SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED FEBRUARY 28, 2007
OR
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES ACT OF 1934
COMMISSION FILE NUMBER: 000-8880
THE BANKER'S STORE, INC.
(Exact name of registrant as specified in its charter)
NEW YORK | 22-3755766 |
State or Other Jurisdiction Of Incorporation or Organization | (I.R.S. Employer Identification No.) |
1535 MEMPHIS JUNCTION ROAD, BOWLING GREEN, KY 42101
(Address, including zip code, of principal executive offices)
(270) 781-8453
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
Common stock, par value $0.01, 14,954,781 shares outstanding as of April 2, 2007.
THE BANKER'S STORE, INC.
FORM 10-QSB
FEBRUARY 28, 2007
INDEX
PART I - FINANCIAL INFORMATION
ITEM 1. | FINANCIAL STATEMENTS |
See financial statements beginning on page F-1.
ITEM 2. | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF OPERATION |
The matters discussed in this management's discussion and analysis or plan of operations contain forward-looking statements that involve risks and uncertainties. The Company's actual results in our two operating segments could differ materially from those discussed here. Factors that could cause or contribute to such differences are discussed elsewhere in this quarterly report on Form 10-QSB. The Company disclaims any intent or obligation to update these forward-looking statements.
OVERVIEW
The Banker's Store, Inc. ("Store") was established in 1968. It remained dormant for many years until it completed the acquisition of B.G. Banking Equipment, Inc., ("B.G. Banking") and Financial Building Equipment Exchange, Inc., ("FBEE"). We are now in the business of buying, selling, refurbishing and trading new and refurbished financial equipment for banks and other financial institutions. Commencing during the fourth quarter of the year ended May 31, 2002, we entered the office equipment and furniture retail business. 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.
We anticipate that our results of operations may fluctuate for the foreseeable future due to several factors, including whether and when new products at competitive prices are obtained and sources of good used banking and banking related equipment and furniture become available at favorable prices, market acceptance of current or new products, delays, or inefficiencies, shipment problems, seasonal customer demand, the timing of significant orders, competitive pressures on average selling prices and changes in the mix of products sold.
Operating results would also be adversely affected by a downturn in the market for our current and future products, order cancellations, or order rescheduling or remanufacturing or delays. We purchase and resell new merchandise and remanufacture 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.
In October, 2006, we added two new executive officers to our management team. We have increased our operating expenses, primarily for personnel and activities supporting newly-introduced products, new product development and entering new markets. Our operating results will be adversely affected if our sales do not correspondingly increase or if our product development efforts are unsuccessful or are subject to delays.
We may not be able to sustain revenue growth on a quarterly or annual basis.
1
SUMMARY OF SIGNIFICANT ACCOUNTING ESTIMATES, RELATED PARTY TRANSACTIONS AND CONTINGENCIES:
Significant accounting estimates:
Our discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in conformity with accounting principles generally accepted in the United States of America. The preparation of these condensed 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. The accounting estimates used as of May 31, 2006 and as outlined in our previously filed Form 10-KSB have been applied consistently for the six months and three months ended February 28, 2007.
Related party transactions:
We have entered into two operating leases with our Chairman of the Board and principal stockholder, Paul Clark, 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 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.
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.
Defendants Taurus, Brosda and Seim filed a motion to dismiss the action, which the court denied on October 5, 2000. Counsel for Taurus, Brosda and Seim, requested to be relieved as counsel and on, November 15, 2000, the court granted that motion. On December 14, 2000, the court granted our oral motion for the entry of 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. There has been no further activity of record in the case since the order of transfer.
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.
2
RESULTS OF OPERATIONS
The following table sets forth operating data as a percentage of revenue for the nine months and three months ended February 28, 2007 and 2006:
Nine months ended | Three months ended | ||||||||||||
February 28, | February 28, | ||||||||||||
2007 | 2006 | 2007 | 2006 | ||||||||||
Net sales | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |||||
Cost of goods sold | 71.5 | % | 68.2 | % | 64.7 | % | 81.2 | % | |||||
Gross profit | 28.5 | % | 31.8 | % | 35.3 | % | 18.8 | % | |||||
Selling, general and administrative expenses | 39.9 | % | 29.1 | % | 36.1 | % | 26.1 | % | |||||
Income (loss) from operations | -11.4 | % | 2.7 | % | -0.8 | % | -7.1 | % | |||||
Other | -0.5 | % | -0.5 | % | -0.3 | % | -0.5 | % | |||||
Income before income tax provision | -11.9 | % | 2.2 | % | -1.2 | % | -7.6 | % | |||||
Income tax provision | 0.0 | % | 0.8 | % | 0.0 | % | -2.9 | % | |||||
Net income (loss) | -11.9 | % | 1.4 | % | -1.2 | % | -4.8 | % |
RESULTS OF OPERATIONS FOR THE NINE MONTHS AND THREE MONTHS ENDED FEBRUARY 28, 2007 AS COMPARED TO THE NINE MONTHS AND THREE MONTHS ENDED FEBRUARY 28, 2006.
