, 2007.  The overall
decrease in our other expenses of $41,191, or approximately 58.44% over the 2008
period is primarily due the reduction preferred stock dividend
payments.





Interest
Income





Interest
income for the twelve months ended December 31, 2008 decreased to $(1) from $1
for the twelve months ended December 31, 2007.





Interest
Expense





Interest
expense for the twelve months ended December 31, 2008 increased to $29,295 from
$28,880 for the twelve months ended December 31, 2007. The overall increase in
our interest expense of $415 or approximately 1.44% over the 2008 period is due
primarily to the increase of interest bearing debts.





Net Loss





Net Loss
for the twelve months ended December 31, 2008 decreased to $3,173 from $335,563
for the twelve months ended December 31, 2007. This decrease in net loss of
$332,390 or approximately 99.05% over the 2008 period is due primarily to the
elimination of Goodwill Impairment.





Liquidity
and Capital Resources




December 31, 2008
                  
                  
                  December 31, 2007Net
      cash (used in) provided by operating activities
                  
                  $
                  29,485
                  
                  
                  $
                  (53,039
                  )Net
      cash (used in) provided by investing activities
                  
                  $
                  (1,628
                  )
                  
                  $
                  (2,473
                  )Net
      cash (used in) provided by financing activities
                  
                  $
                  (10,000
                  )
                  
                  $
                  241,414




General





For the
twelve months ended December 31, 2008, we had positive cash flows resulting from
$29,485 of cash provided by our operating activities, $1,628 of cash used in our
investing activities and $10,000 of cash used in our financing
activities.  Accordingly, for the twelve months ended December 31,
2008, our funds from operations were sufficient to cover our daily operations as
further explained below.


-13-





Cash Flows from Operating
Activities





Net cash
provided by our operating activities of $29,485 for the twelve months ended
December 31, 2008 was primarily attributable to the net loss and offset by
depreciation expense, stock based compensation, decreases in accounts receivable
and increases in accrued liabilities.





Cash Flows from Investing
Activities





Net cash
used in our investing activities of $1,628 for the twelve months ended December
31, 2008.





Cash Flows from Financing
Activities





Net cash
used in our financing activities of $10,000 for the twelve months ended December
31, 2008 primarily payments on our line of credit net of proceeds from a note
payable.





Internal Sources of
Liquidity





For the
twelve months ended December 31, 2008, the revenues generated from our
operations were sufficient to fund our daily operations.  Gross profit
for fiscal year 2008 was $562,715, which was sufficient to meet our operating
expenses of $536,592 for the same period. There is no assurance that funds from
our future operations will meet the requirements of our daily operations in the
future. In the event that funds from our operations will be insufficient to meet
our operating requirements, we will need to seek other sources of financing to
maintain liquidity.





External Sources of
Liquidity





We
actively pursue all potential financing options as we look to secure additional
funds to both stabilize and grow our business operations. Our management will
review any financing options at their disposal, and will judge each potential
source of funds on its individual merits. There can be no assurance that we will
be able to secure additional funds from debt or equity financing, as and when we
need to, or if we can, that the terms of such financing will be favorable to us
or our existing stockholders.





As of
December 31, 2008, we have debt in the total aggregate amount of $228,100 (net
of unamortized discount), as summarized in Notes 2 and 4 to the financial
statements. This debt was incurred to pay our operating costs, compliance costs
and legal fees for our pending litigation.





From
October 2008 through February 2009 we sold 3,000,000 shares of common stock to
11 accredited investors at a price of $0.05 per share for projected gross
proceeds of $150,000, of which $100,000 has already been received by the
Company.





Our
business plan involves, in part, increasing the number of employees placed both
on a temporary and permanent basis. Such increased placement is expected to
result in increased profit to us, although it also results in increased
short- termcash needs. We have
utilized net revenues, the proceeds from a number of private sales of our equity
securities, the exercise of options, the issuance of promissory notes and our
line of credit to meet our working capital requirements. We are reluctant to
incur further debt and intend to rely upon net revenues and private sales of
equity securities to meet our liquidity needs for the next 12
months.





During
2009, we plan to grow our revenues without significant increases in our selling,
general and administrative expenses. Our liquidity and capital resources, as
well as business prospects, are all subject to the risks disclosed in Item 1A,
among others.





ITEM
7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK.








ITEM
8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.





Our
Financial Statements and supplementary data are included beginning immediately
following the signature page to this Report.


-14-




ITEM
9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE





None.





ITEM
9A. CONTROLS AND PROCEDURES





Evaluation of Disclosure Controls and
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, 2008 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, 2008, 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.





Changes
in Internal Control over Financial Reporting.




There
have been no changes in our internal control over financial reporting during the
year ended December 31, 2008, that have materially affected, or are reasonably
likely to materially affect, our internal control over financial
reporting.




Management’s
Evaluation of Internal Control over Financial Reporting





Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in Rule 13a-15(f) of
the Exchange Act. This system is designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of the
consolidated financial statements for external purposes in accordance with
generally accepted accounting principles. Our internal control over financial
reporting includes those policies and procedures that: (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect
our transactions and disposition of our assets; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of
consolidated financial statements in accordance with generally accepted
accounting principles, and that our receipts and expenditures are being made
only in accordance with authorizations of our management and directors; and
(3) provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use or disposition of our assets that could have a
material effect on the consolidated financial statements.




Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Projections of any evaluation of effectiveness
to future periods are 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. All internal control systems, no matter
how well designed, have inherent limitations. Therefore, even those systems
determined to be effective can provide only reasonable assurance with respect to
financial statement preparation and presentation. The scope of management’s
assessment of the effectiveness of internal control over financial reporting
includes all of our Company’s subsidiaries.




Our
management performed an assessment as of December 31, 2008 of the
effectiveness of our internal controls over financial reporting based upon the
framework in Internal Control – Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO), and concluded that
our internal control over financial reporting was effective as of
December 31, 2008.


-15-




This
Annual Report does not include an attestation report of the Company’s
independent registered public accounting firm regarding internal control
over financial reporting. Management’s report was not subject to
attestation by the Company’s independent registered public accounting firm
pursuant to temporary rules of the Securities and Exchange Commission that
permit the Company to provide only management’s report in this annual
report.





ITEM
9B.  OTHER INFORMATION.





None.





PART
III





ITEM
10.  DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE
GOVERNANCE





The
following information sets forth the names of the directors, executive officers,
promoters control persons of the Company, their present positions with the
Company, and their biographical information.




Name
                
                Age
                
                Position(s) Held
                
                Date Service BeganGerald
      McIlhargey
                
                61
                
                President,
      Chief Executive Officer and Director
                
                March
      2004Kenneth
      L. Johnson
                
                49
                
                Secretary,
      Treasurer and Director
                
                April
      2000Bruce
      Schreiner
                
                54
                
                Director
                
                October
      2003Donal
      Ford
                
                53
                
                Director
                
                August
      2006Maureen
      O’Brien
                
                60
                
                Director
                
                August
      2006John
      Blackmon
                
                53
                
                President
      of Staf*Tek Services Inc.
                
                June
      2004




Gerald McIlhargey – Mr.
McIlhargey has been a Director of St. Joseph since March of 2004. Mr. McIlhargey
has spent over 26 years in management consulting for public companies. In his
various management roles, Mr. McIlhargey has extensive experience in Marketing
and Manufacturing as well as the Financing of Public Companies. Mr. McIlhargey
has had a key role with several public companies, including International Corona
Resources, Collingwood Energy, Sense Technologies Inc. and Male Leaf
Petroleum.  Mr. McIlhargey received a Bachelor of Education degree
from Simon Fraser University in British Columbia, Canada in 1972.





