form10ksb.htm

The Banker's Store, Inc. (the "Store") was established in 1968. It remained dormant for many years until we completed the acquisition of B.G. Banking Equipment, Inc., ("B.G. Banking") and Financial Building Equipment Exchange, Inc., ("FBEE"), Kentucky corporations. We are now in the business of buying, selling, trading and refurbishing financial equipment (both new and pre-owned) for banks and other financial institutions. We also sell office equipment and furniture at retail. We market products throughout the United States primarily through direct sales to financial institutions and other distributors supported by our direct sales force and soliciting new contacts through our presence on the internet. In May 1998, our company, which had no significant assets, liabilities, or operations at the time, completed the reverse acquisition of B.G. Banking Equipment, Inc., and Financial Building Equipment Exchange, Inc., which were two affiliated companies that had common ownership.

In connection with this acquisition, we issued 11,282,250 shares of our common stock in exchange for all of the shares of the acquired companies. As a result of the exchange, the former stockholders of the acquired companies owned approximately 75% of the post-acquisition entity, and our former stockholders owned approximately 25% of the post-acquisition entity. The acquisition was treated as a purchase business combination and a reverse acquisition for accounting purposes, in which we were the legal acquirer and the acquired companies were the accounting acquirer.

Our principal products are bank-related equipment, remote drive-up and walk-up teller systems, automated teller machines (ATMs), vaults, safe deposit boxes, safes, filing systems and counter lines. In addition to traditional bank locations, we have added pharmacies and super drug stores, utilities, shipping departments in factories and hospitals to our customer base with drive-up and walk-up pneumatic and belt driven money transport and transaction systems. In addition, we provide all types of physical security systems including access control, master key systems and electronic locks, closed circuit television, and security systems to our customers.

We sell new and pre-owned equipment which has been refurbished in our facilities. We receive much of our pre-owned products directly from existing customers, through asset managers of bank holding companies, web advertising, and a large independent bank equipment dealer network.

Our primary geographic markets are Kentucky, Tennessee and surrounding states. We install our own products and also service the products we sell. The internet has increased awareness of our products and has been a good resource for purchasing as well as sales. Our core market has been the community banks and credit unions with ten branches or less.

Sales of equipment are made directly to customers by our sales personnel, as well as representatives from related companies, and direct support from several manufacturers and distributors. The technical nature of our products requires direct contact with customers and their architects and building contractors. Most products are sold under contractual agreements on total price, terms and conditions. Purchase agreements are required from customers. We currently employ four sales representatives who operate in Kentucky, Tennessee and bordering states who serve customers over the telephone, via internet, on location, and on a walk-in basis.

We know of other entities presently competing for the same geographic and business markets. Some of the other entities, such as Diebold, have greater capital resources, better geographic presence, national marketing, and more experience than we have. Other entities cover similar markets but sell different manufacturers' products as a dealership, and are not quite as diversified in terms of product mix. We have an advantage in some areas with our pre-owned, in-house refurbished steel products and warehousing, transport and installation capabilities, which gives us a pricing advantage on many of the products required by banks. Many of these products seldom change in style and pre-owned can be resold for less than the cost of a new product. We also compete by allowing customer trade-ins, consignment, or purchasing of our customers' excess equipment. From time to time, we cooperate with competitors who, like us, are independent suppliers of banking equipment in fulfilling large orders or supplying each other with pieces of equipment that may otherwise be more difficult to locate.

Once space and funding is available, we plan to install a permanent display area for drive-up systems, which we currently use warehouse space to demonstrate. When complete, we plan to have a showplace for the latest bank related equipment for display and demonstration including banking delivery systems, ATMs, check cashing equipment and other cash handling machines, and office furniture. As planned, the showroom will allow our customers to compare products from different manufacturers. By appointment, our prospective customers can bring drawings of upcoming projects and we will provide brochures, schematics and cut sheets for the architect or builder with complete specifications of all our products.

