<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM ---------------- TO ----------------
Commission File Number 1-3952
SIBONEY CORPORATION
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(Exact name of registrant as specified in its charter)
MARYLAND 73-0629975
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8000 MARYLAND AVENUE, SUITE 1040, P.O. BOX 16184
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ST. LOUIS, MISSOURI 63105
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 314-725-6141
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Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $.10 PER SHARE
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K. [X]
The aggregate market value of the shares of Common Stock held by
nonaffiliates of Registrant as of February 8, 1996 was $2,412,838.
This value was based on the average of the bid and asked prices on
February 8, 1996.
As of February 8, 1996, the Registrant had outstanding 15,566,694
shares of Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
PART III: THE DEFINITIVE PROXY STATEMENT OF REGISTRANT (TO BE FILED
PURSUANT TO REGULATION 14) FOR REGISTRANT'S 1996 ANNUAL MEETING OF
SHAREHOLDERS, WHICH INVOLVES THE ELECTION OF DIRECTORS, IS
INCORPORATED BY REFERENCE INTO ITEMS 10, 11, 12 AND 13.
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<TABLE>
INDEX
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<CAPTION>
PAGE
<C> <S> <C>
PART I
ITEM 1. Business. . . . . . . . . . . . . . . . . . . . . . .3 - 7
ITEM 2. Properties. . . . . . . . . . . . . . . . . . . . . . . .7
ITEM 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . .8
ITEM 4. Submission Of Matters To A Vote Of Security
Holders . . . . . . . . . . . . . . . . . . . . . . . . .8
PART II
ITEM 5. Market For Registrant's Common Equity And
Related Stockholder Matters . . . . . . . . . . . . . . .9
ITEM 6. Selected Financial Data . . . . . . . . . . . . . . . . 10
ITEM 7. Management's Discussion And Analysis
Of Financial Condition And Results Of
Operations. . . . . . . . . . . . . . . . . . . . .11 - 13
ITEM 8. Financial Statements And Supplementary Data . . . . . . 13
ITEM 9. Changes In and Disagreements With Accountants
On Accounting And Financial Disclosure. . . . . . . . . 13
PART III
ITEM 10. Directors And Executive Officers Of The
Registrant. . . . . . . . . . . . . . . . . . . . . . . 14
ITEM 11. Executive Compensation. . . . . . . . . . . . . . . . . 14
ITEM 12. Security Ownership Of Certain Beneficial
Owners And Management . . . . . . . . . . . . . . . . . 14
ITEM 13. Certain Relationships And Related Transactions. . . . . 14
PART IV
ITEM 14. Exhibits, Financial Statements, Financial
Statement Schedule And Reports On Form 8-K. . . . .15 - 30
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
EXHIBIT INDEX. . . . . . . . . . . . . . . . . . . . . . . . . . . 32
</TABLE>
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PART I
ITEM 1 - BUSINESS
GENERAL
The principal businesses in which the Company engages, through
its subsidiaries, are the manufacturing and selling of
educational software products and teaching aids and the holding
of certain natural resource interests.
SUBSIDIARIES AND INDUSTRY SEGMENTS
The Company conducts its business through several wholly-owned
subsidiaries which, at December 31, 1995, were as follows:
<TABLE>
<CAPTION>
YEAR OF
INDUSTRY SEGMENT SUBSIDIARY INCORPORATION ORGANIZATION
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CONTINUING OPERATIONS:
Educational Products Gamco Industries, Inc. Texas 1968
(part of Siboney Learning Group
Division)
Natural Resources Axel Heiberg Oil Company Delaware 1968
Natural Resources Siboney Resources - Texas, Inc. Texas 1968
Natural Resources Siboney Coal Company, Inc. Kentucky 1978
DISCONTINUED OPERATIONS:
Audiovisual Equipment Siboney Communications, Inc. Texas 1950
</TABLE>
A summary of the results of each of the Company's two
industry segments, educational products and natural
resources, for the years ended December 31, 1995, 1994 and
1993, which appears in Note 12 to the Consolidated Financial
Statements on Page 27, is incorporated herein by reference.
