Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-KSB/A
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ANNUAL REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended May 31, 2008
COMMISSION FILE NO.: 000-08880
THE BANKER'S STORE, INC.
(Exact Name of Registrant in its Charter)
NEW YORK 22-3755766
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
1535 Memphis Junction Road, Bowling Green, KY 42101
(Address of Principal Executive Offices)
(270) 781-8453
(Registrant's telephone number, including area code)
Securities Registered Pursuant to Section 12(b) of the Act: None
Securities Registered Pursuant to Section 12(g) of Act:
Common Stock, par value $.01 per share.
Check whether the issuer is not required to file reports pursuant to
Section 13 or 15(d) or the Exchange Act. [ ]
Check whether the issuer: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past
12 months (or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act) Yes [ ] No [X]
Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B 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-KSB or any amendment to
this Form 10-KSB. [X]
For the fiscal year ended May 31, 2008, the issuer's revenues were
$2,424,468.
As of July 9, 2008, the aggregate market value of the voting and non-voting
common equity held by non-affiliates of the Registrant was approximately
$249,408. This aggregate market value is computed by reference to the last
sale price of such common equity on such date. As of July 9, 2008, the
Registrant had 14,954,781 shares of common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None
Transitional Small Business Format Yes [ ] No [X]
ITEM 1.
DESCRIPTION OF BUSINESS
BUSINESS DEVELOPMENT
The Banker's Store, Inc. (the "Company") 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 BUSINESS
Principal Products and Services and Their Markets.
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.
In June of 2001, we entered the office equipment and retail furniture
business, selling to financial institutions, as well as commercial and
industrial customers.
Pursuant to the June 2008 Board of Directors meeting, the Company expanded
its Corporate Information Statement to pursue other lines of business
including eCommerce, power, energy, transportation, and security.
Distribution Methods of Products and Services.
Sales of equipment and services are made directly to customers by our sales
personnel. Additionally, sales may be made by related companies and by
several manufacturers and distributors that the Company fulfills. 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 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.
1
Competitive Conditions.
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, and better national marketing
campaigns. Other entities cover similar markets but sell different
manufacturers' products as a dealership, and are not 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.
A permanent display area is planned for our corporate offices. We will
display drive-up systems, other banking delivery systems, alarms, ATMs, check
cashing equipment, other cash handling machines, and office furniture. The
showroom is expected to permit our customers to compare products from
different manufacturers. By appointment, our 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.
Product Sources and Principal Suppliers.
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.
Significant Customers.
None.
Intellectual Property.
None.
Need for any Governmental Approval for Products or Services.
None.
Effect of Existing or Probable Governmental Regulations on the Business.
None.
Description of Research and Development Activities Over Last Two Years.
None.
Costs and Effects of Compliance with Environmental Laws.
None.
EMPLOYEES
As of July 9, 2008, we employed 15 full-time employees, and 1 part time
employee. Cynthia Hayden serves as interim President and corporate
Secretary. We have two persons employed in sales, two persons in
administrative capacities, and one part time clerical worker. We also have
four persons engaged in installation, and six in service activities in the
field.
2
ITEM 2.
DESCRIPTION OF PROPERTY
We currently occupy approximately 32,000 square feet of office, warehouse,
showroom and shop space which we lease from Paul D. Clark, former Chairman,
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 2008 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 2008.
ITEM 3.
LEGAL PROCEEDINGS
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. We have filed a
motion to dismiss the counterclaim.
Although we cannot predict the outcome of the litigation described above, we
believe that the settlement in process will not have any material adverse
effect on our consolidated financial statements in subsequent periods.
ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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PART II
ITEM 5.
MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND SMALL BUSNESS
ISSUER PURCHASES OF EQUITY SECURITIES
Market Information.
The principal market on which our Common Stock is traded is the OTC Bulletin
Board. Our ticker symbol is BSTR.
The following table sets forth the high and low bid information for our
Common Stock for each quarter, since August 31, 2006. 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, 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
August 31, 2007 0.05 0.10
November 30, 2007 0.30 0.05
February 28, 2008 0.15 0.06
May 31, 2008 0.15 0.07
Holders of our Securities.
The approximate number of holders of record of our common Stock, as of
July 9, 2008 was 577. This information was obtained from Continental Stock
Transfer & Trust Company, our transfer agent.
Dividends.
No dividends have been paid on our Common Stock; we do not foresee paying any
dividends on our stock in the immediate future.
Equity Compensation Plan Information
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, 2008.
Number of
securities remaining
Number of securities available for
to be issued upon Weighted-Average future issuance
exercise of exercise price of under equity
outstanding options outstanding options compensation plans
------------------- ------------------- ------------------
Equity
compensation
plans approved 300,000 shares $.07 950,000 shares(2)
by security
holders (1)
(1) Shareholders approved stock option agreements granted to the Company's
then President and Chief Executive Officer and the Company's then
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. During the fiscal year ended May 31, 2008 the Company's then
Financial Officer resigned and relinquished all rights to said stock
option agreement.
(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 then President and Chief Executive Officer to
purchase a total of an additional 245,455 shares of Common Stock, and to
the Company's then 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.
4
Options Granted
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.
2006 Stock Ownership Incentive Plan
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, 2008, the Company had approximately 15 full-time
employees, 1 part-time employee, and the Company had 3 non-employee
directors.
