**UNITED
        STATES**
 **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 AUGUST 31, 2006**
 
 OR
 
 ** ̈** **TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)**
 **OF
        THE SECURITIES ACT OF 1934**
 **FOR
        THE TRANSITION PERIOD FROM ___________TO ____________**
 
 *COMMISSION
        FILE NUMBER: 000-8880*
 
 **THE
        BANKER'S STORE, INC.**
 
 (Exact
        name of registrant as specified in its charter)
 NEW
                  YORK
              22-3755766State
                  or Other Jurisdiction
              (I.R.S.
                  EmployerOf
                  Incorporation or Organization)
              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  ̈
 
 **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 October 13,
        2006.
  
 
  **THE
        BANKER'S STORE, INC.**
 
 **FORM
        10-QSB**
 
 AUGUST
        31, 2006
 
 
 INDEXPART
                  I - FINANCIAL INFORMATIONITEM
                  1.
              FINANCIAL
                  STATEMENTSSee
                  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.
 
 Because
        we plan to increase our operating expenses, primarily for personnel and
        activities supporting newly-introduced products, new product development
        and
        entering new markets, our operating results would be adversely affected if
        our
        sales did 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.
  2
  **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 three months ended August 31,
        2006.
 
 Related
        party transactions:
 
 We
        have
        entered into two operating leases with our President 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 lease provides for
        a
        monthly rent of $7,200 plus maintenance expenses. The leases expire in August
        and September 2007, respectively.
 
 Contingencies:
 
 Private
        placement - B.G. Banking:
 
 Prior
        to
        the Store's reverse merger with B.G. Banking and FBEE, B.G Banking offered
        and
        received subscriptions for 126,500 shares of its common stock at $1.00 per
        share. Subsequent to the date of the reverse merger, the subscribers of shares
        of B.G. Banking's common stock were offered and they received shares of common
        stock in the Store at a ratio of 1 share of B.G. Banking common stock to
        1.5
        shares of the Store's common stock. We issued 189,750 shares of our common
        stock
        in satisfaction of the subscription agreements at a value of $.67 per share.
 
 Two
        of
        our directors, acting individually as principals of Taurus Investments
        International, Inc. (a Nevada corporation) (collectively "Taurus"), and as
        directors of B.G. Banking prior to its acquisition by the Store and subsequent
        to the acquisition becoming directors of the Store, offered and sold on behalf
        of B.G. Banking what Taurus has admitted to being an aggregate of 304,500
        shares
        of B.G. Banking's common stock for an aggregate consideration of $304,500.
        Taurus has remitted to us net proceeds of $109,674 and claims the difference
        of
        $194,826 as payment for expenses and commissions. In addition, Taurus has
        refused to disclose the names and numbers of shares of common stock and refused
        to remit to us the proceeds of the shares sold. As of August 31, 2006, Taurus
        has failed to turn over the balance of money, provide the names of the stock
        subscribers and the number of shares of common stock purchased.
 
 Based
        upon the accounting provided by Taurus to the Store, the Store may be liable
        for
        the issuance of up to 329,500 shares of common stock if and when Taurus
        substantiates their representation as to the number of shares of common stock
        sold and aggregate consideration. This number of shares represents the number
        of
        shares admittedly sold by Taurus for which the purchasers have as yet remained
        unidentified.
 
 We
        may
        also be forced to defend ourselves against actions to be brought by unknown
        subscribers to shares of common stock of B.G. Banking whose purchase price
        has
        never been disclosed or delivered to the Store. We are aware of one alleged
        purchaser who claims to have delivered funds to Taurus and whose funds were
        apparently not turned over to us. In the opinion of management, the Store
        has no
        liability to such purchasers and intends to vigorously defend such actions,
        if
        and when brought.
 
 We
        have
        received approximately $42,000 from Taurus relating to the purchase of shares
        by
        an unknown investor in June 1999. We are holding such funds in escrow pending
        disposition.
 
 In
        December 2004, the Company issued 7,500 shares of common stock to one of
        the
        subscribers.
 
 As
        of
        August 31, 2006, we have reserved 322,000 shares of common stock pending
        possible issuance of shares in satisfaction of outstanding subscription
        agreements.
 