Kenneth L. Johnson – Mr.
Johnson has been a Director and Secretary/Treasurer of the Company since April
of 2000.  Mr. Johnson has been 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.  Mr. Johnson 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 – Mr.
Schreiner, CPA, has been a Director of the Company since October of 2003. Mr.
Schreiner has also been 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. Mr.
Schreiner 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 – Mr. Ford
has been a Director of the Company since August 24, 2006.  For the
past ten years Mr. Ford has been President of Pinnacle Financial Services, Inc.,
a Third Party Administrator for Pension and Profit Sharing Plans located in
Lantana, FL. 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–Ms. O’Brien has been a
Director of the Company since August 24, 2006. For the past six 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 start up ventures with Real Applications, Inc. which included integrating an
acquired programming services company.




-16-




John Blackmon – 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.  Mr. Blackmon 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.




Term
of Office





Our
directors are elected for a one-year term to hold office until the next annual
general meeting of our shareholders, or until removed from office in accordance
with our bylaws and applicable law.  Our officers are appointed by our
Board of Directors and hold office until removed by the Board.





Family
Relationships





There are
no family relationships among the our 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 past five years, no present or former director, executive officer or person
nominated to become a director or an executive officer of the
Company:





(1)
            was
      a general partner or executive officer of any business against which any
      bankruptcy petition was filed, either at the time of the bankruptcy or two
      years prior to that time;





(2)
            was
      convicted in a criminal proceeding or named subject to a pending criminal
      proceeding (excluding traffic violations and other minor
      offenses);





(3)
            was
      subject to any order, judgment or decree, not subsequently reversed,
      suspended or vacated, of any court of competent jurisdiction, permanently
      or temporarily enjoining, barring, suspending or otherwise limiting his
      involvement in any type of business, securities or banking activities;
      or





(4)
            was
      found by a court of competent jurisdiction (in a civil action), the
      Securities and Exchange Commission or the Commodity Futures Trading
      Commission to have violated a Federal or state securities or commodities
      law, and the judgment has not been reversed, suspended or
      vacated.





Committees
of the Board of Directors; Meetings





During
the year ended December 31, 2008, the entire Board met six times and acted seven
times by unanimous written consent. During fiscal year 2008, no director
attended fewer than 75% 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.





The
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, 2008, the Audit
Committee met two times. 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.




-17-




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.





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, 2008, the Compensation Committee met one time 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 Securities Exchange Act of 1934





Section
16(a) of the Securities Exchange Act of 1934 (the "34 Act") requires our
officers and directors and persons owning more than ten percent of our Common
Stock to file initial reports of ownership and changes in ownership with the
Securities and Exchange Commission ("SEC"). Officers, directors and persons who
are the beneficial owners of more than 10% of the common stock of the Company
are required by SEC regulation to furnish us with copies of all Section 16(a)
forms they file. Based solely upon review of the copies of such reports
furnished to us during, and with respect to, the fiscal year ended December 31,
2008 or any written representations we received from a director, officer, or
beneficial owner of more than 10% of our common stock that no other reports were
required during that period, we believe that, for the fiscal year ended December
31, 2008, all Section 16(a) filing requirements applicable to our reporting
persons were met.





Code
of Ethics





We have
adopted a code of ethics that applies to our principal executive officer,
principal financial officer, principal accounting officer or controller, and
persons performing similar functions.  The code of ethics can be
viewed on our website: www.stjosephinc.com.





ITEM
11.  EXECUTIVE COMPENSATION





Summary
Compensation Table





The
following table sets forth information concerning the compensation of our named
executive officers during 2006, 2007 and 2008:




-18-





Summary Compensation
Table




Name
                                                and
                                                Principal
                                                Position
                                              
                                              Year
                                              
                                              Salary
                                                ($)
                                              
                                              
                                              Bonus
                                                ($)
                                              
                                              
                                              Stock
                                                Awards
                                                ($)
                                              
                                              
                                              Option
                                                Awards
                                                ($)
                                              
                                              
                                              Non-
                                                Equity
                                                Incentive
                                                Plan
                                                Com-
                                                pensation
                                                ($)
                                              
                                              
                                              Non-
                                                Qualified
                                                Deferred
                                                Compen-
                                                sation
                                                Earnings
                                                ($)
                                              
                                              
                                              All other
                                                Compen-
                                                sation
                                                ($)
                                              
                                              
                                              Total
                                                ($)(a)
                                              
                                              (b)
                                              
                                              (c)
                                              
                                              
                                              (d)
                                              
                                              
                                              (e)
                                              
                                              
                                              (f)
                                              
                                              
                                              (g)
                                              
                                              
                                              (h)
                                              
                                              
                                              (i)
                                              
                                              
                                              (j)Gerald
                                              
                                              2006
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              $
                                              36,300
                                              (1)
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              $
                                              36,300McIlhargey
                                              
                                              2007
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -President,
                                              
                                              2008
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -CEO
      andDirectorKenneth
      L.
                                              
                                              2006
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              $
                                              18,150
                                              (2)
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              $
                                              18,150Johnson,
                                              
                                              2007
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -Secretary,
                                              
                                              2008
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -TreasurerandDirectorJohn
                                              
                                              2006
                                              
                                              $
                                              72,000
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              $
                                              18,150
                                              (2)
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              $
                                              18,150Blackmon,
                                              
                                              2007
                                              
                                              $
                                              72,000
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -President
      of
                                              
                                              2008
                                              
                                              $
                                              92,000
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              $
                                              92,000Staf*TekServices,Inc.




(1)
            Calculated
      pursuant to FAS 123R.  Consists of options to purchase 100,000
      shares of common stock at an exercise price of $1.05 per share, which was
      the fair market price as of the date of the grant, August 24,
      2006.  The options expire August 24,
  2011.





(2)
            Calculated
      pursuant to FAS 123R. Consists of options to purchase 50,000 shares of
      common stock at an exercise price of $1.05 per share, which was the fair
      market price as of the date of the grant, August 24, 2006.  The
      options expire August 24, 2011.





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 August 24, 2011.





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. The options have an exercise price of $1.05
per share and expire on August 24, 2011.


-19-





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 $92,000 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 August 24, 2011.





OUTSTANDING
EQUITY AWARDS AT FISCAL-END





The
following table provides information concerning equity awards as of our 2008
fiscal year end, December 31, 2008, held by each of our named executive
officers.





OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END


Option Awards
                
                Stock AwardsName
                
                Number of
                  Securities
                  Underlying
                  Unexercised
                  Options
                  (#)
                  Exercisable
                
                
                Number of
                  Securities
                  Underlying
                  Unexercised
                  Options
                  (#)
                  Unexercisable
                
                
                Equity
                  Incentive
                  Plan
                  Awards:
                  Number of
                  Securities
                  Underlying
                  Unexer-cised
                  Unearned
                  Options
                  (#)
                
                
                Option
                  Exercise
                  Price ($)
                
                Option
                  Expira-tion
                  Date
                
                Number
                  of Shares
                  or Units
                  of Stock
                  That
                  Have Not
                  Vested
                  (#)
                
                
                Market
                  Value of
                  Shares
                  of Units
                  of Stock
                  That
                  Have
                  Not
                  Vested
                  (#)
                
                
                Equity
                  Incentive
                  Plan
                  Awards:
                  Number of
                  Unearned
                  Shares,
                  Units or
                  Other
                  Rights That
                  Have Not
                  Vested
                
                
                Equity
                  Incentive
                  Plan
                  Awards:
                  Market or
                  Payout
                  Value of
                  Unearned
                  Shares,
                  Units or
                  Other
                  Rights That
                  Have Not
                  Vested
                  ($)(a)
                
                (b)
                
                
                (c)
                
                
                (d)
                
                
                (e)
                
                (f)
                
                (g)
                
                
                (h)
                
                
                (i)
                
                
                (j)Gerry
      McIlhargey
                
                
                100,000
                
                
                
                -
                
                
                
                -
                
                
                $
                1.05
                
                August 24, 2011
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Kenneth
      L. Johnson
                
                
                50,000
                
                
                
                -
                
                
                
                -
                
                
                $
                1.05
                
                August
      24, 2011
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -John
      Blackmon
                
                
                50,000
                
                
                
                -
                
                
                
                -
                
                
                $
                1.05
                
                August
      24, 2011
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -





Director
Compensation





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 expire on
August 24, 2011.  All of these options were still outstanding and
unexercised as of December 31, 2008.





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,
2008:




-20-





Name
                
                Fees
                  earned
                  or
      paid
                  in
      cash
                  ($)
                
                
                Stock
                  Awards
                  ($)
                
                
                Option
                  Awards
                  ($)
                
                
                Non-equity
                  incentive
      plan
                  compensation
                  ($)
                
                
                Nonqualified
                  deferred
                  compensation
                  earnings
                  ($)
                
                
                All
      other
                  compensation
                  ($)
                
                
                Total
                  ($)(a)
                
                (b)
                
                
                (c)
                
                
                (d)
                
                
                (e)
                
                
                (f)
                
                
                (g)
                
                
                (h)Bruce
      Schreiner
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Donal
      Ford
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Maureen
      O’Brien
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -





ITEM
12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS.





Equity
Compensation Plans





Information
regarding securities authorized for issuance under equity compensation plans is
disclosed in Item 5 under “Equity Compensation Plans.”





Security
Ownership of Certain Beneficial Owners and Management





The
following table sets forth information as of March 30, 2009 based on information
obtained from the persons named below, with respect to the beneficial ownership
of the our common stock by (i) each person (including groups) known to us to be
the beneficial owner of more than 5 percent 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
      ofBeneficial
      Owner (1)
                
                Number
      of
                  Shares
      of
                  Common
                  Stock
      (2)
                
                
                Percent
                  Outstanding
                
                
                Number
      of
                  Shares
                  of
      Series A
                  Preferred
                  Stock
      (2)
                
                
                Percent
                  OutstandingGerald
      McIlhargey, President, Chief
                  Executive
      Officer and Director
                
                
                889,923
                (3)
                
                
                11.11
                %
                
                
                0
                
                
                
                0
                %Kenneth
      L. Johnson, Secretary, Treasurer and Director
                
                
                150,000
                (4)
                
                
                2.01
                %
                
                
                0
                
                
                
                0
                %Bruce
      Schreiner, Director
                
                
                50,000
                (5)
                
                
                0.67
                %
                
                
                0
                
                
                
                0
                %Maureen
      O’Brien, Director
                
                
                75,000
                (4)
                
                
                1.01
                %
                
                
                0
                
                
                
                0
                %Donal
      Ford, Director
                
                
                75,000
                (4)
                
                
                1.01
                %
                
                
                0
                
                
                
                0
                %John
      Blackmon, President of Staf*Tek Services, Inc.
                
                
                79,954
                (4)
                
                
                1.07
                %
                
                
                0
                
                
                
                0
                %All
      Executive Officers and Directors as a Group(5
      individuals)
                
                
                1,319,877
                
                
                
                15.99
                %
                
                
                0
                
                
                
                0
                %Hong
      Kong Base, Ltd. (7)
                
                
                1,450,000
                (8)
                
                
                15.81
                %
                
                
                0
                
                
                
                0Desert
      Projects, Inc. (9)
                
                
                1,116,667
                (10)
                
                
                14.30
                %
                
                
                0
                
                
                
                0Phyllis
      L. Bell
                
                
                560,000
                (6)
                
                
                7.24
                %
                
                
                330,000
                
                
                
                85.45
                %




-21-




(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 Desert Projects, Inc. is 73-185, Suite
      D, Highway 111, Palm Desert, California, 92260. The address for Ms. Bell
      is Route 1 Box 650, Haskell, Oklahoma 74436.  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 7,406,802 shares of common stock and 386,208 shares of Series A
      Preferred Stock issued and outstanding on March 25, 2009. The 3,000,000
      shares in the Company’s recently completed private placement were not
      issued and outstanding as of March 25, 2009. The Company no longer has any
      shares of Series B Preferred Stock issued and
      outstanding.  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
      500,000 shares of common stock issuable pursuant to subscription in the
      Company’s recently concluded private placement, and 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 50,000 shares of our common stock at an
      exercise price of $1.05 per share.





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





(6)
            Includes
      330,000 share of common stock that may be acquired through conversion of
      330,000 shares of Series A Preferred Stock, 60,000 shares held by a trust
      controlled by Ms. Bell and 170,000 of our common
  stock.





(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)
            Includes
      500,000 shares of common stock issuable pursuant to subscription in the
      Company’s recently concluded private
placement.





(9)
            Desert
      Projects, Inc. is a corporation organized under the laws of the State of
      Nevada and is beneficially owned by James Ralph
  Houston.





(10)
            Includes
      400,000 shares of common stock issuable pursuant to subscription in the
      Company’s recently concluded private
placement





ITEM
13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE





CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS





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 2008 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.




-22-


Gerald
McIlhargey





On
January 5, 2009, COLEMC Investments, Ltd., a Canadian company owned by Gerald
McIlhargey, President and a Director of our Company, purchased 500,000 shares of
our common stock in a private placement for $0.05 per share. These shares are
deemed to be beneficially owned by Mr. McIlhargey.





Desert
Projects Inc. and James Ralph Houston





On
January 3, 2009, Desert Projects, Inc., a 10%+ shareholder of the Company,
purchased 400,000 shares of our common stock in a private placement for $0.05
per share.  Desert Projects, Inc. is a Nevada corporation beneficially
owned by James Ralph Houston.





Hong
Kong Base, Ltd.





On
February 16, 2009, Hong Kong Base, Ltd., a 10%+ shareholder of the Company,
purchased 500,000 shares of our common stock in a private placement for $0.05
per share.  Hong Kong Base, Ltd. is a Hong Kong company beneficially
owned by Miss Yvonne Chun Siu Fun.




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.


-23-





ITEM
14.  PRINCIPAL ACCOUNTING FEES AND SERVICES.





We
appointed the accounting firm of Cordovano and Honeck, LLP, located at 88
Inverness Circle East, Building M-103, Englewood, Colorado 80112, to serve as
our independent auditors for the fiscal years ended December 31, 2008 and
2007.  During our fiscal years 2008 and 2007, accrued fees owed to
Cordovano and Honeck, LLP are as follows:





Audit
Fees





2008
                  
                  2007$                 26,585.00
                  
                  $
                  22,420.00





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





2008
                  
                  2007$                  
      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


2008
                  
                  2007$                  
      0.00
                  
                  $
                  0.00





ITEM
15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES.