The Employment Agreements provide for the following issuances of options
under the Plan as of May 31, 2008:
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 (2) October 9, 2008 Vincent C. Buckman,
President and Chief
Executive Officer
102,273 (1) October 9, 2007 Samuel J. Stone,
then Chief Financial Officer
(1) In January 2008, Mr. Samuel J. Stone, the Company's Chief Financial
Officer resigned from the Company. According to the "2006 Stock
Ownership Incentive Plan" and Mr. Stone's employment agreement, options
will vest on the anniversary date of the grant. However, since Mr.
Stone did not complete the second year of his contract, these options
will not vest.
(2) In July 2008, Mr. Vincent C. Buckman, the Company's President and Chief
Executive Officer resigned from the Company. Accordingly, the options
to be granted October 9, 2008 will not be granted.
Purchase of Equity Securities by the Small Business Issuer and Affiliated
Purchasers
The Company did not purchase any of its securities during the fourth quarter
of the fiscal year ended May 31, 2008.
ITEM 6.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
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.
Overview
The Banker's Store, Inc. (the "Company") 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.
5
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 quality 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 affected. Activities supporting newly
introduced products, new product development, entering new markets, and
increasing sales personnel throughout the year are planned. However, 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.
SUMMARY OF CRITICAL ACCOUNTING POLICIES, RELATED PARTY TRANSACTIONS AND
CONTINGENCIES:
Estimates:
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:
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 inventory 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. The reserve was reduced by $870 in 2008. We recognized
$1,148 of impairment losses in 2007.
Income Taxes:
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 2008 and 2007, we increased the
valuation allowance in an amount equivalent to the deferred income tax
benefit.
New Accounting Pronouncements:
The Company evaluated new accounting pronouncements and concluded that none
of them had any potential impact on its financial position, results of
operations or cash flows.
Related Party Transactions:
We have entered into two operating leases with our former Chairman, Paul D.
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 $7,920 in the aggregate plus maintenance
expenses. The leases expire in August and September 2008, respectively.
6
Contingencies:
Concentrations of credit risk:
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, 2008,
the Company had cash and cash equivalent balances that exceed federally
insured limits in the amount of approximately $21,028.
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.
Litigation:
Please see discussion of certain legal proceedings under Item 3.
Results of Operations
The following table sets forth operating data as a percentage of net sales:
Twelve months ended Three months ended
May 31, May 31,
2008 2007 2008 2007
Net sales 100% 100% 100% 100%
Cost of goods sold 69.6% 72.5% 93.5% 74.8%
Gross profit 30.4% 27.5% 6.5% 25.2%
Selling, general and administrative
expenses 43.3% 35.3% 40.2% 25.4%
Income (loss) from operations -12.9% -7.8% -33.7% -0.2%
Other -0.4% -0.4% -0.2% -0.3%
Income before income tax provision -13.3% -8.2% -33.9% -0.5%
Income tax provision 0.0% 0.0% 0.0% 0.0%
Net income (loss) -13.3% -8.2% -33.9% -0.5%
Results of Operations for the Years Ended May 31, 2008 and 2007.
Revenues were approximately $2,424,468 for the year ended May 31, 2008 as
compared to approximately $2,622,010 for the year ended May 31, 2007
reflecting a decrease of approximately $197,542 or 8%.
Cost of goods sold and related expenses were $1,686,868 for the year ended
May 31, 2008 as compared to approximately $1,902,046 for the year ended May
31, 2007 reflecting a decrease of approximately $215,178 or 11%. This
decrease and the corresponding decrease in revenues is principally a result
of the decrease in spending by our core business of financial institutions.
7
Gross profit increased by approximately $17,636 during the year ended May 31,
2008 primarily due to advanced purchasing of new equipment to avoid
incremental cost increases by our vendors due to rising fuel prices and
rising costs of steel. Gross profit for the three months ended May 31, 2008
was $32,868 as compared to $246,650 for the three months ended May 31, 2007,
reflecting a decrease of $213,782 or 87%. The primary reason for this
decrease was the sale of a new product line that was sold at an introductory
price that carried a smaller gross profit ratio than our normal products.
This practice will not continue into the next quarter.
Selling, general and administrative expenses were approximately $1,050,235
for the year ended May 31, 2008 as compared to approximately $926,372 for the
year ended May 31, 2007, reflecting an increase of approximately $123,863 or
13%. In part, this increase is due to the full year recognition of the CEO's
and the former CFO's employment contracts.
As a result of the aforementioned, there was a net loss during the year ended
May 31, 2008 of $322,830 as compared to net loss of approximately $217,523
for the previous fiscal year.
Liquidity and Capital Resources
We have financed our operations primarily through revenues from operations.
We had cash and cash equivalents of $149,365 and working capital of $74,325
at May 31, 2008. Net cash and cash equivalents used by operations were
$152,691, a decrease of approximately $183,074.
The decrease primarily resulted from a decrease in customer deposits of
$81,796 and the loss from operations of $322,830. Partially offsetting these
was a decrease in inventories of $88,847; a decrease in prepaid expenses and
other current assets of $44,387; an increase in accounts payable and other
accruals of $47,796; and other net of $19,969. The note payable to the
principal stockholder was reduced in the amount of $47,106. The Company has
no other long-term debt outstanding.