Revenues were approximately $1,789,397 for the nine months ended February 28, 2007 as compared to approximately $1,923,504 for the nine months ended February 28, 2006 reflecting a decrease of approximately $134,107 or (7%). The decrease in revenues during the nine months ended February 28, 2007 is the net result of a decrease in equipment sales. The revenues for the three months ending February 28, 2007 were $698,516 as compared to $616,867 indicating and increase of approximately $81,649 or 13% for the comparable prior period ending February 28, 2006. Revenues increased during this quarter due to an increase in office equipment sales and the completion of several projects that had taken longer to complete due to construction delays.
Cost of goods sold for the nine months ended February 28, 2007 were approximately $1,279,538 or 72% of net sales as compared to approximately $1,311,814 or 68% of net sales for the nine months ended February 28, 2006. Cost of goods sold for three months ending February 28, 2007 which was $451,866 as compared to $500,714 for three months ending February 28, 2006. Gross profit decreased during the nine months ended February 28, 2007 as compared to the nine months ended February 28, 2006 primarily due to decreased sales combined with a change in sales mix from preowned equipment to new equipment. Traditionally, preowned equipment carries a higher gross profit than new equipment.
Selling, general and administrative expenses were approximately $714,698 for the nine months ended February 28, 2007 as compared to approximately $559,159 for the nine months ended February 28, 2006 reflecting an increase of approximately $155,539 or 28%. In part, this increase is due to hiring two new executives, and creating two new executive positions. Previously, Paul D. Clark filled the position of CEO and CFO. Mr. Clark has now moved to the Chairman position and Mr. Vince Buckman has assumed the CEO and President position and Mr. Sam Stone has assumed the CFO position.
As a result of the aforementioned, the Company incurred a net loss from operations during the nine months ended February 28, 2007 of approximately $213,133 as opposed to a net profit of approximately $27,275 for the comparable prior period.
3
LIQUIDITY AND CAPITAL RESOURCES
We have historically financed our operations through revenues from operations.
We had cash and cash equivalents of $475,585 and working capital of $354,558 at February 28, 2007. At February, 28, 2007, the Company’s cash position had increased by $120,897 from the year-end of May 31, 2006. The increase in liquidity primarily came from the customer deposits and the collection of accounts receivable and was partially offset by the increase of inventories.
The company has a $350,000 revolving line of credit with borrowings bearing interest at .25% above the prime rate guaranteed by the Company’s principal stockholder. The line of credit expires on November 21, 2007. At February 28, 2007, the Company has no outstanding borrowings under the line.
We are evaluating various alternatives in addressing our future facilities expansion needs. Relocation to a new facility or leasing of additional facility space would be expected to result in an increase in rent upon occupancy. We believe that our available cash, cash from operations and funds from existing credit arrangements will be sufficient to satisfy our operating funding needs through at least February 28, 2008. 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. The Company will seek to combine with growing profitable companies in the ATM, financial equipment, and service industry. There can be no assurance that additional capital for expansions and acquisitions 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 and 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.
CONTROLS AND PROCEDURES |
(a) DISCLOSURE CONTROLS AND PROCEDURES. As of February 28, 2007, the Company evaluated the effectiveness of the design and operation of its disclosure controls and procedures. The Company's disclosure controls and procedures are the controls and other procedures that it designed to ensure that it records, processes, summarizes and reports in a timely manner the information it must disclose in reports that it files with or submits to the Securities and Exchange Commission. Vincent Buckman, the Company's President and CEO, supervised and participated in this evaluation. Based on this evaluation, Mr. Buckman concluded that, as of the date of their evaluation, the Company's disclosure controls and procedures were effective.
(b) CHANGES IN INTERNAL CONTROLS. There were no changes in internal controls over financial reporting known to the Chief Executive Officer and Chief Financial Officer that occurred during the period covered by this report that has materially affected, or is likely to materially effect, the Company’s internal control over financial reporting.