EXHIBIT NO.
                    
                    DESCRIPTION
      OF DOCUMENT2.1  (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.




-24-





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.


-25-


SIGNATURES





Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this Report to be signed on its behalf by
the undersigned, thereunto duly authorized.





Dated:  March
      31, 2009St.
      Joseph, Inc.By:  /s/ Gerry
      McIlhargeyGerry
      McIlhargey, President and Chief Executive
  Officer





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/ Gerry McIlhargey
              
              March
      31, 2009Gerry
      McIlhargey, President,Chief
      Executive Officer andDirector/s/Kenneth L. Johnson
              
              March
      31, 2009Kenneth
      L. Johnson,Secretary-Treasurer
      and Director/s/Bruce Schreiner
              
              March
      31, 2009Bruce
      Schreiner, Director/s/ Donal Ford
              
              March
      31, 2009Donal
      Ford, Director/s/ Maureen O’Brien
              
              March
      31, 2009Maureen
      O’Brien, Director


-26-




ST.
JOSEPH, INC.


Index
to Consolidated Financial Statements





PageReport
      of Independent Registered Public Accounting Firm
                F-2Consolidated
      Balance Sheet at December 31, 2008 and 2007
                F-3Consolidated
      Statements of Operations for the years ended December 31, 2008 and
      2007
                F-4Consolidated
      Statement of Changes in Stockholders' Deficit for the years
      endedDecember
      31, 2008 and 2007
                F-5Consolidated
      Statements of Cash Flows for the years ended December 31, 2008 and
      2007
                F-6Notes
      to Consolidated Financial Statements
                F-7
      - F-15


F-1




Report
of Independent Registered Public Accounting Firm




To the
Board of Directors and Shareholders:


St.
Joseph, Inc.





We have
audited the consolidated balance sheet of St. Joseph, Inc. as of December 31,
2008, and the related consolidated statements of operations, changes in
stockholders’ deficit, and cash flows for the years ended December 31, 2008 and
2007. These consolidated financial statements are the responsibility of the
Company’s management.  Our responsibility is to express an opinion on
these consolidated financial statements based on our audits.





We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audits to obtain reasonable assurance about whether
the consolidated financial statements are free of material
misstatement.  The Company is not required to have, nor were we
engaged to perform, an audit of its internal control over consolidated financial
reporting.  Our audit included consideration of internal control over
consolidated financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose o f expressing an
opinion on the effectiveness of the Company’s internal control over consolidated
financial reporting.  Accordingly, we express no such
opinion.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements,
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall consolidated financial statement
presentation.  We believe that our audits provide a reasonable basis
for our opinion.





In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of St. Joseph, Inc. as of
December 31, 2008, and the results of their operations and their cash flows for
the years ended December 31, 2008 and 2007, in conformity with accounting
principles generally accepted in the United States of America.





The
accompanying consolidated financial statements have been prepared assuming the
Company will continue as a going concern.  As discussed in Note 1 to
the consolidated financial statements, the Company has incurred recurring losses
and has negative working capital and a net capital deficiency at December 31,
2008.  These conditions raise substantial doubt about the Company’s
ability to continue as a going concern.  Further information and
management’s plans in regard to this uncertainty are also described in Note
1.  The consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.




/s/ CORDOVANO
      AND HONECK LLPCordovano and
      Honeck LLPEnglewood,
      ColoradoMarch 30,
      2009




F-2


ST.
JOSEPH, INC.
 CONSOLIDATED
BALANCE SHEETS
 
 December 31,
                                    
                                    
                                    December 31,2008
                                    
                                    
                                    2007ASSETSCURRENT
      ASSETS:Cash
                                    
                                    $
                                    221,992
                                    
                                    
                                    $
                                    204,135Accounts
      receivable, net of allowance for doubtful accounts of
    $2,208
                                    
                                    
                                    212,821
                                    
                                    
                                    
                                    246,075Total
      current assets
                                    
                                    
                                    434,813
                                    
                                    
                                    
                                    450,210Property
      and equipment, net of Accum Dep of $179,606 (2008) and $178,483
      (2007)
                                    
                                    
                                    2,978
                                    
                                    
                                    
                                    2,473Deposits
                                    
                                    
                                    1,230
                                    
                                    
                                    
                                    1,230$
                                    439,021
                                    
                                    
                                    $
                                    453,913LIABILITIES
      AND STOCKHOLDERS' DEFICITCURRENT
      LIABILITIES:Accounts
      payable
                                    
                                    $
                                    264,206
                                    
                                    
                                    $
                                    272,637Accrued
      liabilities
                                    
                                    
                                    18,168
                                    
                                    
                                    
                                    11,456Accrued
      preferred dividend
                                    
                                    
                                    117,311
                                    
                                    
                                    
                                    39,104Due
      to former officer
                                    
                                    
                                    25,000
                                    
                                    
                                    
                                    25,000Notes
      payable:Notes
      payable
                                    
                                    
                                    5,000
                                    
                                    
                                    
                                    -Bank
      (Note 4)
                                    
                                    
                                    180,000
                                    
                                    
                                    
                                    195,000Former
      Officer (Note 2)
                                    
                                    
                                    48,120
                                    
                                    
                                    
                                    48,120Total
      current liabilities
                                    
                                    
                                    657,805
                                    
                                    
                                    
                                    591,317STOCKHOLDERS'
      DEFICIT (Note 7):Preferred
      stock, Series A, $.001 par value, $3.00 face value; 25,000,000 shares
      authorized, 386,208 shares issued and outstanding
                                    
                                    
                                    386
                                    
                                    
                                    
                                    386Common
      stock, $.001 par value; 100,000,000 shares authorized, 7,406,802 issued
      and outstanding
                                    
                                    
                                    7,407
                                    
                                    
                                    
                                    7,407Additional
      paid-in capital
                                    
                                    
                                    1,950,201
                                    
                                    
                                    
                                    1,950,201Retained
      deficit
                                    
                                    
                                    (2,176,778
                                    )
                                    
                                    
                                    (2,095,398
                                    )Total
      Stockholders' Deficit
                                    
                                    
                                    (218,784
                                    )
                                    
                                    
                                    (137,404
                                    )$
                                    439,021
                                    
                                    
                                    $
                                    453,913
  The
accompanying notes are an integral part of the financial
statements.