We also desire to expand our customer base and enter additional markets. To
accomplish these goals, we are currently evaluating a number of strategies
and related steps. We are considering and evaluating opportunities to grow
and expand through mergers or acquisitions. We may hire additional sales
personnel in order to reach potential customers in new markets and additional
customers in existing markets.
Our ability to effect any of these strategies or to take any of these steps
will depend on a number of factors including, but not limited too, our
ability to generate sufficient cash flow or obtain sufficient capital on
reasonable terms; our ability to locate and hire qualified personnel on
satisfactory terms and conditions, the availability of attractive candidates
for merger or acquisition on reasonable terms and conditions; continued
demand for our products and services; our ability to withstand increased
competitive pressures; and economic conditions within the financial services
industry and within the markets we serve. There is no assurance that we will
be able to meet any or all of our goals.
We believe that our available cash, cash from operations and our ability to
activate new credit arrangements will be sufficient to satisfy our funding
needs through at least May 31, 2009. Thereafter, if cash generated from
operations is insufficient to satisfy our working capital and capital
expenditure requirements, we may be required to sell additional equity or
debt securities or obtain additional credit facilities. There can be no
assurance that such additional capital, if needed, will be available on
satisfactory terms, if at all. Furthermore, any additional equity financing
may be dilutive to stockholders, and debt financing, if available, may
include restrictive covenants. Our future liquidity and capital funding
requirements will depend on numerous factors, including the extent to which
our new products and products under consideration are successfully developed,
gain market acceptance and become and remain competitive, the timing and
results of regulatory actions in the banking industry, the costs and timing
of further expansion of sales, marketing and manufacturing activities,
facilities expansion needs. The failure by us to raise capital on acceptable
terms when needed could have a material adverse effect on our business,
financial condition and results of operations.
8
ITEM 7.
FINANCIAL STATEMENTS
THE BANKER'S STORE, INC. AND SUBSIDIARIES
INDEX
Page
Report of Independent Registered Public Accounting Firm F-2
Condensed Consolidated:
Balance Sheets F-3
May 31, 2008 and 2007
Statements of Operations
Years ended May 31, 2008 and 2007 F-4
Statements of Changes in Stockholder's Equity
Years ended May 31, 2008 and 2007 F-5
Statements of Cash Flows
Years ended May 31, 2008 and 2007 F-6
Notes to Consolidated Financial Statements F-7
9
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
-------------------------------------------------------
To the Board of Directors and Stockholders
We have audited the accompanying consolidated balance sheets of The Banker's
Store, Inc. and Subsidiaries as of May 31, 2008 and 2007, and the related
consolidated statements of operations, changes in stockholders' equity and
cash flows for the years then ended. 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
audit.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audit included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose
of expressing an opinion on the effectiveness of the Company's internal
control over financial reporting. Accordingly, we express no such opinion.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of The
Banker's Store, Inc. and Subsidiaries as of May 31, 2008 and 2007, and their
results of operations and cash flows for the years then ended, in conformity
with accounting principles generally accepted in the United States of
America.
Marmann & Associates, PC
Sheffield, Alabama
July 31, 2008
F-2
THE BANKER'S STORE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
MAY 31, 2008 AND 2007
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS 2008 2007
Current Assets:
Cash and cash equivalents $ 149,365 $ 357,323
Accounts receivable, net of allowance for
bad debts of $4,043 131,820 163,384
Inventories 578,790 667,637
Prepaid expenses and other current assets 62,461 106,848
------------- -------------
Total current assets 922,436 1,295,192
Equipment and improvements, net 69,181 80,143
Other assets 831 20,467
------------- -------------
Totals $ 992,448 $ 1,395,802
------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ -- $ 2,346
Accounts payable and accrued expenses 137,377 89,845
Customer deposits 305,115 386,911
Note payable - principal stockholder 142,519 189,625
Accrued compensation - principal stockholder 263,100 263,100
Private placement funds in dispute -- --
------------- -------------
Total current liabilities 848,111 931,827
Long-term debt, net of current portion -- --
------------- -------------
Total liabilities 848,111 931,827
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par value; 200,000,000
shares authorized; 14,954,781 shares
issued and outstanding 149,548 149,548
Additional paid-in capital 553,889 550,697
Less: treasury stock 2,000 shares (at cost) (2,000) (2,000)
Accumulated (deficit) earnings (557,100) (234,270)
Total stockholders' equity 144,337 463,975
Totals $ 992,448 $ 1,395,802
------------- -------------
The accompanying notes are an integral part of these financial statements.
F-3
THE BANKER'S STORE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
MAY 31, 2008 AND 2007
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Twelve Months Ended Three Months Ended
May 31, May 31,
2008 2007 2008 2007
Revenue $ 2,424,468 $ 2,622,010 $ 502,199 $ 698,516
Cost of goods sold 1,686,868 1,902,046 469,331 451,866
Gross profit 737,600 719,964 32,868 246,650
Selling, general and
administrative expenses 1,050,235 926,372 201,953 252,149
Income (loss) from
Operations (312,635) (206,408) (169,085) (5,499)
Other income (expense):
Interest and other
income (expenses) 6,344 5,924 -- 1,258
Interest expense (16,539) (17,039) (1,013) (3,209)
Total other
income (expense): (10,195) (11,115) (1,013) (1,951)
Income before income
tax provision (322,830) (217,523) (170,098) (7,450)
Income tax provision -- -- -- --
Net income $ (322,830) $ (217,523) $ (170,098) $ (7,450)
Basic earnings (loss)
per common share $ (0.02) $ (0.01) $ (0.01) $ (0.00)
Diluted earnings (loss)
per share $ (0.02) $ (0.01) $ (0.01) $ (0.00)
The accompanying notes are an integral part of these financial statements.
