SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(X) Quarterly report for the quarterly period ended September,
30, 1996
OR
( ) Transition Report Pursuant To Section 13 Or 15(d) of The
Securities Exchange Act of 1934
Commission file number 1-3952
SIBONEY CORPORATION
(Exact name of registrant as specified in its charter)
Maryland 73-0629975
(State or other jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
8000 Maryland Ave., Ste 1040, P.O. Box 16184, St. Louis, MO 63105
(Address of principal executive offices)
(Zip Code)
314-725-6141
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
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 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 [ ]
Title of class of Number of Shares
common stock outstanding as of this Report Date
------------ ----------------------------------
Common stock, par value 15,566,694
$.10 per share
1
<PAGE>
INDEX
-----
PART I FINANCIAL INFORMATION
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheet September 3
30, 1996 and December 31, 1995
Condensed Consolidated Statement Of Operations 5
Three Months and Nine Months Ended September
30, 1996 and September 30, 1995
Condensed Consolidated Statement Of Cash Flows 6
Nine Months Ended September 30, 1996 and 1995
Notes To Condensed Consolidated Financial 7
Statements
ITEM 2. Management's Discussion and Analysis of Financial 8
Condition and Results of Operations
PART II OTHER INFORMATION
ITEM 6. Exhibits And Reports On Form 8-K 11
SIGNATURES 11
EXHIBIT INDEX 12
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SIBONEY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1996 AND DECEMBER 31, 1995
ASSETS
DECEMBER 31,
SEPTEMBER 30, 1995 (SEE
1996 NOTE BELOW)
CURRENT ASSETS
Cash and cash equivalents $ 783,626 $ 599,924
Accounts and notes receivable 230,738 178,149
Inventories (Note 3) 184,587 230,236
Prepaid expenses and deposits 289,767 306,423
----------- ------------
TOTAL CURRENT ASSETS 1,488,718 1,314,732
PROPERTY, PLANT AND EQUIPMENT (NET OF 228,768 376,599
ACCUMULATED DEPRECIATION OF $697,457 AT
SEPTEMBER 30, 1996 AND $1,111,190 AT
DECEMBER 31, 1995)
INVESTMENTS IN NATURAL RESOURCES 5,101 5,101
----------- ------------
$ 1,722,587 $ 1,696,432
=========== ============
NOTE: The balance sheet at December 31, 1995 has been taken from the audited
financial statements at that date and condensed.
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
SIBONEY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(CONTINUED)
SEPTEMBER 30, 1996 AND DECEMBER 31, 1995
LIABILITIES AND STOCKHOLDERS' EQUITY
DECEMBER 31,
SEPTEMBER 30, 1995 (SEE
1996 NOTE BELOW)
CURRENT LIABILITIES
Notes payable $ 1,000 $ 1,000
Accounts payable 136,414 29,683
Accrued expenses 108,075 81,551
------------ -----------
TOTAL CURRENT LIABILITIES 245,489 112,234
STOCKHOLDERS' EQUITY
Common stock:
Authorized 20,000,000 shares
at $.10 par value; issued
and outstanding 15,566,694
shares 1,556,670 1,556,670
Additional paid-in capital 27,528 27,528
Retained earnings (deficit) (107,100) --
------------ -----------
TOTAL STOCKHOLDERS' EQUITY 1,477,098 1,584,198
------------ -----------
$ 1,722,587 $ 1,696,432
============ ===========
NOTE: The balance sheet at December 31, 1995 has been taken from the audited
financial statements at that date and condensed.