F-3


ST.
JOSEPH, INC.
 CONSOLIDATED
STATEMENTS OF OPERATIONS
 
 Twelve Months EndedDecember 31,2008
                  
                  
                  2007REVENUES:Contract
                  
                  $
                  2,432,778
                  
                  
                  $
                  2,485,279COST
      OF REVENUES
                  
                  
                  1,870,063
                  
                  
                  
                  1,994,271Gross
      Margin
                  
                  
                  562,715
                  
                  
                  
                  491,008COSTS
      AND EXPENSES:General
      and Administrative Expenses
                  
                  
                  535,469
                  
                  
                  
                  494,459Depreciation
      and Amortization
                  
                  
                  1,123
                  
                  
                  
                  3,100Goodwill
      Impairment
                  
                  
                  
                  
                  
                  
                  258,525Total
      Costs and Expenses
                  
                  
                  536,592
                  
                  
                  
                  756,084Operating
      Income (Loss)
                  
                  
                  26,123
                  
                  
                  
                  (265,076
                  )OTHER
      INCOME AND (EXPENSE):Interest
      Income
                  
                  
                  (1
                  )
                  
                  
                  1Other
      Income (expense)
                  
                  
                  -
                  
                  
                  
                  (41,608
                  )Interest
      Expense
                  
                  
                  (29,295
                  )
                  
                  
                  (28,880
                  )Net
      Other Expense
                  
                  
                  (29,296
                  )
                  
                  
                  (70,487
                  )Loss
      before provision for income taxes
                  
                  
                  (3,173
                  )
                  
                  
                  (335,563
                  )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
                  
                  
                  (3,173
                  )
                  
                  
                  (335,563
                  )Benefit
      from tax loss carryforward
                  
                  
                  -
                  
                  
                  
                  -Net
      Loss
                  
                  
                  (3,173
                  )
                  
                  
                  (335,563
                  )Preferred
      stock dividend requirements
                  
                  
                  (78,208
                  )
                  
                  
                  (110,530
                  )Loss
      applicable to common stockholders
                  
                  $
                  (81,381
                  )
                  
                  $
                  (446,093
                  )Basic
      and diluted loss per common share
                  
                  $
                  (0.01
                  )
                  
                  $
                  (0.07
                  )Weighted
      average common shares outstanding
                  
                  
                  7,406,802
                  
                  
                  
                  6,098,253


The
accompanying notes are an integral part of the financial
statements.




F-4


ST.
JOSEPH, INC.
 CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
 
 AdditionalPreferred Stock-Series A
                                                      
                                                      
                                                      Preferred Stock-Series B
                                                      
                                                      
                                                      Common Stock
                                                      
                                                      
                                                      Paid-in
                                                      
                                                      
                                                      RetainedShares
                                                      
                                                      
                                                      Par value
                                                      
                                                      
                                                      Shares
                                                      
                                                      
                                                      Par value
                                                      
                                                      
                                                      Shares
                                                      
                                                      
                                                      Par value
                                                      
                                                      
                                                      Capital
                                                      
                                                      
                                                      Deficit
                                                      
                                                      
                                                      TotalBalance
      December 31, 2006
                                                      
                                                      
                                                      386,208
                                                      
                                                      
                                                      
                                                      386
                                                      
                                                      
                                                      
                                                      50,000
                                                      
                                                      
                                                      
                                                      50
                                                      
                                                      
                                                      
                                                      6,049,212
                                                      
                                                      
                                                      
                                                      6,049
                                                      
                                                      
                                                      
                                                      1,562,565
                                                      
                                                      
                                                      
                                                      (1,649,305
                                                      )
                                                      
                                                      
                                                      (80,255
                                                      )Sale
      of preferred stock, including Beneficial Conversion Feature totaling
      $41,667 (Note 4)
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      166,667
                                                      
                                                      
                                                      
                                                      167
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      241,500
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      241,667Preferred
      stock dividends (Note 4)
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      (110,530
                                                      )
                                                      
                                                      
                                                      (110,530
                                                      )Sale
      of common stock @ $0.30 per share
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      214,000
                                                      
                                                      
                                                      
                                                      214
                                                      
                                                      
                                                      
                                                      63,986
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      64,200Conversion
      of series B preferred stock to common stock at $0.30 per share (Note
      7)
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      (216,667
                                                      )
                                                      
                                                      
                                                      (217
                                                      )
                                                      
                                                      
                                                      931,667
                                                      
                                                      
                                                      
                                                      932
                                                      
                                                      
                                                      
                                                      18,785
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      19,500Conversion
      of notes payable to common stock (Note 2)
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      189,923
                                                      
                                                      
                                                      
                                                      190
                                                      
                                                      
                                                      
                                                      54,787
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      54,977Conversion
      of notes payable to common stock (Note 2)
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      22,000
                                                      
                                                      
                                                      
                                                      22
                                                      
                                                      
                                                      
                                                      8,578
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      8,600Net
      loss for the year ended December 31, 2007
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      (335,563
                                                      )
                                                      
                                                      
                                                      (335,563
                                                      )Balance
      December 31, 2007
                                                      
                                                      
                                                      386,208
                                                      
                                                      
                                                      $
                                                      386
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      7,406,802
                                                      
                                                      
                                                      $
                                                      7,407
                                                      
                                                      
                                                      $
                                                      1,950,201
                                                      
                                                      
                                                      $
                                                      (2,095,398
                                                      )
                                                      
                                                      $
                                                      (137,404
                                                      )Preferred
      stock dividends (Note 4)
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      (78,207
                                                      )
                                                      
                                                      
                                                      (78,207
                                                      )Net
      loss for the year ended December 31, 2008
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      (3,173
                                                      )
                                                      
                                                      
                                                      (3,173
                                                      )Balance
      December 31, 2008
                                                      
                                                      
                                                      386,208
                                                      
                                                      
                                                      $
                                                      386
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      $
                                                      -
                                                      
                                                      
                                                      
                                                      7,406,802
                                                      
                                                      
                                                      $
                                                      7,407
                                                      
                                                      
                                                      $
                                                      1,950,201
                                                      
                                                      
                                                      $
                                                      (2,176,778
                                                      )
                                                      
                                                      $
                                                      (218,784
                                                      )
  The
accompanying notes are an integral part of the financial
statements.




F-5


ST.
JOSEPH, INC.
 CONSOLIDATED
STATEMENTS OF CASH FLOW
 
 Twelve Months EndedDecember 31,OPERATING ACTIVITIES
                        
                        2008
                        
                        
                        2007Net
      loss
                        
                        $
                        (3,173
                        )
                        
                        $
                        (335,563
                        )Adjustments
      to reconcile net loss to net cash provided by (used in) operating
      activities:Depreciation
      and amortization
                        
                        
                        1,123
                        
                        
                        
                        3,100Stock
      Issued for interest expense
                        
                        
                        -
                        
                        
                        
                        5,000Goodwill
      impairment
                        
                        
                        -
                        
                        
                        
                        258,525Changes
      in operating assets and liabilities:(Increase)
      decrease in accounts receivable
                        
                        
                        33,254
                        
                        
                        
                        (19,453
                        )Increase
      in allowance for doubtful accounts
                        
                        
                        -
                        
                        
                        
                        2,208Increase
      (decrease) in accounts payable
                        
                        
                        (8,431
                        )
                        
                        
                        (2,501
                        )Decrease
      in accrued liabilities
                        
                        
                        6,712
                        
                        
                        
                        35,645Net
      cash provided by (used in) operating activities
                        
                        
                        29,485
                        
                        
                        
                        (53,039
                        )INVESTING ACTIVITIESEquipment
      acquisitions
                        
                        
                        (1,628
                        )
                        
                        
                        (2,473
                        )Net
      cash used in investing activities
                        
                        
                        (1,628
                        )
                        
                        
                        (2,473
                        )FINANCING ACTIVITIESPayments
      on line of credit
                        
                        
                        (15,000
                        )
                        
                        
                        (5,000
                        )Proceeds
      from notes payable
                        
                        
                        5,000
                        
                        
                        
                        -Proceeds
      from notes payable to related parties
                        
                        
                        -
                        
                        
                        
                        36,000Payments
      on notes payable to related parties
                        
                        
                        -
                        
                        
                        
                        (4,527
                        )Payments
      on preferred stock dividends
                        
                        
                        -
                        
                        
                        
                        (90,926
                        )Proceeds
      from sale of common stock
                        
                        
                        -
                        
                        
                        
                        64,200Proceeds
      from sale of preferred stock
                        
                        
                        -
                        
                        
                        
                        241,667Net
      cash provided by (used in) financing activities
                        
                        
                        (10,000
                        )
                        
                        
                        241,414INCREASE
      (DECREASE) IN CASH
                        
                        
                        17,857
                        
                        
                        
                        185,902CASH
      AT BEGINNING OF PERIOD
                        
                        
                        204,135
                        
                        
                        
                        18,233CASH
      AT END OF PERIOD
                        
                        $
                        221,992
                        
                        
                        $
                        204,135SUPPLEMENTAL
      INFORMATION:Cash
      paid during the period for:Interest
                        
                        $
                        29,295
                        
                        
                        $
                        28,880Income
      taxes
                        
                        $
                        -
                        
                        
                        $
                        -
  The
accompanying notes are an integral part of the 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, 2008 and 2007
included in this report include the activities of St. Joseph, Inc. and its
wholly-owned subsidiary, 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 capital deficiency at December 31, 2008. 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,
2008 and 2007.