F-4
THE BANKER'S STORE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
MAY 31, 2008 AND 2007
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
Retained
Addi Earnings
Common Stock tional (Accum
------------------- Paid-in ulated Treasury
Shares Amount Capital Deficit) Stock Total
---------- -------- -------- ---------- -------- ----------
Balance
May 31, 2003 14,947,215 $149,473 $497,216 $(175,372) $ -- $ 471,317
Net loss -- -- -- (999) -- (999)
Balance
May 31, 2004 14,947,215 149,473 497,216 (176,371) -- 470,318
Shares issued 7,500 75 (75) -- -- --
Treasury stock -- -- -- -- (2,000) (2,000)
Net income -- -- -- 101,061 -- 101,061
Balance
May 31, 2006 14,954,781 $149,548 $497,141 $ (16,747) $ (2,000) $627,942
Shares issued -- -- -- -- -- --
Treasury stock -- -- -- -- -- --
Private
placement funds -- -- 42,000 -- -- 42,000
Stock based
Compensation -- -- 11,556 -- -- 11,556
Net income -- -- -- (217,523) -- (217,523)
Balance
May 31, 2007 14,954,781 149,548 550,697 (234,270) (2,000) 463,975
Shares issued -- -- -- -- -- --
Treasury stock -- -- -- -- -- --
Private
placement funds -- -- 3,192 -- -- 3,192
Stock based
Compensation -- -- -- -- -- --
Net income -- -- -- (322,830) -- (322,830)
Balance
May 31, 2008 14,954,781 $149,548 $553,889 $(557,100) $(2,000) $ 144,337
---------- -------- -------- ---------- -------- ----------
The accompanying notes are an integral part of these financial statements.
F-5
THE BANKER'S STORE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
TWELVE MONTHS ENDED MAY 31, 2008 AND 2007
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
May 31,
2008 2007
----------- ------------
Operating activities
Net income (loss) $ (322,830) $ (217,523)
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
Depreciation and amortization 19,969 25,154
Stock based compensation -- 11,556
Changes in operating assets and liabilities:
Accounts receivable 31,564 122,753
Inventories 88,847 8,943
Prepaid expenses and other current assets 44,387 (79,299)
Accounts payable and accrued expenses 47,532 (51,630)
Customer deposits (81,796) 210,429
Net cash (used in) operating activities (152,691) 30,383
Investing activities
Capital expenditures, net of writeoffs (9,008) (10,431)
Net cash (used in) investing activities (9,008) (10,431)
Financing activities
Increase (decrease) in long-term debt, net (2,346) (7,651)
Loan payable - Borrowing from principal stockholder (47,105) (9,666)
Net cash provided by (used in) financing activities (46,259) (17,317)
Net increase in cash and cash equivalents (207,958) 2,635
Cash and cash equivalents, beginning of period 357,323 354,688
Cash and cash equivalents, end of period $ 149,365 $ 357,323
----------- ------------
Supplemental disclosure of cash flow information:
Interest paid $ 16,539 $ 17,039
----------- ------------
Income taxes paid $ -- $ 3,350
----------- ------------
The accompanying notes are an integral part of these financial statements.
F-6
THE BANKER'S STORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Organization and principles of consolidation:
The Banker's Store, Inc. (the "Store") was incorporated under the laws of the
State of New York on June 26, 1968. On May 31, 1998, the Company completed
the acquisition of B.G. Banking Equipment, Inc., ("B.G. Banking") and
Financial Building Equipment Exchange, Inc. ("FBEE"), both Kentucky
corporations, in exchange for 11,282,250 shares of its common stock. The
acquisition of B.G. Banking and FBEE by the Store (collectively, the
"Company") has been accounted for as a reverse merger involving a shell
company, effectively a recapitalization of B.G. Banking and FBEE (the
operating companies/accounting acquirers). Accordingly, the historical
financial statements of the operating companies are presented as the
historical financial statements of the registrant. The results of operations
of the Store (legal acquirer) are included in the consolidated financial
statements since May 31, 1998, the date of the merger. All significant
intercompany accounts and transactions have been eliminated in consolidation.
The Company is in the business of buying, selling, trading and refurbishing
financial equipment for banks and other financial institutions. During 2001,
the Company commenced the business of buying and selling office equipment.
Use of estimates:
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect certain reported
amounts and disclosures. Actual results could differ from those estimates.
Revenue recognition:
The Company records sales of furniture and equipment when the products are
shipped. In sales that require installation, the Company generally obtains
customer deposits and invoices the customer on completion of the contractual
obligation. In such cases, the sale is recognized when the customer is
invoiced upon completion of the installation, and the customer deposit is
applied against the amount due.
Cash and cash equivalents:
The Company considers all highly liquid investments with an original maturity
of three months or less when purchased to be cash equivalents.