Because of a large number of mergers in the past decade among banks, resulting in the closing and relocating of a number of branches, we have been able to stockpile some quantities of equipment for resale. This equipment includes safes and vaults, vault panels, depositories, bullet resistant glass, teller fixtures, and office furniture. We do not believe that a shortage of our products is likely. Because part of this business requires that we match an existing product's specifications, size, color, and other features, we buy from several manufacturers for each product we sell. We can usually match our competitors' equipment for quality and price, with new or pre-owned products purchased directly from manufacturers, distributors and specialty equipment brokers.

As of July 13, 2007, we employed 21 full-time employees. Paul Clark serves as our Chairman, Vincent C. Buckman serves as our President and CEO, Sam Stone serves as our CFO, and Cynthia Hayden serves as Vice President and our corporate Secretary. We have four persons employed in sales, five persons in administrative capacities and one clerical worker. We also have five persons engaged in installation, and six in service activities in the field.

We currently occupy approximately 32,000 square feet of office, warehouse, showroom and shop space which we lease from our Chairman, Paul Clark pursuant to two separate leases. We pay a monthly rental of $5,500, plus maintenance expenses, for 23,976 square feet of office and warehouse space, which is located at 1535 Memphis Junction Road, Bowling Green, Kentucky, pursuant to a three year lease agreement dated August 1, 1998, between Mr. Clark and the Company. This lease has been renewed thru August 2007 on substantially the same terms. We also pay $2,420 per month, plus maintenance expenses, for the remainder of the space, primarily consisting of a showroom located at 370 Cal Batsel Road, Bowling Green, Kentucky, pursuant to a lease that has been extended thru September 2007. In January 2007 the monthly rent was raised from $7,200 to $7,920 as a result of an increase in property taxes.

On March 7, 2000, we filed an action in the Supreme Court of the State of New York, County of New York, against Stamford Financial Consulting, Inc., Taurus International Investment, Inc., George C. Bergleitner, Jr., Alexander C. Brosda and Andrew Seim (the “New York Action”), seeking an amount of not less than $1.7 million for breach of fiduciary duty, breach of contract, conversion and unjust enrichment, and seeking an accounting of defendants’ books and records. The action arises out of B. G. Banking’s Confidential Private Placement Memorandum dated January 31, 1998, prepared by Stamford Financial, for the sale of 3,000,000 shares of B. G. Banking common stock at $1.00 per share. On April 5, 2000, defendant George C. Bergleitner served a counterclaim alleging that we failed to have 180,000 shares of stock transferred without any legal endorsement, pursuant to Rule 144(k) under the Securities Exchange Act of 1934, as amended. The counterclaim seeks damages of $900,000 based upon the value of the stock at the highest amount at which it traded, which is alleged to be $5.00 per share.

In December 2000, the court entered a default judgment against Taurus International Investment, Inc., Alexander C. Brosda and Andrew Seim leaving only George Bergleitner and his company, Stamford Financial to defend the lawsuit.

By order entered on May 4, 2001, the Court granted a motion filed by Stamford Financial Consulting, Inc. and George C. Bergleitner, to transfer the New York Action to the New York State Supreme Court, Delaware County, and the action is continuing there against these two defendants.

The following table sets forth the high and low bid information for our Common Stock for each quarter, since August 31, 2005. This information was received from the OTC Bulletin Board. As these are over-the-counter market quotations, they reflect inter-dealer prices, without retail markup, markdown, or commissions, and may not represent actual transactions.

			High:		Low:

For the quarter ended:	August 31, 2005	$	0.08	$	0.07
	November 30, 2005		0.11		0.08
	February 28, 2006		0.12		0.09
	May 31, 2006		0.08		0.06
	August 31, 2006		0.08		0.06
	November 30, 2006		0.09		0.06
	February 28, 2007		0.35		0.09
	May 31, 2007		0.10		0.10

The following table provides a summary of the number of options granted under plans or agreements approved by our shareholders, the weighted average exercise price of those options and the number of shares remaining available for issuance as of May 31, 2007.