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


F-7


ST.
JOSEPH, INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS





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
      yearsOffice
      equipment
              5
      yearsComputer
      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.





Goodwill and
Impairment





The
Company tested its goodwill for impairment using the two-step process prescribed
in SFAS No. 142. The first step is a screen for potential impairment, while the
second step measures the amount of the impairment, if any. The Company performed
the impairment test as of December 31, 2007 and determined that there was
potential impairment of the goodwill. The Company performed the second step as
of and determined that the goodwill balance of $258,525 was impaired.
Accordingly, the Company wrote-off its goodwill totaling $258,525 in the
accompanying consolidated financial statements for the year ended December 31,
2007. Following the impairment charge, there is no goodwill balance remaining at
December 31, 2008.





Impairment and Disposal of
Long-lived Assets





The
Company evaluates the carrying value of its long-lived assets under the
provisions of SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets". Statement No. 144 requires impairment losses to be recorded
on long-lived assets used in operations when indicators of impairment are
present and 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. Other
than the goodwill impairment discussed above, no SFAS No. 144 impairments have
been recognized for the years ended December 31, 2008 and 2007.





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.


F-8


ST.
JOSEPH, INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS





Advertising
Costs





The
Company expenses all advertising as incurred. The Company incurred advertising
costs totaling $4,405 and $5,295 for the years ended December 31, 2008 and 2007,
respectively.





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, 2007 were not included in the diluted loss per share as all 386,208
preferred shares and all 760,000 options were anti-dilutive. Preferred stock and
common stock options outstanding at December 31, 2008 were not included in the
diluted loss per share as all 386,208 preferred shares and all 560,000 options
were anti-dilutive. Therefore, basic and diluted losses per share at December
31, 2008 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.





Stock-Based
Compensation:




On
January 1, 2006, the Company adopted SFAS 123R, Share-Based Payment (“SFAS
123(R)”), which requires the measurement and recognition of compensation expense
for all share-based awards made to employees and directors, including employee
stock options and shares issued through its employee stock purchase plan, based
on estimated fair values. The Company adopted SFAS 123(R) using the modified
prospective transition method, which requires the application of the accounting
standard as of the beginning in 2006. The Company’s financial statements as of
and for the year ended December 31, 2007 reflect the impact of SFAS
123(R).




Stock
compensation expense recognized during the period is based on the value of
share-based awards that are expected to vest during the period. Stock
compensation expense in 2007 includes compensation expense for the share-based
awards granted subsequent to January 1, 2006 based on the grant date fair
value estimated in accordance with the provisions of SFAS
123(R).  2007 stock compensation also includes expense for the
share-based awards granted prior to January 1, 2006, but vested subsequent
to January 1, 2006, based on the grant date fair value estimated in accordance
with the provisions of SFAS 123(R).  Stock compensation expense
recognized in the statement of operations is based on awards that are expected
to vest.





For the
period ended December 31, 2008, the Company realized $0 in stock-based
compensation expense.




The
Company estimates the fair value of its share-based awards utilizing the
Black-Scholes option-pricing model.





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.


F-9


ST.
JOSEPH, INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS




Recent Accounting
Pronouncements





In
July 2006, the Financial Accounting Standards Board issued Interpretation
No. 48 (“FIN 48”), Accounting for Uncertainty in Income Taxes, which
clarifies the accounting for uncertainty in income taxes recognized in an
enterprise’s financial statements in accordance with FASB Statement
No. 109, Accounting for Income Taxes. FIN 48 provides guidance on the
financial statement recognition and measurement of a tax position taken or
expected to be taken in a tax return. FIN 48 also provides guidance on
derecognition, classification, interest and penalties, accounting in interim
periods, disclosures, and transition. The adoption of FIN 48 did not impact the
Company’s financial position or results of operation.





In
September 2006, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 157 (“SFAS 157”), Fair Value
Measurements. SFAS 157 clarifies the principle that fair value should be based
on the assumptions market participants would use when pricing an asset or
liability and establishes a fair value hierarchy that prioritizes the
information used to develop those assumptions. Under the standard, fair value
measurements would be separately disclosed by level within the fair value
hierarchy. SFAS 157 is effective for financial statements issued for fiscal
years beginning after November 15, 2007 and interim periods within those
fiscal years, with early adoption permitted. The adoption of SFAS 157 did not
materially impact its financial position or results of operations.





In
February 2007, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 159 (“SFAS 159”), The Fair Value Option
for Financial Assets and Financial Liabilities - Including an amendment of FASB
Statement No. 115.  This Statement permits entities to choose to
measure many financial instruments and certain other items at fair value. The
objective is to improve financial reporting by providing entities with the
opportunity to mitigate volatility in reported earnings caused by measuring
related assets and liabilities differently without having to apply complex hedge
accounting provisions. This Statement is expected to expand the use of fair
value measurement, which is consistent with the Board’s long-term measurement
objectives for accounting for financial instruments.  SFAS 157 is
effective for financial statements issued for fiscal years beginning after
November 15, 2007.  The Company has not determined the affect of
adopting this standard.





NOTE 2 – RELATED PARTY
TRANSACTIONS





On
September 5, 2007, an officer loaned the Company $30,000 for working capital in
exchange for a promissory note, of which $2,423 was repaid.  The note
matured on December 31, 2007.  The note included $2,400 fixed interest
payment at maturity.  The note was converted to 99,923 shares of
common stock at a price of $0.30 per share on December 31, 2007, which was the
fair value of the stock on the date of the transaction.





On
December 5, 2006, an officer loaned the Company $25,000 for working capital in
exchange for a promissory note.  The note matured on June 30, 2007 and
included a $2,000 fixed interest payment at maturity.   The note
was converted to 90,000 shares of common stock at a price of $0.30 per share on
December 31, 2007.





On
November 1, 2006, a shareholder advanced the Company $2,000 for working capital
in exchange for a promissory note.  The note was repaid during the
first quarter of 2007.





On March
18, 2007, a shareholder loaned the Company $6,000 for working capital in
exchange for a promissory note.  The note matured on June 30, 2007 and
included a $600 fixed interest payment at maturity.   The note
was converted to 22,000 shares of common stock at a price of $0.30 per share on
December 31, 2007, which was the fair value of the stock on the date of the
transaction.