Inventories:
Inventory consists of new and used furniture and equipment primarily used in
the banking industry. Inventories are stated at the lower of cost or market
utilizing the first-in, first-out method. The Company reviews the inventory
quarterly for obsolescence, and estimates an allowance. The allowance for
obsolete inventory was $36,148 and $35,278 as of May 31, 2007 and 2008,
respectively.
Equipment and improvements:
Equipment and improvements are stated at cost, less accumulated depreciation
and amortization. Depreciation and amortization have been provided utilizing
the straight-line method over the estimated useful lives of the assets.
Advertising:
Advertising expenses are considered non-response costs and are expensed as
incurred. Total advertising expense was $16,462 in 2008 and $13,978 in 2007.
F-7
THE BANKER'S STORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(concluded):
Net earnings (loss) per share:
The Company presents "basic" earnings (loss) per share and, if applicable,
"diluted" earnings per share pursuant to the provisions of Statement of
Financial Accounting Standards No. 128, "Earnings per Share". Basic earnings
(loss) per share are calculated by dividing net income or loss by the
weighted average number of shares outstanding during each period. The
calculation of diluted earnings per share is similar to that of basic
earnings per share, except that the denominator is increased to include the
number of additional common shares that would have been outstanding if all
potentially dilutive common shares were issued during the period. The
Company considered the share based compensation as described in Note 11 in
the calculation of dilutive common shares outstanding during the year ended
May 31 2007. The weighted average numbers of shares for determining basic
earnings per share were 14,954,781in 2008 and 2007. Fully-diluted weighted-
average common shares outstanding are not utilized in the calculation of loss
per common share as the effect would be anti-dilutive, decreasing the
reported loss per common share.
Income taxes:
The Company accounts for income taxes pursuant to the asset and liability
method which requires deferred income tax assets and liabilities be computed
for differences between the financial statement and tax bases of assets and
liabilities that will result in taxable or deductible amounts in the future
based on enacted tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount
expected to be realized. Income tax expense is the tax payable or refundable
for the period plus or minus the change during the period in deferred tax
assets and liabilities. See Note 6.
NOTE 2 - EQUIPMENT AND IMPROVEMENTS:
Equipment and improvements consist of the following:
Range of
Estimated
Useful Lives 2008 2007
Machinery and equipment 3 to 10 years $ 52,825 $ 43,138
Transportation equipment 5 years 136,257 139,794
Computer equipment 5 years 23,190 20,332
Furniture and fixtures 5 years 1,267 1,267
Leasehold improvements 3 years 54,728 54,728
Totals 268,267 259,259
Less accumulated depreciation
and amortization 199,086 179,116
Totals $ 69,181 $ 80,143
-------- --------
Depreciation and amortization amounted to $19,969 and $25,154 for the years
ended May 31, 2008 and 2007 respectively.
F-8
THE BANKER'S STORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - NOTE PAYABLE TO BANK:
The Company has a $350,000 revolving line of credit with borrowings bearing
interest at .25% above the prime rate and guaranteed by the Company's
principal stockholder. The line of credit expired on November 7, 2007., and
was not renewed by the Company.
NOTE 4 - LONG-TERM DEBT:
Long-term debt consists of the following notes that are collateralized by
transportation equipment:
2008 2007
6.5% notes, payable in monthly installments
of $310, including interest and maturing
September 2007 $ -- $ 1,225
6% notes, payable in monthly installments
of $283, including interest and maturing
September 2007 -- 1,121
------- -------
Totals -- 2,346
Less current portion -- 2,346
Long-term portion $ -- $ --
------- -------
NOTE 5 - RELATED PARTY NOTE AND ACCRUED COMPENSATION:
The former Chairman and principal stockholder has an employment contract with
the Company, renewable annually. The contract provides for an annual salary
of $12,000 plus health insurance and other benefits. The Company has accrued
compensation of $263,100 through May 31, 2008 and 2007, respectively, related
to this contract.
The Company has a demand promissory note payable with interest accruing at
8.75% per annum with the former Chairman and principal stockholder in the
amount $142,519 and $189,625 as of May 31, 2008 and 2007, respectively. The
Chairman and principal stockholder has represented that he will not demand
repayment of the note until the Company has sufficient resources to make the
repayment. The company began repaying principal on the promissory note in
January 2007.
NOTE 6 - INCOME TAXES:
The provision for income taxes differs from the amounts computed using the
Federal statutory rate of 34% as a result of the following:
2008 2007
Expected provision at Federal statutory rate (34) (34)
Effect of state taxes, net of Federal
income tax effect (6) (6)
Utilization of deferred tax assets 40 40
Decrease in deferred tax valuation -- --
Effective tax rate --% --%
------- -------
Due to the uncertainties related to the extent and timing of our future
taxable income, we have established a total valuation allowance against
deferred tax assets. At May 31, 2007, the Company had $19,636 in deferred
tax assets net of a valuation allowance, in order to recognize the benefit
attributable to net operating loss carrybacks.
F-9
THE BANKER'S STORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - INCOME TAXES (concluded):
As of May 31, 2008 the Company has an unused net operating loss carry-forward
balance of approximately $436,861 that is available to offset future taxable
income. This unused net operating loss carry-forward balance expires through
2027 and 2028.