	Number of securities to be issued upon exercise of outstanding options	Weighted –Average exercise price of outstanding options	Number of securities remaining available for future issuance under equity compensation plans
Equity compensation plans approved by security holders (1)	550,000 shares	$.07	950,000 shares(2)

Equity compensation plans not approved by security holders	N/A	N/A	N/A
Total	550,000	$.07	950,000(2)

(1) Shareholders approved stock option agreements granted to the Company’s President and Chief Executive Officer and the Company’s Financial Officer with respect to a total of 550,000 shares at the Company’s annual meeting of shareholders held on January 11, 2007. At the January 11, 2007 annual meeting, shareholders also approved the 2006 Stock Ownership Incentive Plan (“Plan”) which authorizes the grant of restricted stock and stock options with respect to a maximum of 950,000 shares.

(2) Although no options have been granted under the Plan, pursuant to employment agreements with the Company’s President and Chief Executive Officer and the Company’s Chief Financial Officer (“Employment Agreements”), the Company agreed to issue options in 2007 and 2008 under the Plan to the Company’s President and Chief Executive Officer to purchase a total of an additional 245,455 shares of Common Stock, and to the Company’s Chief Financial Officer to purchase a total of an additional 204,545 shares of Common Stock with an exercise price equal to fair market value on the date of grant. See “2006 Stock Ownership Incentive Plan” below.

On October 9, 2006 the Company entered into Employment Agreements with Vincent C. Buckman and Samuel J. Stone with regard to their service as President and Chief Executive Officer and Chief Financial Officer, respectively. Under the Employment Agreements, the Company granted options to Mr. Buckman and Mr. Stone to purchase 300,000 shares and 250,000 shares, respectively, of the Company’s Common Stock. Shareholders of the Company approved these option agreements at the annual meeting of shareholders held on January 11, 2007. The exercise price of these options was equal to fair market value of the Company’s Common Stock on the date of issuance. The Company also agreed to issue options to Mr. Buckman to purchase an additional 245,455 shares of Common Stock and options to Mr. Stone to purchase an additional 204,545 shares of Common Stock pursuant to the Employment Agreements. These additional options will be granted pursuant to the Plan as described below.

The Plan was approved by shareholders at the annual meeting of shareholders held on January 11, 2007. The purpose of the Plan is to enhance the ability of the Company to secure and retain the services of qualified employees and non-employee directors and to provide incentives for such employees and non-employee directors to exert maximum efforts for the success of the Company. The number of shares of Common Stock authorized for issuance under the Plan is 950,000 shares, subject to adjustment as provided in the Plan. Full-time employees of the Company and its subsidiaries and non-employee directors of the Company are eligible to receive stock options and restricted stock under the Plan. As of May 31, 2007, the Company had approximately 21 full-time employees and the Company had 1 non-employee director.

Options to be granted - number of shares	Date of Grant	Recipient of Options

122,728	October 9, 2007	Vincent C. Buckman, President and Chief Executive Officer
122,727	October 9, 2008	Vincent C. Buckman, President and Chief Executive Officer
102,273	October 9, 2007	Samuel J. Stone, Chief Financial Officer
102,272	October 9, 2008	Samuel J. Stone, Chief Financial Officer

An agreement with Objective Equity LLC was signed on June 2, 2007 pursuant to which 300,000 shares of restricted stock will be issued by the Company as compensation to Objective Equity LLC for Corporate Advisory and Financial Placement Services.

The matters discussed in this management's discussion and analysis of financial condition and results of operations contain forward-looking statements that involve risks and uncertainties. Our actual results in our two segments could differ materially from those discussed here. Factors that could cause or contribute to such differences are discussed elsewhere in this annual report on Form 10-KSB. We disclaim any intent or obligation to update these forward-looking statements.