F-10


ST.
JOSEPH, INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS





On June
16, 2005, we issued our president at the time, John Simmons, a promissory note
in the amount of $96,000. This note replaced and superseded a promissory note
that we issued to Mr. Simmons in December of 2003. The note carries a ten
percent interest rate, payable quarterly and matured on June 16, 2006. Mr.
Simmons resigned as our President, Chief Executive Officer on May 17, 2006 and
as our Director on May 30, 2006. During the year ended December 31, 2008, we did
not repay any balance under the note. As of December 31, 2008, we owed $48,120
in principal and $2,406 in accrued interest on the note. The note obligation is
included in the accompanying consolidated balance sheet as Note payable, former
officer.  Under the terms of the note, we are currently in default of
the note. Mr. Simmons has instituted legal proceedings to collect this note and
if he prevails, we will have to pay Mr. Simmons his court costs, including
reasonable attorneys’ fees. However, we believe that the amount owed to Mr.
Simmons on the note is fully or partially offset by sums owed to us in
connection with expense reimbursements that were paid to Mr. Simmons while he
was the President of our Company and to which we believe he may not have the
rights. We currently have a lawsuit against Mr. Simmons in the U.S. District
Court, Northern District of Texas, Dallas Division, to recover damages against
Mr. Simmons of not less than $75,000, plus attorneys’ fees, costs of litigation,
interest and tremble damages.





NOTE 3 – PROPERTY AND
EQUIPMENT





Property
and equipment consisted of the following at December 31, 2008 and
2007:


2008
                            
                            
                            2007Furniture
      and fixtures
                            
                            $
                            35,447
                            
                            
                            $
                            35,447Office
      equipment
                            
                            
                            59,923
                            
                            
                            
                            88,295Computer
      equipment
                            
                            
                            37,629
                            
                            
                            
                            37,629Leasehold
      improvements
                            
                            
                            19,585
                            
                            
                            
                            19,585Total
      property and equipment
                            
                            
                            152,584
                            
                            
                            
                            180,956Less
      accumulated depreciation
                            
                            
                            (149,606
                            )
                            
                            
                            (178,483
                            )Property
      and equipment, net
                            
                            $
                            2,978
                            
                            
                            
                            2,473





Depreciation
expense totaled $1,123 and $3,100, respectively, for the years ended December
31, 2008 and 2007.





NOTE 4 – LINE OF
CREDIT





The
Company has a $200,000 line of credit of which $180,000 was unpaid and
outstanding at December 31, 2008 and $195,000 was unpaid and outstanding at
December 31, 2007. The interest rate on the credit line 6.79 percent at December
31, 2008.  Interest payments are due monthly.  The note
matures April 7, 2009.




F-11


ST.
JOSEPH, INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 5 – CONCENTRATION OF
CREDIT RISK





The
Company conducts a significant portion of its operations with one customer.
During the year ended December 31, 2008, approximately 73 percent of the
Company's service revenues were conducted with this one customer. During the
year ended December 31, 2007, approximately 79 percent of the Company's service
revenues were conducted with one customer.





NOTE 6 – INCOME
TAXES





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





Years EndedDecember 31,2008
                    
                    
                    2007U.S.
      Federal statutory rate
                    
                    
                    15.73
                    %
                    
                    
                    34.00
                    %State
      income tax, net of federal benefit
                    
                    
                    3.90
                    %
                    
                    
                    4.00
                    %Permanent
      book-to-tax differences
                    
                    
                    -0.00
                    %
                    
                    
                    -0.03
                    %Timing
      Differences
                    
                    
                    -0.00
                    %
                    
                    
                    -0.03
                    %Net
      operating loss for which no taxbenefit is currently available
                    
                    
                    -19.63
                    %
                    
                    
                    -37.94
                    %0.00
                    %
                    
                    
                    0.00
                    %





At
December 31, 2008, the Company's current tax benefit consisted of a net tax
asset of $232,867 due to operating loss carryforwards of approximately $932,509
which was fully allowed for, in the valuation allowance of $232,867. 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, 2008 and 2007 were $623
and $19,229, respectively. Net operating loss carry forwards will expire through
2028.





The
valuation allowance will be evaluated at the end of each year, considering
positive and negative evidence about whether the asset will be realized. At that
time, the allowance will either be increased or reduced; reduction could result
in the complete elimination of the allowance if positive evidence indicates that
the value of the deferred tax asset is no longer impaired and the allowance is
no longer required.





Should
the Company undergo an ownership change, as defined in Section 382 of the
Internal Revenue Code, the Company's tax net operating loss carry forwards
generated prior to the ownership change will be subject to an annual limitation,
which could reduce or defer the utilization of those losses.





NOTE 7 – SHAREHOLDERS'
EQUITY




Preferred
Stock




During
the year ended December 31, 2008, the Company did not issue any Series A
Convertible Preferred Stock.  The Board of Directors is authorized to
issue shares of Series A Convertible Preferred Stock and to fix the number of
shares in such series as well as the designation, relative rights, powers,
preferences, restrictions, and limitations of all such series.  In
December 2003, the Company issued 386,208 shares of Series A Convertible
Preferred Stock that remain outstanding at December 31, 2008.  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.





Common
Stock





During
the year ended December 31, 2007, the Company sold 214,000 shares of its common
stock at $0.30 per share pursuant to the exemptions afforded by Section 4(2) of
the Securities Act of 1933, as amended.  The Company received gross
proceeds of $64,200 from such sales.





During
the year ended December 31, 2006, the Company sold 28,500 shares of its common
stock at $2.00 per share pursuant to the exemptions afforded by Section 4(2) of
the Securities Act of 1933, as amended.  The Company received gross
proceeds of $57,000 from such sales.




F-12


Equity Awards Granted to
Employees





On August
24, 2006, the Company granted options to ten employees and directors to purchase
410,000 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 $1.05 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 and $.363 per
share, respectively.  Stock option compensation totaling $148,830 was
been recognized during the year ended December 31, 2006 in the accompanying
consolidated financial statements related to these options.





The fair
value for the options granted during the year ended December 31, 2006 was
estimated at the date of grant using the Black-Scholes option-pricing model with
the following assumptions:





Risk-free
      interest rate
                  
                  
                  4.78
                  %Dividend
      yield
                  
                  
                  0.00
                  %Volatility
      factor
                  
                  
                  29.02
                  %Weighted
      average expected life
                  
                  5
      years





The
following schedule summarizes the changes in the Company’s equity awards for the
years ended December 31, 2008 and 2007:





Weighted
                                                        
                                                        
                                                        WeightedAwards
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        Average
                                                        
                                                        
                                                        AverageOutstanding
                                                        
                                                        
                                                        Exercise
                                                        
                                                        
                                                        Exercise
                                                        
                                                        
                                                        Remaining
                                                        
                                                        
                                                        Aggregateand
                                                        
                                                        
                                                        Price
                                                        
                                                        
                                                        Price
                                                        
                                                        
                                                        Contractual
                                                        
                                                        
                                                        IntrinsicExercisable
                                                        
                                                        
                                                        Per Share
                                                        
                                                        
                                                        Per Share
                                                        
                                                        
                                                        Life
                                                        
                                                        
                                                        ValueOutstanding
      at January 1, 2007
                                                        
                                                        
                                                        760,000
                                                        
                                                        
                                                        $
                                                        0.10
                                                        
                                                        
                                                        $
                                                        0.10Granted
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        $
                                                        -
                                                        
                                                        
                                                        $
                                                        -Exercised
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        $
                                                        -
                                                        