The tax years 2005,2006, and 2007 remain subject to examination by tax
authorities.
Significant components of the Company's deferred tax assets as of May 31,
2008 and 2007 are as follows:
2008 2007
Deferred tax assets:
Net operating loss carryback -- $19,636
Net operating loss carryforwards 179,474 55,364
Accrued officer salary 105,000 105,000
Depreciation -- (1,000)
Inventory reserve 14,000 14,500
Other 3,500 3,500
301,974 197,000
Valuation allowance for deferred tax assets (301,974) (177,364)
Deferred tax assets $ -- $ 19,636
------- -------
NOTE 7 - LEASE OBLIGATIONS - RELATED PARTY:
The Company has entered into two operating leases with its Chairman and
principal stockholder for the lease of an aggregate of 32,000 square feet of
office and warehouse space located in Bowling Green, Kentucky. The leases
provide for a monthly rent of $7,920 plus applicable real estate taxes and
maintenance expenses. The leases expire in August and September 2008,
respectively.
Related rent expense amounted to $95,040 and $89,280 respectively for the
years ended May 31, 2008 and 2007.
NOTE 8 - CONTINGENCIES:
Litigation:
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. We have filed a
motion to dismiss the counterclaim.
Although we cannot predict the outcome of the litigation described above, we
do not believe that the ultimate outcome will have any material adverse
effect on our consolidated financial statements in subsequent periods.
F-10
THE BANKER'S STORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - CONTINGENCIES (CONTINUED):
Concentrations of credit risk:
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, 2008,
the Company has cash and cash equivalent balances that exceed federally
insured limits in the amount of approximately $21,028.
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.
NOTE 9 - FAIR VALUE OF FINANCIAL INSTRUMENTS:
The Company's material financial instruments at May 31, 2008 for which
disclosure of estimated fair value is required by certain accounting
standards consisted of cash and cash equivalents, accounts receivable and
accounts payable, advances from principal stockholder and long-term debt. In
the opinion of management, (i) cash and cash equivalents, accounts receivable
and accounts payable were carried at values that approximated their fair
value because of their liquidity and/or their short-term maturities; (ii)
long-term debt were carried at values that approximated their fair values
because they had interest rates equivalent to those currently prevailing for
financial instruments with similar characteristics and (iii) although
management does not believe that there is a practical method that can be used
to specifically determine the fair value of the advances from the principal
stockholder, because of the relationship of the Company and its stockholders,
it believes that the carrying value of the advances approximates fair value.
NOTE 10 - SEGMENT INFORMATION:
The Company has adopted the provisions of Statements of Financial Accounting
Standards No. 131, "Disclosures about Segments of an Enterprise and Related
Information ("SFAS 131"). The Company has two reporting segments: "Banking
Equipment" and "Office Equipment" The Banking Equipment segment is comprised
of the operations connected with the buying, selling, trading of new and
refurbished financial equipment for banks and other financial institutions.
The Office Equipment segment is comprised of buying and selling office
equipment and supplies.
F-11
THE BANKER'S STORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Segment disclosure information follows:
THE BANKER'S STORE, INC. AND SUBSIDIARIES
DISCLOSURE OF REPORTED SEGMENT PROFIT OR LOSS, AND SEGMENT ASSETS
TWELVE MONTHS ENDED TWELVE MONTHS ENDED
MAY MAY
2008 2007
Banking Office Banking Office
Equipment Equipment Totals Equipment Equipment Totals
---------- --------- ---------- ---------- --------- ----------
Revenues
from external
customers $2,040,473 $ 383,995 $2,424,468 $2,325,322 $ 296,688 $2,622,010
Intersegment
revenues - - - - - -
Interest
Revenue 4,233 - 4,233 5,995 - 5,995
Interest expense 16,539 - 16,539 17,039 - 17,039
Net interest
Expense 12,306 - 12,306 11,043 - 11,043
Depreciation and
Amortization 18,957 1,012 19,969 24,435 719 25,154
Segment
profit (loss) (244,871) (77,959) (322,830) (189,899) (27,624) (217,523)
Segment assets $ 909,496 $ 82,952 $ 992,448 $1,294,827 $100,975 $1,395,802
NOTE 11 - SHARE BASED COMPENSATION
On January 11, 2007, the Company established a share based compensation plan,
which is described below. The compensation cost that has been charged
against income was $11,556 for the year ended May 31, 2007, and $0 for the
year ended May 31, 2008. No income tax benefit was recognized during either
year "See Note 6". There were no options exercised and no effect on cash
flows during the year ended May 31, 2007 or May 31, 2008.
2006 Stock Ownership Incentive Plan
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, 2008, the Company had approximately 15 full-time
employees, 1 part-time employee, and the Company had 3 non-employee
directors.
F-12
THE BANKER'S STORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Under the plan option awards vest over a three year period. The fair value
of each option award is estimated on the date of grant using the Black
Scholes Option Pricing Model. The inputs used in the Black Scholes Option
Pricing Model are disclosed below.
Current stock price $0.07
Expected dividends None
Restrictions None
Exercise price $0.07
Risk free rate 4.74%
Expected term (in years) 3.5
Historical volatility 127%
Dilution adjustment 6.27%
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.