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
<TABLE>
SIBONEY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------- -------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES $1,690,704 1,923,117 509,122 526,592
COST OF PRODUCT SALES 318,620 429,592 112,853 135,409
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 1,583,195 1,477,067 554,259 470,870
----------- ----------- ----------- ----------
INCOME (LOSS) FROM
OPERATIONS (211,111) 16,458 (157,990) (79,687)
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE)
Interest Income 17,775 18,169 6,343 7,946
Gain on Sale of Assets 118,288 -- 118,288 --
Miscellaneous (32,052) (24,669) (10,208) (2,673)
----------- ----------- ----------- -----------
TOTAL OTHER INCOME (EXPENSE) 104,011 (6,500) 114,423 5,273
----------- ----------- ----------- ----------
NET INCOME (LOSS) $ (107,100) $ 9,958 $ (43,567) $ (74,414)
========== ========== ========== ==========
WEIGHTED AVERAGE SHARES
OUTSTANDING 15,566,694 15,566,694 15,566,694 15,566,694
=========== =========== =========== ==========
INCOME (LOSS) PER SHARE $ (.007) $ .001 $ (.003) $ (.005)
=========== =========== ============ ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
<TABLE>
SIBONEY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) from continuing operations $(107,100) $ 9,958
Adjustments to reconcile net income (loss)
from continuing operations to net
cash provided by operating activities:
Depreciation 92,657 96,790
Loss on disposition of assets -- 427
Gain on sale of assets (118,288) --
Change in assets and liabilities:
(Increase) decrease in accounts and notes (52,589) 49,538
receivable
(Increase) decrease in inventory 32,068 (20,875)
Decrease in prepaid expenses
and deposits 8,810 36,075
Increase in accounts payable and
accrued expenses 133,255 3,599
---------- ---------
NET CASH PROVIDED BY (USED IN) OPERATIONS (11,187) 175,512
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of assets 230,000 --
Payments for equipment (35,111) (55,995)
---------- ----------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 194,889 (55,995)
---------- ----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 183,702 119,517
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 599,924 570,191
---------- ---------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 783,626 $ 689,708
========== =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
<PAGE>
SIBONEY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996 AND 1995
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The condensed consolidated balance sheet as of September 30, 1996, the
condensed consolidated statement of operations for the nine-month periods
and the three-month periods ended September 30, 1996 and 1995 and the
condensed consolidated statement of cash flows for the nine-month periods
then ended have been prepared by the Company, without audit. In the opinion
of management, all adjustments (which include only recurring adjustments)
necessary to present fairly the financial position and results of operations
at September 30, 1996 and for all periods have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. These condensed consolidated
financial statements should be read in conjunction with the financial
statements and notes thereto included in the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1995. The results of operations
for the period ended September 30, 1996 are not necessarily indicative of
the operating results for the full year.
2. STOCKHOLDERS' EQUITY
During the nine months ended September 30, 1996, stockholders' equity was
changed solely by the net loss for the period.
3. INVENTORIES
Inventories consist of the following:
SEPTEMBER 30, 1996 DECEMBER 31, 1995
------------------ -----------------
Raw materials $ 64,657 $ 128,063
Finished goods 119,930 102,173
-------- --------
$ 184,587 $ 230,236
======== ========
7
<PAGE>
SIBONEY CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Company's continuing operations for the periods presented consist of the
following two segments:
1) The Company is engaged, through its Siboney Learning Group Division and
Gamco Industries, Inc. ("Gamco"), a subsidiary, in the production and
distribution of educational software, teaching aids and related supplies.
The Company has been serving the educational market for more than 35 years.
The Company's proprietary educational software is produced for use on
Macintosh, Apple II, IBM and IBM compatible computers. Of Gamco's total
sales, approximately 85% is generated by proprietary software, and the
remainder is represented by non-proprietary educational software and other
related products. Sales are made to private and public schools, grades 1
through 12, by a network of independent distributors throughout the United
States, as well as through catalogs published by Gamco and other
educational software distributors. Popular Gamco software titles include
Money Challenge, Undersea Reading for Meaning and Touchdown Math- Whole
Numbers and Fractions.
2) The holding of interests in certain natural resources, including coal, oil
and gas, through several subsidiaries.
During September 1996, Siboney Learning Group entered into a software licensing
and distribution agreement with Merit Audio Visual of New York, New York. Under
the license agreement, Siboney Learning Group received a license to use and
market 21 software programs which teach skills for reading and writing to
elementary through high school students. Gamco has historically been strongest
in areas relating to mathematics. Consequently, the acquisition of these
products and their addition to the Company's product line will add an important
dimension to the products offered by the Company.
The Company is in the process of converting its existing 106 Apple II and DOS
products to Macintosh and Windows platforms, which are becoming the predominant
systems used in schools. Of its total products, 23 have already been converted
to a Macintosh platform and an additional 12 are being converted during the
current school year, together with the first 20 programs being converted to a
Windows format and five to a CD-ROM format. Adding to this, it is contemplated
that the 21 newly licensed products, which are also in a DOS format, will be
converted by Siboney Learning Group to a Macintosh format within five months and
to Windows within an additional five months.
As a result, it is anticipated that the Company's total educational software
product offerings and the breath of its educational coverage will expand
significantly during the current school year as well as the 1997-1998 school
year. Siboney Learning Group will use Gamco's established distribution channels,
as well as new distribution programs to sell the software.
8
<PAGE>
The following is management's discussion and analysis of certain significant
factors which have affected the Company's financial position and operating
results during the periods included in the accompanying condensed consolidated
financial statements.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
THREE MONTHS ENDED SEPTEMBER 30, 1996 vs. SEPTEMBER 30, 1995
Revenues decreased during the three month period ended September 30, 1996
compared to the same period in 1995. Sales at Gamco were marginally improved,
with September sales showing an improvement over August 1995 and September 1995
sales. Gamco is releasing more new products on current platforms (Macintosh,
Windows and CD-ROM) which should enhance sales in the future.