 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.
  3
  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
        Andew 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.
  On
        August
        14, 2001, we were named as defendant (under the names The Bankstore, Inc.
        and
        B.G. Banking Equipment, Inc.) in an action filed in the Circuit Court of
        the
        Twelfth Judicial District, Manatee County, Florida, by Taurus Venture Capital
        Fund, LLC and Taurus International Investments, Inc. (the “Florida Action”). Our
        president, Paul D. Clark (“Clark”), was also named a defendant. In the Florida
        Action, Plaintiffs alleged that The Banker’s Store and Mr. Clark violated
        various Florida statute, by failing to effect the exchange of 150,000 shares
        of
        B.G. Banking common stock held by Alexander Brosda and Andrew Seim (allegedly
        as
        the beneficial owners for plaintiffs), for 225,000 shares of the common stock
        of
        The Banker’s Store. The claim seeks $2,000,000 for actual damages based upon a
        per share price of $4.50, treble damages of $6,615,000 plus interest and
        fees.
        In November 2001, we filed a motion with Mr. Clark to dismiss the action
        on
        jurisdictional grounds. On May 30, 2002, the court issued a decision denying
        the
        motion to dismiss.
  On
        August
        6, 2002, we, together with Mr. Clark, filed an Answer, Affirmative Defenses
        and
        Counterclaims against plaintiffs, denying the allegations in the complaint
        and
        alleging as counterclaims the same claims as are alleged in the above described
        action pending in New York State, seeking damages in 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 plaintiffs’ books and
        records.
  On
        May
        28, 2003, the Company and Clark filed a motion for summary judgment seeking
        dismissal of the complaint. That motion was not ruled upon. Effective May
        19,
        2006, however, the Manatee County Circuit Court in Brandenton, Florida dismissed
        the Florida Action, without prejudice, for failure to prosecute.
  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.
  4
  **RESULTS
        OF OPERATIONS**
 
 The
        following table sets forth operating data as a percentage of revenue for
        the
        three months ended August 31, 2006 and 2005:
 
 Three
                  months ended
                August
                  31,2006
              
              2005Net
                  sales
              
              
              100.0
              %
              
              100.0
              %Cost
                  of sales
              
              
              78.0
              %
              
              72.9
              %Gross
                  profit
              
              
              22.0
              %
              
              27.1
              %Selling,
                  general and administrative expenses
              
              
              37.5
              %
              
              35.1
              %Income
                  (loss) from operations
              
              
              -15.5
              %
              
              -8.0
              %Other
              
              
              -0.5
              %
              
              0.1
              %Income
                  before income tax provision
              
              
              -16.0
              %
              
              -7.9
              %Income
                  tax provision
              
              
              0.0
              %
              
              0.0
              %Net
                  income (loss)
              
              
              -16.0
              %
              
              -7.9
              %
  5
  **RESULTS
        OF OPERATIONS FOR THE THREE MONTHS ENDED AUGUST 31, 2006 AS COMPARED TO THE
        THREE MONTHS ENDED AUGUST 31, 2005.**
 
 Revenues
        were approximately $595,872 for the three months ended August 31, 2006 as
        compared to approximately $568,360 for the three months ended August 31,
        2005
        reflecting a increase of approximately $27,512 or 4.8%. The increase in revenues
        during the three months ended August 31, 2006 is the net result of an increase
        in service revenue and a decrease in preowned equipment.
 
 Cost
        of
        goods sold and related expenses for the three months ended August 31, 2006
        were
        approximately $464,993 or 78.0% of net sales as compared to approximately
        $414,330 or 72.9% of net sales for the three months ended August 31, 2005.
        Gross
        profit decreased during the three months ended August 31, 2006 as compared
        to
        the three months ended August 31, 2005 primarily due to the decrease in sale
        of
        preowned equipment.
 
 Selling,
        general and administrative expenses were approximately $223,533 for the three
        months ended August 31, 2006 as compared to approximately $199,689 for the
        three
        months ended August 31, 2005 reflecting an increase of approximately $23,843
        or
        12% over the same period last year.
 
 As
        a
        result of the aforementioned, the Company incurred a net loss during the
        three
        months ended August 31, 2006 of approximately $95,650 as opposed to a net
        loss
        of approximately $45,069 for the comparable prior period.
 