Number of
securities remaining
Number of securities available for
to be issued upon Weighted-Average future issuance
exercise of exercise price of under equity
outstanding options outstanding options compensation plans
Equity
compensation
plans approved 300,000 shares $.07 950,000 shares (2)
by security
holders (1)
(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.
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 (2) October 9, 2008 Vincent C. Buckman,
President and Chief
Executive Officer
102,273 (1) October 9, 2007 Samuel J. Stone,
then Chief Financial
Officer
(1) In January 2008, Mr. Samuel J. Stone, the Company's Chief Financial
Officer resigned from the Company. According to the "2006 Stock Ownership
Incentive Plan" and Mr. Stone's employment agreement, options will vest on
the anniversary date of the grant. However, since Mr. Stone did not complete
the second year of his contract, these options will not vest.
(2) In July 2008, Mr. Vincent C. Buckman, the Company's President and Chief
Executive Officer resigned from the Company. Accordingly, the options to be
granted October 9, 2008 will not be granted.
F-13
THE BANKER'S STORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 - SUMMARIZED QUARTERLY FINANCIAL DATA (Unaudited)
The following data summarizes quarterly operating results.
August November February May
31, 30, 28, 31,
2007 2007 2008 2008 Totals
Revenues $830,738 $533,635 $557,896 $502,199 $2,424,468
Cost of goods sold 548,547 349,901 319,089 469,331 1,686,868
Gross profit 282,191 183,734 238,807 32,868 737,600
Selling, general
and administrative
expenses 311,198 239,589 297,495 201,953 1,050,235
Income (loss)
from operations (29,007) (55,855) (58,688) (169,085) (312,635)
Other income
(expense) (2,068) (2,655) (4,459) (1,013) (10,195)
Income before
income tax
provision (31,075) (58,510) (63,147) (170,098) (322,830)
Income tax
provision -- -- -- -- --
Net income (loss) (31,075) (58,510) (63,147) (170,098) (322,830)
-------- -------- -------- --------- ----------
Basic earnings
(loss) per common
share $ -- $ -- $ (0.01) $ (0.01) $ (0.02)
-------- -------- -------- --------- ----------
Diluted earnings
(loss) per
common share $ -- $ -- $ (0.01) $ (0.01) $ (0.02)
-------- -------- -------- --------- ----------
ITEM 8.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 8A.
CONTROLS AND PROCEDURES
(a) Disclosure controls and procedures. Based upon an evaluation by Cynthia
Hayden, acting as our principal executive officer and as our principal
financial officer of the effectiveness of the design and operation of our
disclosure controls and procedures concluded that our disclosure controls and
procedures were effective as of May 31, 2008.
This Annual Report does not include an attestation report of our registered
public accounting firm regarding internal controls over financial reporting.
Management's report was not subject to attestation by our registered public
accounting firm pursuant to temporary rules of the Securities and Exchange
Commission that permit us to provide only management's report in this Annual
Report. Our registered public accounting firm will be required to attest to
our management's assessment of internal control over financial reporting
beginning with our Annual Report for the year ended May 31, 2009.
(b) Management's Report On Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate
internal control over financial reporting. Internal control over financial
reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the
Securities Exchange Act of 1934 as a process designed by, or under the
supervision of, the company's principal executive and principal financial
officers and effected by the company's board of directors, management and
other personnel, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with accounting principles generally accepted in the
United States of America and includes those policies and procedures that:
- Pertain to the maintenance of records that in reasonable detail accurately
and fairly reflect the transactions and dispositions of the assets of the
company;
- Provide reasonable assurance that transactions are recorded as necessary
to permit preparation of financial statements in accordance with accounting
principles generally accepted in the United States of America and that
receipts and expenditures of the company are being made only in accordance
with authorizations of management and directors of the company; and
- Provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the company's assets that
could have a material effect on the 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. Because of the inherent limitations of
internal control, there is a risk that material misstatements may not be
prevented or detected on a timely basis by internal control over financial
reporting. However, these inherent limitations are known features of the
financial reporting process. Therefore, it is possible to design into the
process safeguards to reduce, though not eliminate, this risk.
As of May 31, 2008 management assessed the effectiveness of our internal
control over financial reporting based on the criteria for effective internal
control over financial reporting established in Internal Control--Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission ("COSO") and SEC guidance on conducting such assessments. Based
on that evaluation, they concluded that, during the period covered by this
report, such internal controls and procedures were not effective to detect
the inappropriate application of US GAAP rules as more fully described below.
This was due to deficiencies that existed in the design or operation of our
internal controls over financial reporting that adversely affected our
internal controls and that may be considered to be material weaknesses.
The matters involving internal controls and procedures that our management
considered to be material weaknesses under the standards of the Public
Company Accounting Oversight Board were: (1) lack of a functioning audit
committee resulting in ineffective oversight in the establishment and
monitoring of required internal controls and procedures; (2) inadequate
segregation of duties consistent with control objectives; and (3) ineffective
controls over period end financial disclosure and reporting processes. The
aforementioned material weaknesses were identified by our President in
connection with the review of our financial statements as of May 31, 2008.
Management believes that the material weaknesses set forth in items (2) and
(3) above did not have an effect on our financial results. However,
management believes that the lack of a functioning audit committee resulted
in ineffective oversight in the establishment and monitoring of required
internal controls and procedures, which could result in a material
misstatement in our financial statements in future periods.