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DESCRIPTION OF BUSINESS AND PROPERTIES BY INDUSTRY SEGMENT
EDUCATIONAL PRODUCTS:
SIBONEY LEARNING GROUP DIVISION/GAMCO INDUSTRIES, INC.
BUSINESS - GENERAL DESCRIPTION -- The Company is engaged,
through its learning group division and Gamco Industries, Inc.
("Gamco") a subsidiary, in the production and distribution of
educational software, teaching aids and related supplies.
In 1995, the Company formed the Siboney Learning Group
Division and hired a new Executive Vice President, Ernest R.
(Bodie) Marx, as the head of the division. Mr. Marx has been
an executive and proprietor of companies engaged in the
educational software and related products business for more
than 18 years. The Company's purpose for forming the new
division was to take advantage of Mr. Marx's background and
experience and expand upon its interests in the manufacture
and sale of educational software and related products. Such
expansion is expected to occur both through Gamco, which was
made part of the new division and reports to Mr. Marx, and by
other internal and external expansion.
The Company has been serving the educational market for more
than 35 years. The Company's proprietary educational software
is produced for use on McIntosh, Apple II, IBM and IBM
compatible computers. Of Gamco's total sales, 76% 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 (a new release in
1995) and Touchdown Math - Whole Numbers and Fractions.
SOURCES AND AVAILABILITY OF RAW MATERIALS -- Raw materials are
generally available and are purchased from a wide range of
suppliers. Shortages are not anticipated.
PATENTS AND TRADEMARKS -- Gamco holds various patents, none
of which are deemed to be material to its business or are
expected to become material in the foreseeable future.
SEASONALITY -- The Company historically tends to experience
higher sales and accounts receivable in the educational
products business at the end and beginning of the typical
school year, (i.e. in May, June, August and September) and
lower levels thereof in November and December. However,
seasonality is not deemed to have an overall material effect
on the Company's operations.
WORKING CAPITAL ITEMS -- The Company does not engage in
unusual practices relating to working capital items. Gamco
does not purchase or maintain an unusually high amount of
inventory in advance, although certain materials are purchased
in larger quantities in order to obtain volume discounts.
Gamco does not routinely offer extended
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terms for payment, but historically some public school districts
and public educational institutions have delayed making payment
until appropriated funds become available at the beginning of the
academic year. Gamco maintains a policy under which products
may be returned within thirty days from the date of purchase
if they do not meet a customer's satisfaction. For the year
1995, approximately 7% of sales were returned, of which 5%
represented previewed sales returned within thirty days.
DEPENDENCE ON LIMITED NUMBER OF CUSTOMERS -- In 1995,
approximately 13% of Gamco's revenues were generated from
catalog sales through one dealer, Educational Resources, Inc.
BACKLOG -- The Company traditionally does not have a material
backlog of orders for Gamco products.
GOVERNMENT BUSINESS -- Although a substantial portion of
Gamco's business is done with governmental subdivisions, such
business is not subject to price renegotiation or termination
for convenience of the buyer.
ENVIRONMENTAL IMPACT -- Present federal, state and local
provisions regulating the discharge of materials into the
environment or otherwise relating to protection of the
environment are not expected to materially affect Gamco (or
any other segment of business of the Company).
RESEARCH AND DEVELOPMENT -- Gamco's expenditures for research
and development of new computer software products and
upgrading and adapting existing software products were
approximately $391,000, $345,000 and $260,000 in 1995, 1994
and 1993, respectively.
COMPETITION -- Gamco operates in highly competitive markets
which are subject to ongoing technological change and are
expected to continue to require relatively high research and
development expenditures. Sales of Gamco's computer software
products are substantially dependent upon expenditures of
political subdivisions and school districts.
NATURAL RESOURCES:
SIBONEY COAL COMPANY, INC.
Siboney Coal Company, Inc. ("Siboney Coal"), a subsidiary of
the Company, owns the fee and mineral interests in certain
coal properties in Johnson and Martin Counties, Kentucky. The
properties consist of approximately 325 surface or fee acres
which include mineral rights and approximately 1,120 acres of
mineral rights alone.