PART II.
OTHER INFORMATION
LEGAL PROCEEDINGS |
No material developments occurred during the quarter with respect to our on-going litigation. For a discussion of this litigation, please see Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operation-Litigation herein.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
None.
DEFAULTS BY THE COMPANY UPON ITS SENIOR SECURITIES |
None.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS |
The Banker’s Store annual meeting was held on Thursday, January 11, 2007 at 1535 Memphis Junction Road, Bowling Green, Kentucky 42101. The Proxy Statement, the Notice of the Annual Meeting of Shareholders and the proxy card were mailed to shareholders on or about December 11, 2006 to shareholders of record as of December 4, 2006. The following matters were proposed and approved as follows:
4
* | The election of directors proposed by the Board: | For | Withheld | against | abstain | |||||
Paul D. Clark | 13,850,639 | 1,515 | ||||||||
Vincent C. Buckman | 13,850,639 | 1,515 | ||||||||
Samuel J. Stone | 13,850,639 | 1,515 | ||||||||
Cynthia A. Hayden | 13,850,639 | 1,515 | ||||||||
Roberta W. Clark | 13,850,639 | 1,515 | ||||||||
* | The approval of the options granted to the Company’s new Chief Executive Officer and Chief Financial Officer | 13,406,483 | 10,855 | 1,215 | ||||||
* | The approval of the 2006 Stock Ownership Incentive Plan | 13,414,909 | 2,305 | 1,339 | ||||||
* | The ratification of the appointment of Marmann, Irons & Assoc. PC, as independent public accountants for the fiscal year ending May 31, 2007. | 13,849,528 | 50 | 120 |
OTHER INFORMATION |
None.
EXHIBITS |
a) Exhibits
31.1 Certification Pursuant to Rule 13a-14(a) of Vincent C. Buckman, CEO and President
31.2 Certification Pursuant to Rule 13a-14(a) of Sam Stone, Chief Financial Officer
32.1 Certification of Vincent C. Buckman
32.2 Certification of Sam Stone
5
FINANCIAL STATEMENTS
THE BANKER'S STORE, INC. AND SUBSIDIARIES
I N D E X
PAGE
PAGE | ||
CONDENSED CONSOLIDATED BALANCE SHEETSFEBRUARY 28, 2007 (UNAUDITED) AND MAY 31, 2006 | F-2 | |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS NINE AND THREE MONTHS ENDED FEBRUARY 28, 2007 AND 2006 (UNAUDITED) | F-3 | |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS NINE MONTHS ENDED FEBRUARY 28, 2007 AND 2006 (UNAUDITED) | F-4 | |
F-5 - F-7 | ||
PART II. OTHER INFORMATION | ||
* * *
F-1
THE BANKER'S STORE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
FEBRUARY 28, 2007 AND MAY 31, 2006
February 28, | May 31, | ||||||
ASSETS | 2007 | 2006 | |||||
Current Assets: | |||||||
Cash and cash equivalents | $ | 475,585 | $ | 354,688 | |||
Accounts receivable, net of allowance for bad debts of $4,043 | 177,934 | 286,137 | |||||
Inventories | 724,974 | 676,580 | |||||
Prepaid expenses and other current assets | 30,631 | 27,549 | |||||
Total current assets | 1,409,124 | 1,344,954 | |||||
Equipment and improvements, net | 89,005 | 94,866 | |||||
Other assets | 20,468 | 20,467 | |||||
Totals | $ | 1,518,597 | $ | 1,460,287 | |||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
Current Liabilities: | |||||||
Current portion of long-term debt | $ | 4,070 | $ | 8,454 | |||
Accounts payable and accrued expenses | 196,853 | 141,475 | |||||
Customer deposits | 389,769 | 176,482 | |||||
Note payable - principal stockholder | 200,774 | 207,991 | |||||
Accrued compensation - principal stockholder | 263,100 | 254,400 | |||||
Private placement funds in dispute | - | 42,000 | |||||
Total current liabilities | 1,054,566 | 830,802 | |||||
Long-term debt, net of current portion | - | 1,543 | |||||
Total liabilities | 1,054,566 | 832,345 | |||||
Commitments and contingencies | |||||||
Stockholders' equity: | |||||||
Common stock, $.01 par value; 80,000,000 shares authorized; 14,954,781 and 14,954,715 shares issued and outstanding | 149,548 | 149,548 | |||||
Additional paid-in capital | 546,363 | 497,141 | |||||
Less: treasury stock 2,000 shares (at cost) | (2,000 | ) | (2,000 | ) | |||
Accumulated (deficit) earnings | (229,880 | ) | (16,747 | ) | |||
Total stockholders' equity | 464,031 | 627,942 | |||||
Totals | $ | 1,518,597 | $ | 1,460,287 |
The accompanying notes are an integral part of these financial statements.