This annual report does not include an attestation report of the
Corporation's registered public accounting firm regarding internal control
over financial reporting. Management's report was not subject to attestation
by the Corporation's registered public accounting firm pursuant to temporary
rules of the SEC that permit the Corporation to provide only the management's
report in this annual report.
Management's Remediation Initiatives
In an effort to remediate the identified material weaknesses and other
deficiencies and enhance our internal controls, we have initiated, or plan to
initiate, the following series of measures:
We will create a position to segregate duties consistent with control
objectives and will increase our personnel resources and technical accounting
expertise within the accounting function when funds are available to us.
And, on June 11, 2008, we appointed outside directors to our board of
directors who shall appoint an audit committee resulting in a fully
functioning audit committee who will undertake the oversight in the
establishment and monitoring of required internal controls and procedures
such as reviewing and approving estimates and assumptions made by management
when funds are available to us.
Management believes that the appointment of the outside directors, who shall
appoint a fully functioning audit committee, will remedy the lack of a
functioning audit committee.
We anticipate that these initiatives will be at least partially, if not
fully, implemented by December 31, 2009. Additionally, we plan to test our
updated controls and remediate our deficiencies by December 31, 2009.
(c) Internal controls. During the year ended May 31, 2008, there were no
changes in our internal control over financial reporting that materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.
ITEM 8B.
OTHER INFORMATION
None.
F-14
PART III
The information required by Part III, with the exception of Item 13, is
incorporated by reference to the Company's definitive proxy statement for the
2008 annual meeting of stockholders, which the Company will file with the
Securities and Exchange Commission within 120 days after the end of the
fiscal year covered by this report.
ITEM 9.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH
SECTION 16(A) OF THE EXCHANGE ACT
Incorporated by reference as described above.
ITEM 10.
EXECUTIVE COMPENSATION
Incorporated by reference as described above.
ITEM 11.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
Incorporated by reference as described above.
ITEM 12.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company entered into an Acquisition Agreement and Plan of Merger with
Chesscom Consultants, Inc. on June 11, 2008. Joan Jolitz, a director of the
Company, is the former officer, director and shareholder of Chesscom.
Allison Belcher, a director of the Company, is the step-daughter of Joan
Jolitz, but has no other connection to Chesscom. The approximate dollar
value of the transaction is $480,000. As Mrs. Jolitz had assigned her
interest in Chesscom to other shareholders prior to the transaction with the
Company, neither Mrs. Jolitz or Mrs. Belcher have any monetary interest in
the transaction.
ITEM 13.
EXHIBITS
EXHIBIT NUMBER AND DESCRIPTION OF DOCUMENT
2.1
Agreement of Business Combination By Stock Exchange, dated April 15, 1998, by
and between BG Banking Equipment and Maritime Transport & Technology, Inc.
(2)
3.1
Certificate of Incorporation of The Banker's Store, Inc., as amended.
3.2
Articles of Incorporation of Financial Building Equipment Exchange, Inc. (1)
3.3
Articles of Incorporation as amended of BG Banking Equipment, Inc. (1)
3.4
Bylaws of The Banker's Store, Inc.
4.1
Specimen Common Stock Certificate. (2)
10.1
Business Lease, dated August 1, 1998, by and between Paul D. Clark and
Maritime Transport and Technology, Inc. (dba The Bank Store and dba BG
Banking Equipment, Inc.)(2)
10.2
Employment Agreement, dated February 1, 1998, by and between Maritime
Transport & Technology, Inc. (dba The Bank Store and dba BG Banking
Equipment, Inc.) and Paul Clark. (2)
10.3
Employment Agreement between the Company and Vincent C. Buckman. (3)
10.4
Employment Agreement between the Company and Samuel Stone (3)
10.5
2006 Stock Ownership Incentive Plan (4)
21.1
Subsidiaries of the Company. (1)
31.1
Certification Pursuant to Rule 13a-14(a) of Thomas C. Cook, Principal
Executive Officer & Director
32.1
Certification of Thomas C. Cook
(1)
Incorporated herein by reference from the Company's Form 10-K filed for the
year ending May 31, 1998.
(2)
Incorporated herein by reference from the Company's Form 10-K filed for the
year ending May 31, 2000.
(3)
Incorporated by reference from the Company's Current Report on Form 8-K filed
with the SEC on October 13, 2006.
(4)
Incorporated by reference from the Company's definitive proxy statement filed
with the SEC on December 11, 2006.
ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
Incorporated by reference as described above.
10
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this amended report to
be signed on its behalf by the undersigned, thereunto duly authorized.
The Banker's Store, Inc.
By: /s/ Thomas C. Cook
------------------
Thomas C. Cook
Principal Executive Officer
Date: November 23, 2009
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.
/s/ Thomas C. Cook Dated: November 23, 2009
Thomas C. Cook
Principal Executive Officer and Director
/s/ Thomas C. Cook Dated: November 23, 2009
Thomas C. Cook
Principal Financial Officer
/s/ Stephen K. Wilson Dated: November 23, 2009
Stephen K. Wilson
Director
/s/ Joan Jolitz Dated: November 23, 2009
Joan Jolitz
Director
/s/ Allison Belcher Dated: November 23, 2009
Allison Belcher
Director
11