We anticipate that our results of operations may fluctuate for the foreseeable future due to several factors, including our ability to obtain new products at competitive prices, sources of good used banking and banking related equipment and furniture at favorable prices, market acceptance of current or new products, delays, or inefficiencies, shipping problems, seasonal customer demand, the timing of significant orders, competition for customers and markets, competitive pressures on average selling prices and changes in the mix of products sold.

Operating results could also be adversely affected by a downturn in the market for our current and future products, order cancellations, order rescheduling or manufacturing delays. We purchase and resell new merchandise and refurbish and ship our other products shortly after receipt of orders. We have not developed a significant backlog for such products and do not anticipate developing a material backlog for such products in the future.

Because we have increased our operating expenses for personnel, our operating results have been adversely effected. Subject to available funds, we plan to increase activities supporting newly introduced products, new product development and entering new markets. Our operating results could continue to be adversely affected if our sales do not correspondingly increase or if our product development efforts are unsuccessful or are subject to delays.

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in conformity with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to accounts receivable, inventories, equipment and improvements, income taxes and contingencies. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Inventories, consisting primarily of finished goods, are stated at the lower of cost or market. Cost is determined by the first-in first-out method. Management monitors and periodically reviews inventory quantities and agings and, when appropriate, inventory is sold at lower than normal margins in order to reduce the levels of excess or older goods.

Impairment losses on the equipment and improvements are recognized when events indicate that the undiscounted cash flows estimated to be generated by such assets are less than their carrying value and all or a portion of such carrying value may not be recoverable. We recognized $1,148 of impairment losses in 2007. We did not recognize any impairment losses during 2006.

Deferred tax assets resulted from temporary differences attributable to allowance for doubtful accounts, slow-moving inventories, accrued officer salary and other temporary differences. Due to the uncertainties related to the extent and timing of our future taxable income, we have established a valuation allowance in prior periods. In 2007, we increased the valuation allowance in an amount equivalent to the deferred income tax benefit.

We have entered into two operating leases with our Chairman and principal stockholder, Paul Clark for the lease of an aggregate of approximately 32,000 square feet of office and warehouse space located in Bowling Green, Kentucky. The leases provide for a monthly rent of $7,200 in the aggregate plus maintenance expenses. The leases expire in August and September 2007, respectively. In January 2007 the monthly rent was raised from $7,200 to $7,920 as a result of an increase in property taxes.

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents and accounts receivable. The Company places its cash and cash equivalents with high credit quality institutions to limit its credit exposure. Cash balances are insured by the Federal Deposit Insurance Corporation up to $100,000 per depositor. The Company's cash balances with financial institutions, at times, may exceed the Federal Deposit Insurance Corporation insured limits. At May 31, 2007, the Company has cash and cash equivalent balances that exceed federally insured limits in the amount of approximately $125,016.

The Company closely monitors the extension of credit to its customers while maintaining allowances for potential credit losses. On a periodic basis, the Company evaluates its accounts receivable and establishes an allowance for doubtful accounts, based on a history of past write-offs and collections and current credit considerations.

	Twelve months ended						Three months ended
	May 31,						May 31,
	2007			2006			2007			2006


Net sales		100.0	%		100.0	%		100.0	%		100.0	%

Cost of goods sold		72.5	%		68.0	%		74.8	%		81.2	%

Gross profit		27.5	%		32.0	%		25.2	%		18.8	%

Selling, general and administrative expenses		35.3	%		29.6	%		25.4	%		26.1	%

Income (loss) from operations		-7.8	%		2.4	%		-0.2	%		-7.3	%

Other		-0.4	%		-0.4	%		-0.3	%		-0.5	%

NEW YORK		22-3755766
State or Other Jurisdiction Of Incorporation or Organization)		(I.R.S. Employer Identification No.)