F-2
THE BANKER'S STORE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FEBRUARY 28, 2007 AND 2006.
NINE MONTHS ENDED FEBRUARY 28, | THREE MONTHS ENDED FEBRUARY 28, | ||||||||||||
2007 | 2006 | 2007 | 2006 | ||||||||||
Revenue | $ | 1,789,397 | $ | 1,923,504 | $ | 698,516 | $ | 616,867 | |||||
Cost of goods sold | 1,279,538 | 1,311,814 | 451,866 | 500,714 | |||||||||
Gross profit | 509,859 | 611,690 | 246,650 | 116,153 | |||||||||
Selling, general and administrative expenses | 714,698 | 559,159 | 252,149 | 160,738 | |||||||||
Income (loss) from operations | (204,839 | ) | 52,531 | (5,499 | ) | (44,585 | ) | ||||||
Other income (expense): | |||||||||||||
Interest and other income (expenses) | 4,377 | 2,966 | 1,258 | 1,200 | |||||||||
Interest expense | (12,671 | ) | (12,584 | ) | (3,209 | ) | (4,140 | ) | |||||
Total other income (expense): | (8,294 | ) | (9,618 | ) | (1,951 | ) | (2,940 | ) | |||||
Income before income tax provision | (213,133 | ) | 42,913 | (7,450 | ) | (47,525 | ) | ||||||
Income tax provision | - | 15,638 | - | (18,052 | ) | ||||||||
Net income | $ | (213,133 | ) | $ | 27,275 | $ | (7,450 | ) | $ | (29,473 | ) | ||
Basic earnings (loss) per common share | $ | (0.01 | ) | $ | 0.00 | $ | (0.00 | ) | $ | (0.00 | ) | ||
Diluted earnings (loss) per share | $ | (0.01 | ) | $ | 0.00 | $ | (0.00 | ) | $ | (0.00 | ) |
The accompanying notes are an integral part of these financial statements.
F-3
THE BANKER'S STORE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED FEBRUARY 28, 2007 AND 2006
FEBRUARY 28, | |||||||
2007 | 2006 | ||||||
Operating activities | |||||||
Net income (loss) | $ | (213,133 | ) | $ | 27,275 | ||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | |||||||
Depreciation and amortization | 19,039 | 19,099 | |||||
Stock based compensation | 7,222 | - | |||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | 108,202 | 213,352 | |||||
Inventories | (48,394 | ) | (97,154 | ) | |||
Prepaid expenses and other current assets | (3,083 | ) | 5,133 | ||||
Accounts payable and accrued expenses | 55,378 | (57,786 | ) | ||||
Customer deposits | 213,287 | 126,953 | |||||
Net cash provided by (used in) operating activities | 138,518 | 236,872 | |||||
Investing activities | |||||||
Capital expenditures, net of writeoffs | (13,177 | ) | (14,642 | ) | |||
Net cash (used in) investing activities | (13,177 | ) | (14,642 | ) | |||
Financing activities | |||||||
Increase (decrease) in long-term debt, net | (5,927 | ) | (10,081 | ) | |||
Loan payable - Borrowing from principal stockholder | 1,483 | 17,550 | |||||
Net cash provided by financing activities | (4,444 | ) | 7,469 | ||||
Net increase (decrease) in cash and cash equivalents | 120,897 | 229,699 | |||||
Cash and cash equivalents, beginning of period | 354,688 | 237,388 | |||||
Cash and cash equivalents, end of period | $ | 475,585 | $ | 467,087 | |||
Supplemental disclosure of cash flow information: | |||||||
Interest paid | $ | 12,652 | $ | 12,296 |
The accompanying notes are an integral part of these financial statements.