 **LIQUIDITY
        AND CAPITAL RESOURCES**
 
 We
        have
        historically financed our operations through revenues from operations, private
        and public placements of equity securities, debt and capital lease financing
        and
        interest income earned on the net proceeds from the private placements.
  6
  We
        had
        cash and cash equivalents of $487,199 and working capital of $414,494 at
        August
        31, 2006. During the three months ended August 31, 2006, our cash and cash
        equivalents increased by $132,511. Cash and cash equivalents generated from
        operations was $140,124 primarily due to an increase in accounts payable
        and
        accrued expenses of $21,299.
 
 We
        are
        evaluating various alternatives in addressing our future facilities expansion
        needs. The alternatives being evaluated include negotiations with various
        parties for the leasing of additional facility space and the purchase of
        additional property to build a new or additional office and warehousing
        facility. 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 August 31, 2007. 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.
 
 **ITEM
        3. CONTROLS AND PROCEDURES**
 
 (a)
        DISCLOSURE CONTROLS AND PROCEDURES. As of August 31, 2006, 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.
        Paul D. Clark, the Company's President, CEO and CFO as of August 31, 2006,
        supervised and participated in this evaluation. Based on this evaluation,
        Mr.
        Clark 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.
  7
  **PART
        II.**
 **OTHER
        INFORMATION**
 
 **ITEM
        1. 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.
 
 **ITEM
        2. CHANGES IN SECURITIES AND USE OF PROCEEDS**
 
 None.
 
 **ITEM
        3. DEFAULTS BY THE COMPANY UPON ITS SENIOR SECURITIES**
 
 None.
 
 **ITEM
        4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**
 
 None.
 
 **ITEM
        5. OTHER INFORMATION**
 
 None.
 
 **ITEM
        6. EXHIBITS**
 
 a)
        Exhibits
 
 31.1
        Certification Pursuant to Rule 13a-14(a) of Vincent
        C. Buckman
 31.2
        Certification Pursuant to Rule 13a-14(a) of Sam
        Stone
 32.1
        Certification of Vincent C. Buckman
 32.2
        Certification of Sam Stone
  8
  **FINANCIAL
        STATEMENTS**
 
 **THE
        BANKER'S STORE, INC. AND SUBSIDIARIES**
 
 **I
        N D E X**
 
 **PAGE**
 
 **PART
        I - FINANCIAL INFORMATION**
 
 **ITEM
                  1. FINANCIAL STATEMENTS**
              **PAGE****CONDENSED
                  CONSOLIDATED BALANCE SHEETSAUGUST 31, 2006 (UNAUDITED) AND MAY 31,
                  2006**
              **F-2****CONDENSED
                  CONSOLIDATED STATEMENTS OF OPERATIONSTHREE MONTHS ENDED AUGUST 31, 2006 AND 2005 (UNAUDITED)**
              **F-3****CONDENSED
                  CONSOLIDATED STATEMENTS OF CASH FLOWS THREE MONTHS
                  ENDED AUGUST 31, 2006 AND 2005 (UNAUDITED)**
              **F-4****NOTES
                  TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                  (UNAUDITED)**
              **F-5
                  - F-9****ITEM
                  2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION****PART
                  II. OTHER INFORMATION****SIGNATURES**
 
 *
        * *
  F-1
  **THE
        BANKER'S STORE, INC. AND SUBSIDIARIES**
 
 **CONDENSED
        CONSOLIDATED BALANCE SHEETS**
 **AUGUST
        31, 2006 AND MAY 31, 2006**
 
 **ASSETS**
              
              **August
                  31,**
                **2006**
              
              **May
                  31,**
                **2006**Current
                  Assets:Cash
                  and cash equivalents
              
              $
              487,199
              
              $
              354,688Accounts
                  receivable, net of allowance for bad debts of $4,043
              
              
              130,621
              
              
              286,137Inventories
              
              
              637,345
              
              
              676,580Prepaid
                  expenses and other current assets
              
              
              32,966
              
              
              27,549Total
                  current assets
              
              
              1,288,131
              
              
              1,344,954Equipment
                  and improvements, net
              
              
              97,923
              
              
              94,866Other
                  assets
              
              
              20,467
              
              
              20,467Totals
              
              $
              1,406,521
              
              $
              1,460,287**LIABILITIES
                  AND STOCKHOLDERS' EQUITY**Current
                  Liabilities:Current
                  portion of long-term debt
              