Royalties earned by Siboney Coal Company were lower for the quarter compared to
1995. Revenues from the coal lease are dependent on third party mining
operations, which are temporarily suspended from time to time.
Cost of product sales decreased during the third quarter compared to the
previous year's quarter as a result of the successful effort to increase the
percentage of proprietary sales versus non-proprietary product sales. As a
result, cost of product sales as a percentage of revenue was reduced to 22.2%
compared to 25.7% in the prior year.
Selling, general and administrative expenses increased during the quarter
compared to the same period in 1995 due to higher employment expenses, increased
advertising costs and costs associated with the outsourcing for product
conversion to new platforms.
During the quarter, Gamco sold their print shop equipment which is reflected in
the increase in gain on sale of assets.
As a result of the above mentioned factors, net income decreased for the quarter
ended September 30, 1996 when compared to the same period in 1995.
NINE MONTHS ENDED SEPTEMBER 30, 1996 vs. SEPTEMBER 30, 1995
Revenues decreased during the nine month period ended September 30, 1996
compared to the same period in 1995. Sales at Gamco for the nine months were
lower, as was the trend in the educational software industry. Coal revenues
increased slightly for the period.
Cost of product sales decreased as a result of lower sales at Gamco. As a result
of increasing proprietary product sales compared to non-proprietary sales, the
cost of product sales as a percentage of total revenue was reduced to 18.9%
during the current period as compared to 22.3% for the same period last year.
Selling, general and administrative expenses increased during the nine month
period, as compared to the same period in 1995, primarily due to higher
salaries, severance payments, increased advertising costs at Gamco/Siboney
Learning Group and the cost associated with the use of outside development
houses for product conversion to new formats.
Gain on sale of assets increased for the nine month period of 1996 due to the
sale of the print shop equipment at Gamco.
Net income decreased during the nine months ended September 30, 1996 due to the
above mentioned factors.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
LIQUIDITY AND CAPITAL RESOURCES
Cash increased at September 30, 1996 compared to December 31, 1996 due to cash
received from the sale of the print shop equipment and from a reduction in
inventories.
Consistent with prior years, accounts receivable increased at September 30, 1996
compared to December 31, 1995. The increase was attributable to a larger sales
volume at Gamco during September 1996 compared to December 1995.
Inventories decreased at September 30, 1996 compared to December 31, 1995 due to
a planned decrease of slower selling non-proprietary inventory items and the
sale of the print shop inventory. These decreases were partially offset by an
increased inventory of support materials that accompany programs sold.
Prepaid expenses and deposits decreased at September 30, 1996 compared to
December 31, 1995. As a result of the closing of the print shop, Gamco no longer
has work in progress on catalogs therefore there was no incremental increase in
catalog expense. In previous years, catalogs were capitalized when produced and
expensed throughout the year.
Plant, property and equipment decreased at September 30, 1996 compared to
December 31, 1995 as a result of the closing of the print shop at Gamco and the
sale of its equipment.
Accounts payable increased at September 30, 1996 due to an outstanding invoice
for the most recent Gamco catalog. The invoice has subsequently been paid.
Accrued expenses increased at September 30, 1996 compared to December 31, 1995.
Accrued expenses increase throughout the year for payment of invoices that occur
at year end.
10
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits: See Exhibit Index on page 11 hereof.
b) Reports on Form 8-K: No reports on Form 8-K were filed by the
Registrant during the quarter ended September 30, 1996.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
SIBONEY CORPORATION
Date: November 8, 1996 By: /s/ Timothy J. Tegeler
----------------------
Timothy J. Tegeler
President, Chief Executive
Officer and Chief Financial
Officer
11
<PAGE>
EXHIBIT INDEX
Exhibit Number Description Page
27(a) Financial Data Schedule 12
(Filed in EDGAR version
only)
12
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 783,626
<SECURITIES> 0
<RECEIVABLES> 280,063
<ALLOWANCES> 49,325
<INVENTORY> 184,587
<CURRENT-ASSETS> 1,488,718
<PP&E> 926,225
<DEPRECIATION> 697,457
<TOTAL-ASSETS> 1,722,587
<CURRENT-LIABILITIES> 245,489
<BONDS> 0
0
0
<COMMON> 1,556,670
<OTHER-SE> (79,572)
<TOTAL-LIABILITY-AND-EQUITY> 1,722,587
<SALES> 1,610,533
<TOTAL-REVENUES> 1,690,704
<CGS> 318,620
<TOTAL-COSTS> 318,620
<OTHER-EXPENSES> 1,583,195
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (107,100)
<INCOME-TAX> 0
<INCOME-CONTINUING> (107,100)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (107,100)
<EPS-PRIMARY> (.007)
<EPS-DILUTED> (.007)
</TABLE>