                                                        
                                                        $
                                                        -Cancelled/Expired.
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        $
                                                        -
                                                        
                                                        
                                                        $
                                                        -Outstanding
      at December 31, 2007
                                                        
                                                        
                                                        760,000
                                                        
                                                        
                                                        $
                                                        0.10
      - $1.05
                                                        
                                                        
                                                        $
                                                        0.61Granted
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        $
                                                        -
                                                        
                                                        
                                                        $
                                                        -Exercised
                                                        
                                                        
                                                        -
                                                        
                                                        
                                                        $
                                                        -
                                                        
                                                        
                                                        $
                                                        -Cancelled/Expired
                                                        
                                                        
                                                        (200,000
                                                        )
                                                        
                                                        $
                                                        -
                                                        
                                                        
                                                        $
                                                        -Outstanding
      at December 31, 2008
                                                        
                                                        
                                                        560,000
                                                        
                                                        
                                                        $
                                                        0.10 - $1.05
                                                        
                                                        
                                                        $
                                                        0.80
                                                        
                                                        
                                                        2.8
      years
                                                        
                                                        
                                                        $
                                                        -





All
equity awards were fully vested as of December 31, 2008.  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,
2008, and then multiplying that amount by the number of options.  The
exercise price exceeds the market value of the stock on December 31, 2008;
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.





In
connection with the cancellation of the options previously granted to Mr.
Simmons, the Board of Directors cancelled 250,000 shares of common stock that
were previously issued to Mr. Simmons pursuant to the exercise of these now
cancelled options.  As of December 31, 2008, the Company had not
refunded the $25,000 received from Mr. Simmons to exercise the stock
options.  The $25,000 liability is included in the accompanying
consolidated financial statements as Due to former officer.





The Board
of Directors concluded that the grant of 100,000 options to each Optionee was
fair and reasonable, and accordingly ratified the issuance of 100,000 options to
each Optionee, including Mr. Simmons.  To the extent that the issuance
of the 1,900,000 options which have been voided by resolution of the Board of
Directors is deemed fair, the Company may have a contingent liability for
cancelling Mr. Simmons’ 1,900,000 options.




F-13


ST.
JOSEPH, INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 8 – LEGAL
PROCEEDINGS





As
previously disclosed in a current report on Form 8-K, filed with the SEC on June
20, 2007, on June 8, 2007, we filed a complaint against our former President,
CEO and Director John H. Simmons in the United States District Court for the
District of Colorado, Civil Action No. 07-CV-01208. The complaint alleged, among
other things, that Mr. Simmons breached his fiduciary duties by diverting
Company funds for personal and recreational use and acquiring shares of our
common stock without adequate consideration. We are seeking damages against Mr.
Simmons of not less than $75,000, attorneys’ fees, costs of litigation, interest
and tremble damages. On August 27, 2007, this suit was dismissed due to
jurisdictional reasons and the parties agreed to move the case to
Texas.





On
October 11, 2007, we re-filed this lawsuit United States District Court,
Northern District of Texas, Dallas Division, Civil Action No. 307CV1718-R for
the same causes of action and asking for the same relief. Although we believe
that our claims against Mr. Simmons are meritorious, there can be no assurance
that we will prevail in this litigation. At this time, we cannot estimate any
possible loss from this litigation in the event that we do not
prevail.





On
October 3, 2007, Mr. Simmons filed a lawsuit in United States District Court,
Dallas County, Civil Action No. DC-07-11801 against the Company, its officers,
and other individuals.  The complaint alleged, among other things, that the
Mr. Simmons 1,900,000 options were converted and that the Company failed to
repay a $96,000 promissory note and breached a duty to indemnify Mr. Simmons in
relation to previously filed litigation. The complaint also makes a variety of
accusations against Company’s officers and other individuals, including
accusations that these individuals breached fiduciary duties with regard to Mr.
Simmons, engaged in fraud and conspiracy to commit fraud, and converted shares
and options owned by him. Mr. Simmons seeks unspecified damages, both
actual and exemplary, against the Company and the other defendants.  During
the quarter ended March 31, 2008, Gerald McIlhargey, Maureen O’Brien, Donal Ford
and Bruce Schreiner, and David Core were all released from the suit as
defendants. The Company believes that Mr. Simmons accusations are without
factual basis and intends to vigorously defend against the lawsuit.   The
costs of defending against the complaint could be substantial; however we
are unable to predict an exact amount, or even a meaningful estimate, at this
time.





As
previously disclosed in a quarterly report on Form 10-QSB, filed with the SEC on
November 20, 2006, on July 28, 2006, Zachary Karo, a former employee, filed a
lawsuit against the Company and its subsidiary Staf*Tek Services, Inc. in the
district court in Tulsa County, Oklahoma, Case No. CJ 2006 04713, in connection
with stock options allegedly granted to Mr. Karo. Mr. Karo alleges that he was
granted an option to purchase up to 25,000 shares of the Company’s common stock
at $0.10 per share but that management refused to issue Mr. Karo such shares
upon his attempt toexercise of the alleged
option. A motion was made by the Companyand granted with
prejudice to dismiss the case. Mr. Karo re-filed to
vacate the dismissal, which was subsequently vacated, and in a hearing on April
2, 2008 the motion for dismissal was approved. At this time there has not been a
date set for a pretrial. Mr. Karo is seeking damages, actual and exemplary,
against the Company in an amount in excess of $10,000. Management denies that
Mr. Karo was owed such stock options. The Company has engaged local counsel and
intends to vigorously defend this action on the basis brought by the plaintiffs.
The costs of defending against the complaint could be substantial; however
management is unable to estimate an amount at this time.





On
September 4, 2008, Phyllis L. Bell and Paul D. Aelmore filed a lawsuit in United
States District Court, Northern District of Oklahoma, Case No.
08-CF-00470-TCK-SAJ against the Company, and officers and directors of the
Company. Ms. Bell and Mr. Aelmore are holders of the Company’s Series A
Convertible Preferred Stock which they received for selling Staf*Tek Services,
Inc. to the Company in January 2004 pursuant to an Agreement of Share Exchange
and Purchase and Sale (the “Purchase Agreement”). The complaint alleged, among
other things, that the Company breached the Share Purchase Agreement by failing
to pay dividends on the Series A Convertible Preferred Stock. The Company has
been accruing the dividends following a determination by its management that the
Company did not have funds legally available for distribution. The complaint
also alleges that the Company made misrepresentations that under circumstances
that constituted fraudulent inducement, fraud and/or constructive fraud, and
breached its duty to deal in good faith with the plaintiffs. The plaintiffs seek
unspecified damages against the Company and the other defendants for
compensatory and punitive damages in excess of $75,000, costs, and pre-judgment
interest. The Company has made a settlement offer of $2,500 per month to be
distributed among the Preferred A shareholders.  The costs of
defending against the complaint could be substantial; however we are unable to
predict an exact amount, or even a meaningful estimate, at this
time.




F-14


ST.
JOSEPH, INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 9 – SUBSEQUENT
EVENT





As of
March 25, 2009, we sold 3,000,000 shares of common stock to 11 accredited
investors at a price of $0.05 per share for projected gross proceeds of
$150,000, of which $100,000 has already been received by the Company. 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 to only to accredited
investors; as such term is defined by Rule 501 of Regulation D.  All
of the shares sold in the private placement are restricted securities pursuant
to Rule 144.




F-15