              $
              6,849
              
              $
              8,454Accounts
                  payable and accrued expenses
              
              
              162,774
              
              
              141,475Customer
                  deposits
              
              
              195,273
              
              
              176,482Note
                  payable - principal stockholder
              
              
              207,991
              
              
              207,991Accrued
                  compensation - principal stockholder
              
              
              258,750
              
              
              254,400Private
                  placement funds in dispute
              
              
              42,000
              
              
              42,000Total
                  current liabilities
              
              
              873,637
              
              
              830,802Long-term
                  debt, net of current portion
              
              
              592
              
              
              1,543Total
                  liabilities
              
              
              874,229
              
              
              832,345Commitments
                  and contingenciesStockholders'
                  equity:Common
                  stock, $.01 par value; 80,000,000shares authorized; 14,954,781
                  shares
                  issued and outstanding
              
              
              149,548
              
              
              149,548Additional
                  paid-in capital
              
              
              497,141
              
              
              497,141Less:
                  treasury stock 2,000 shares (at cost)
              
              
              (2,000
              )
              
              (2,000
              )Accumulated
                  (deficit) earnings
              
              
              (112,397
              )
              
              (16,747
              )Total
                  stockholders' equity
              
              
              532,292
              
              
              627,942Totals
              
              $
              1,406,521
              
              $
              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**
 **THREE
        MONTHS ENDED AUGUST 31, 2006 AND 2005**
 
 **AUGUST
                  31,****2006**
              
              **2005**Revenue
              
              $
              595,872
              
              $
              568,360Cost
                  of goods sold
              
              
              464,993
              
              
              414,330Gross
                  profit
              
              
              130,879
              
              
              154,030Selling,
                  general and administrative expenses
              
              
              223,533
              
              
              199,689Income
                  (loss) from operations
              
              
              (92,654
              )
              
              (45,659
              )Other
                  income (expense):Interest
                  and other income (expenses)
              
              
              1,648
              
              
              1,199Interest
                  expense
              
              
              (4,644
              )
              
              (609
              )Total
                  other income (expense):
              
              
              (2,996
              )
              
              590Income
                  before income tax provision
              
              
              (95,650
              )
              
              (45,069
              )Income
                  tax provision
              
              
              -
              
              
              -Net
                  income
              
              $
              (95,650
              )
              $
              (45,069
              )Basic
                  earnings (loss) per common share
              
              $
              (0.01
              )
              $
              (0.00
              )Diluted
                  earnings (loss) per share
              
              $
              (0.01
              )
              $
              (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**
 **THREE
        MONTHS ENDED AUGUST 31, 2006 AND 2005**
 
 **AUGUST
                  31,****2006**
              
              **2005**Operating
                  activitiesNet
                  income (loss)
              
              $
              (95,650
              )
              $
              (45,069
              )Adjustments
                  to reconcile net income (loss) to net cash provided by (used in)
                  operating
                  activities:Depreciation
                  and amortization
              
              
              6,350
              
              
              6,241Changes
                  in operating assets and liabilities:Accounts
                  receivable
              
              
              155,516
              
              
              132,732Inventories
              
              
              39,235
              
              
              4,726Prepaid
                  expenses and other current assets
              
              
              (5,417
              )
              
              632Accounts
                  payable and accrued expenses
              
              
              21,299
              
              
              (41,983
              )Customer
                  deposits
              
              
              18,791
              
              
              (17,617
              )Net
                  cash provided by (used in) operating activities
              
              
              140,124
              
              
              39,662Investing
                  activitiesCapital
                  expenditures, net of writeoffs
              
              
              (9,407
              )
              
              -Net
                  cash (used in) investing activities
              
              
              (9,407
              )
              
              -Financing
                  activitiesIncrease
                  (decrease) in long-term debt, net
              
              
              (2,556
              )
              
              (19,434
              )Proceeds
                  from long-term debt
              
              
              -
              
              
              24,000Loan
                  payable - Borrowing from principal stockholder
              
              
              4,350
              
              
              5,850Net
                  cash provided by financing activities
              
              
              1,794
              
              
              10,416Net
                  increase (decrease) in cash and cash equivalents
              
              
              132,511
              
              
              50,078Cash
                  and cash equivalents, beginning of period
              
              
              354,688
              
              
              237,388Cash
                  and cash equivalents, end of period
              
              $
              487,199
              
              $
              287,466Supplemental
                  disclosure of cash flow information:Interest
                  paid
              
              $
              4,644
              
              $
              609
 
 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 August 31, 2006, and the
        Company's results of operations and cash flows for the three months ended
        August
        31, 2006 and 2005. 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 three months ended August 31,
        2006
        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 August 31, 2006 and 2005. The weighted average numbers of shares for
        determining basic earnings per share were 14,947,281 and 14,947,215 in 2006
        and
        2005, respectively. The weighted average numbers of shares for determining
        diluted earnings per share were 15,269,281 and 15,269,215 in 2006 and 2005,
        respectively.
 