F-4
THE BANKER'S STORE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Basis of presentation:
In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting of normal recurring accruals, necessary to present fairly the financial position of The Banker's Store, Inc. and Subsidiaries (the "Company") as of February 28, 2007 and the Company's results of operations and cash flows for the nine months ended February 28, 2007 and 2006. Pursuant to the rules and regulations of the United States Securities and Exchange Commission (the "SEC"), certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed in or omitted from these consolidated financial statements unless significant changes have taken place since the end of the most recent fiscal year. Accordingly, these unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of May 31, 2006 and for the years ended May 31, 2006 and 2005 and the notes thereto (the "Audited Financial Statements") and the other information included in the Company's Annual Report on Form 10-KSB (the "Form 10-KSB") for the year ended May 31, 2006.
The consolidated results of operations for the nine months ended February 28, 2007 are not necessarily indicative of the results to be expected for the full year.
Note 2 - Earnings (loss) per common 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 is 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 reserve shares described in Note 4 as potentially dilutive common shares outstanding during the periods ended February 28, 2007. The weighted average numbers of shares for determining basic earnings per share were 14,954,781 in 2007. The weighted average numbers of shares for determining diluted earnings per share were 15,276,781 in 2007.
Note 3 - Income taxes:
The Company’s estimated federal and state income tax rate is 40 percent. Due to the uncertainties related to, among other things, the extent and timing of our future taxable income, the Company offset the deferred tax assets attributable to the potential benefits of approximately $45,000 from the utilization of net operating loss carryforwards and other deferred tax assets by an equivalent valuation allowance as of February 28, 2007. Deferred tax assets offset by a valuation allowance were approximately $100,000 as of February 28, 2006. Total deferred tax assets were $204,000 offset by a valuation allowance of $184,000 as of February 28, 2007.
As a result of the corresponding increase in the valuation allowance and deferred tax assets of $5,000 during the three months ended February 28, 2007, the Company did not recognize any income taxes in the accompanying condensed consolidated statements of operations to offset its pre-tax income and loss in the periods.
F-5
THE BANKER'S STORE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 4 - 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.
Defendants Taurus, Brosda and Seim filed a motion to dismiss the action, which the court denied on October 5, 2000. Counsel for Taurus, Brosda and Seim, to be relieved as counsel and on, November 15, 2000, the court granted that motion. On December 14, 2000, the court granted our oral motion for the entry of 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. There has been no further activity of record in the case since the order of transfer.
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-6
THE BANKER'S STORE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 5 - 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"). Pursuant to the provisions of SFAS 131, the Company is reporting segment sales, cost of goods sold, gross margins and inventories in the same format reviewed by the Company's management (the "management approach"). 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 and 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.
Revenues and other related segment information follows for the nine months and three months ended February 28, 2007 and 2006:
NINE MONTHS ENDED FEBRUARY 28, 2007 | NINE MONTHS ENDED FEBRUARY 28, 2006 | ||||||||||||||||||
Banking | Office | Banking | Office | ||||||||||||||||
Equipment | Equipment | Totals | Equipment | Equipment | Totals | ||||||||||||||
Revenues from external customers | $ | 1,592,443 | $ | 196,954 | $ | 1,789,397 | $ | 1,723,439 | $ | 200,065 | $ | 1,923,504 | |||||||
Segment profit (loss) | (185,902 | ) | (27,231 | ) | (213,133 | ) | 31,026 | (3,751 | ) | 27,275 | |||||||||
Segment assets | $ | 1,416,594 | $ | 102,003 | $ | 1,518,597 | $ | 1,504,343 | $ | 126,616 | $ | 1,630,959 |
THREE MONTHS ENDED FEBRUARY 28, 2007 | THREE MONTHS ENDED FEBRUARY 28, 2006 | ||||||||||||||||||
Banking | Office | Banking | Office | ||||||||||||||||
Equipment | Equipment | Totals | Equipment | Equipment | Totals | ||||||||||||||
Revenues from external customers | $ | 606,672 | $ | 91,844 | $ | 698,516 | $ | 563,947 | $ | 52,920 | $ | 616,867 | |||||||
Segment profit (loss) | 12,387 | (19,837 | ) | (7,450 | ) | (28,565 | ) | (908 | ) | (29,473 | ) | ||||||||
Segment assets | $ | 1,416,594 | $ | 102,003 | $ | 1,518,597 | $ | 1,504,343 | $ | 126,616 | $ | 1,630,959 |
* * *
F-7
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
THE BANKER'S STORE, INC.
By: | /s/ Vincent C. Buckman | ||
Vincent C. Buckman, | |||
President, CEO, and Director | |||
(Principal Executive Officer) | |||
Date: April 13, 2007 |