Siboney Coal leases the coal properties to Mountaineer Land
Company ("Mountaineer"), a subsidiary of Ashland Coal Company,
under a twenty-five year lease entered into in 1987, under
which mining operations have been conducted on and off since
March 1990. Under the terms of the lease, Mountaineer has the
right to mine the coal and pay a
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royalty to Siboney Coal. An advance royalty and certain
royalties previously paid by Mountaineer are recoupable against
future production royalties payable on coal mined and sold from
the properties. The lease calls for annual payments of $30,000
plus royalties per ton of coal mined. The lease is cancellable
on thirty days' prior written notice by the lessee. Siboney Coal
earned $70,596 in 1995, $35,814 in 1994 and $68,878 in 1993 under
the lease. Future revenues in excess of minimum royalties from
the coal lease are dependent on mining operations of the lessee
and at certain times have been, and may in the future be,
discontinued.
For further discussion of the "Natural Resources Segment" see
Note 6 to the Consolidated Financial Statements on Page 23.
OIL AND GAS
Siboney Resources - Texas, Inc. ("Siboney Resources - Texas"),
a subsidiary of the Company, has royalty interests in certain
oil and gas leases in Texas. Revenues from such leases are
not a material factor in the Company's consolidated revenues.
Axel Heiberg Oil Company ("Axel"), a subsidiary of the
Company, holds a 2.28% working interest in oil and gas
property rights on 1,843 acres in the Canadian Arctic Islands.
Due to the high cost of exploration and recovery of oil and
gas from this region, it is not anticipated that revenues will
be generated from this interest in the foreseeable future.
Revenue and income after tax from oil and gas related
operations are not significant to the Company. The present
value of estimated future net oil and gas reserves of Axel and
Siboney Resources - Texas is presently not determinable.
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Prior to the takeover of Cuba by Fidel Castro in 1958, the
Company and its predecessor held oil exploration rights
covering approximately four million acres in Cuban territory.
Following the expropriation of these properties by the Castro
regime, the Company filed claims against the Cuban government
with the Foreign Claims Settlement Commission, which was
authorized under the International Claims Settlement Act of
1949, as amended, to determine the validity and value of
claims of United States nationals against the Cuban government
for properties which have been expropriated. The Commission
certified the Company's loss to be $2,454,000 plus interest
at 6% per annum from November 1959. No funds have ever been
appropriated to satisfy such claims. Accordingly, the Company
has not considered and currently does not consider the claim
to be material and cannot determine the possibility of or the
amount of any possible recovery.
In 1995, legislation was introduced in Congress which would
grant the right of U.S. companies whose properties were
confiscated by the Cuban government to bring action in U.S.
federal district courts against foreign nationals that
"traffic" in, or make use of, confiscated properties and would
provide that those companies would be liable to the United
States company who owns the claim to the confiscated property
for money damages. In the spring of 1996, this legislation
was passed by Congress, signed by the President and will take
effect in August 1996.
PERSONNEL:
As of February 8, 1996, the Company had 24 employees, 3 of
which were employed by the parent corporation and 21 by
Gamco.
ITEM 2. PROPERTIES
The Company leases 817 square feet of office space under a
lease expiring on December 31, 1997. Effective March 1, 1996,
an additional 652 square feet of office space was leased under
an agreement which expires March 1, 1997, and is cancellable
by either party on sixty-day notice. These facilities are
considered adequate to meet the needs of the Company for the
foreseeable future.
Gamco, owns two buildings, aggregating 79,000 square feet in
Big Spring, Texas on a parcel totalling 18 acres. Gamco
utilizes approximately 75% of the space available in the
buildings. The Company considers these facilities adequate
to meet the needs of Gamco for the foreseeable future.
The Company's subsidiaries operating in the natural resources
segment own interests in certain coal, oil and gas properties.
The present value of estimated future reserves of such
properties is not presently determinable by the Company.