 **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 $38,000 from the utilization of net operating loss carryforwards
        and other deferred tax assets by an equivalent valuation allowance as of
        August
        31, 2006. Total deferred tax assets offset by a valuation allowance were
        $136,000 as of August 31, 2005. Total deferred tax assets were $153,000 offset
        by a valuation allowance of $133,364 as of August 31, 2006.
  F-5
  **THE
        BANKER'S STORE, INC. AND SUBSIDIARIES**
 
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 (Unaudited)
  **Note
        4 - Contingencies:**
 
 Private
        placement - B.G. Banking:
 
 Prior
        to
        The Banker's Store, Inc.'s reverse acquisition with B.G. Banking and FBEE
        on May
        31, 1998, B.G. Banking offered and received subscriptions for 126,500 shares
        of
        its common stock at $1.00 per share. Subsequent to the date of the reverse
        merger, the subscribers to shares of B.G. Banking's common stock were offered
        and they received shares of common stock in The Banker's Store, Inc. at a
        ratio
        of 1 share of B.G. Banking common stock to 1.5 shares of The Banker's Store
        Inc.'s common stock. The Company issued 189,750 shares of its common stock
        in
        satisfaction of the subscription agreements at a value of $.67 per share.
 
 Two
        of
        the Company's directors, acting individually as principals of Taurus Investments
        International, Inc. (a Nevada corporation) (collectively "Taurus"), and as
        directors of B.G. Banking prior to its acquisition by The Banker's Store,
        Inc.
        and subsequent to the acquisition becoming directors of the Company, offered
        and
        sold on behalf of B.G. Banking what Taurus has admitted to being an aggregate
        of
        304,500 shares of B.G. Banking's common stock for an aggregate consideration
        of
        $304,500. Taurus has remitted to the Company net proceeds of $109,674 and
        claims
        the difference of $194,826 as payment for expenses and commissions. In addition,
        Taurus has refused to disclose the names and numbers of shares of common
        stock
        and refused to remit to the Company the proceeds of the shares sold. As of
        August 31, 2006, Taurus has failed to turn over the balance of money, provide
        the names of the stock subscribers and the number of shares of common stock
        purchased.
 
 Based
        upon the accounting provided by Taurus to the Company, the Company may be
        liable
        for the issuance of up to 329,500 shares of common stock if and when Taurus
        substantiates their representation as to the number of shares of common stock
        sold and the aggregate consideration. This number of shares represents the
        number of shares admittedly sold by Taurus for which the purchasers have
        as yet
        remained unidentified.
  F-6
  **THE
        BANKER'S STORE, INC. AND SUBSIDIARIES**
 
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 (Unaudited)
 
 **Note
        4 - Contingencies (continued):**
 
 Private
        placement - B.G. Banking (concluded):
 
 The
        Company may also be forced to defend itself against actions to be brought
        by
        unknown subscribers to shares of common stock of B.G. Banking whose purchase
        price has never been disclosed or delivered to the Company. The Company is
        aware
        of one alleged purchaser who claims to have delivered funds to Taurus and
        whose
        funds were apparently not turned over to the Company. In the opinion of
        management, the Company has no liability to such purchasers and intends to
        vigorously defend such actions, if and when brought.
 
 The
        Company has received approximately $42,000 from Taurus relating to the purchase
        of shares by an unknown investor in June 1999. The Company is holding such
        funds
        in escrow pending disposition.
 
 As
        of
        August 31, 2006, the Company has reserved 322,000 shares of common stock
        pending
        possible issuance of shares in satisfaction of outstanding subscription
        agreements.
 
 **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
        Andew 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.
  On
        August
        14, 2001, we were named as defendant (under the names The Bankstore, Inc.
        and
        B.G. Banking Equipment, Inc.) in an action filed in the Circuit Court of
        the
        Twelfth Judicial District, Manatee County, Florida, by Taurus Venture Capital
        Fund, LLC and Taurus International Investments, Inc. (the “Florida Action”). Our
        president, Paul D. Clark (“Clark”), was also named a defendant. In the Florida
        Action, Plaintiffs alleged that The Banker’s Store and Mr. Clark violated
        various Florida statute, by failing to effect the exchange of 150,000 shares
        of
        B.G. Banking common stock held by Alexander Brosda and Andrew Seim (allegedly
        as
        the beneficial owners for plaintiffs), for 225,000 shares of the common stock
        of
        The Banker’s Store. The claim seeks $2,000,000 for actual damages based upon a
        per share price of $4.50, treble damages of $6,615,000 plus interest and
        fees.
        In November 2001, we filed a motion with Mr. Clark to dismiss the action
        on
        jurisdictional grounds. On May 30, 2002, the court issued a decision denying
        the
        motion to dismiss.
  On
        August
        6, 2002, we, together with Mr. Clark, filed an Answer, Affirmative Defenses
        and
        Counterclaims against plaintiffs, denying the allegations in the complaint
        and
        alleging as counterclaims the same claims as are alleged in the above described
        action pending in New York State, seeking damages in 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 plaintiffs’ books and
        records.
  On
        May
        28, 2003, the Company and Clark filed a motion for summary judgment seeking
        dismissal of the complaint. That motion was not ruled upon. Effective May
        19,
        2006, however, the Manatee County Circuit Court in Brandenton, Florida dismissed
        the Florida Action, without prejudice, for failure to prosecute.
  Although
        it cannot predict the outcome of the litigation described above, management
        does
        not believe that the ultimate outcome of the claims brought by the plaintiffs
        will not have any material adverse effects on the Company's consolidated
        financial statements in subsequent periods.
  F-7
  **THE
        BANKER'S STORE, INC. AND SUBSIDIARIES**
 
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 (Unaudited)
  **Note
        4 - Contingencies (concluded):**
 
 **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.
 
 Revenue,
        intersegment revenues and other related segment information follows as of
        August
        31, 2006 and for the three months ended August 31, 2006 and 2005:
  F-8
  **THE
        BANKER'S STORE, INC. AND SUBSIDIARIES**
 
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 (Unaudited)
  **Note
        5 - Segment information (concluded):**
 
 **THE
        BANKER'S STORE, INC. AND SUBSIDIARIES**
 
 **DISCLOSURE
        OF REPORTED SEGMENT PROFIT OR LOSS, AND SEGMENT ASSETS**
 
 **THREE
                  MONTHS ENDED**
              
              **THREE
                  MONTHS ENDED****AUGUST
                  31,**
              
              **AUGUST
                  31,****2006**
              
              
              
              
              
              **2005****Banking
                  Equipment**
              
              **Office
                  Equipment**
              
              **Totals**
              
              **Banking
                  Equipment**
              
              **Office
                  Equipment**
              
              **Totals**Revenues
                  from external customers
              
              $
              538,523
              
              $
              57,349
              
              $
              595,872
              
              $
              486,623
              
              $
              81,736
              
              $
              568,359Intersegment
                  revenues
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Interest
                  revenue
              
              
              1,648
              
              
              -
              
              
              1,648
              
              
              669
              
              
              -
              
              
              669Interest
                  expense
              
              
              4,644
              
              
              -
              
              
              4,644
              
              
              2,260
              
              
              -
              
              
              2,260Net
                  interest expense
              
              
              2,996
              
              
              -
              
              
              2,996
              
              
              1,591
              
              
              -
              
              
              1,591Depreciation
                  and amortization
              
              
              6,216
              
              
              134
              
              
              6,350
              
              
              28,298
              
              
              366
              
              
              28,664Segment
                  profit (loss)
              
              
              (93,022
              )
              
              (2,628
              )
              
              (95,650
              )
              
              (51,340
              )
              
              6,271
              
              
              (45,069
              )Segment
                  assets
              
              $
              1,281,072
              
              $
              125,449
              
              $
              1,406,521
              
              $
              1,368,461
              
              $
              158,588
              
              $
              1,527,049
 
 *
        *
        *
  F-9
  **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. Buckamn,*
 
 
 **President,
        CEO,, and Director**
 
 (Principal
        Executive Officer)
 
 
 Date:
        October 16, 2006
  F-10