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ITEM 3. LEGAL PROCEEDINGS
On October 4, 1985, the Company's subsidiary, Siboney
Communications, Inc. ("SCI"), filed a voluntary petition under
Chapter 7 of the United States Bankruptcy Code in the United
States Bankruptcy Court for the Northern District of Texas,
Dallas Division. The proceeding remains currently pending;
however, substantially all of the assets of SCI were sold and
distributed in 1986 under supervision of the Bankruptcy Court.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
(A) Principal Market
The Company's common stock, par value $.10 per share, is
traded in the over-the-counter market.
(B) Stock Price And Dividend Information
The following table sets forth the high and low bid prices
per share of common stock as reported by market makers
polled by the Company:
<TABLE>
<CAPTION>
1995 BID 1994 BID
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QUARTER HIGH LOW QUARTER HIGH LOW
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<S> <C> <C> <C> <C> <C>
First 0.17 0.13 First 0.31 0.15
Second 0.21 0.13 Second 0.19 0.15
Third 0.15 0.13 Third 0.26 0.18
Fourth 0.15 0.15 Fourth 0.17 0.15
</TABLE>
The foregoing market quotations reflect interdealer
prices, without retail mark-up, markdown or commission
and may not necessarily represent actual transactions.
(C) Approximate Number Of Holders Of Common Stock
The number of holders of record of the Company's common
stock as of February 8, 1996 was 17,473.
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ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------------------------
1995 1994 1993 1992 1991
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total assets of continuing
operations $ 1,696,432 $ 1,875,057 $ 1,764,684 $ 1,721,162 $ 1,545,651
===============================================================================================================
Revenues from continuing
operations $ 2,359,492 $ 2,306,827 $ 2,060,465 $ 2,208,716 $ 2,075,931
===============================================================================================================
Income (loss) from continuing
operations $ (98,405) $ 89,272 $ 74,128 $ 312,714 $ 188,537
===============================================================================================================
Income from discontinued
operations [Note (a)] $ -- $ 60,691 $ 603,202 $ 91,667 $ 340,844
===============================================================================================================
Cumulative effect on prior
years of change in accounting
principle $ (66,368) $ -- $ -- $ -- $ --
===============================================================================================================
Net income (loss) $ (164,773) $ 149,963 $ 677,330 $ 404,381 $ 529,381
===============================================================================================================
Earnings (loss) per common
share [Note (b)]:
Continuing operations $ (0.006) $ 0.005 $ 0.005 $ 0.020 $ 0.012
Discontinued operations -- 0.004 0.037 0.006 0.022
Cumulative effect on prior
years of change in accounting
principle (0.004) -- -- -- --
- ---------------------------------------------------------------------------------------------------------------
$ (0.010) $ 0.009 $ 0.042 $ 0.026 $ 0.34
===============================================================================================================
Average number of common and
common equivalent shares
outstanding 16,366,287 16,422,782 16,204,465 15,366,694 15,366,694
===============================================================================================================
NOTES:
(a) Discontinued operations relate primarily to SCI. In 1994,
income from discontinued operations arose from an
adjustment to a liability reserve relating to SCI
previously established, which management determined to be
no longer necessary. In 1993 and prior years, income from
discontinued operations was generated as liabilities
relating to legal judgments were settled for less than was
originally recorded and established reserves were adjusted
to reflect amounts determined by management to be currently
required.
(b) Earnings per share have been computed by dividing net
income by the average number of common and common
equivalent shares outstanding during the year.
(c) The Company has paid no cash dividends during the five
years ended December 31, 1995.
</TABLE>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis sets forth certain factors
which produced changes in the Company's results of operations
during the three years ended December 31, 1995, and comments on
the Company's financial position as of December 31, 1995.
RESULTS OF OPERATIONS:
1995 IN COMPARISON WITH 1994:
During 1995, the Company's consolidated revenues increased
$52,665 to $2,359,492. Revenues from the educational products
segment increased $19,116 to $2,284,529 while revenues from
the natural resource segment increased $33,549 to $74,963.
Educational product revenues increased because of increased
outside printing sales made by Gamco's print shop. Sales of
both proprietary and nonproprietary computer software and
related products decreased slightly in the educational segment
during the last half of the year due to educators' concerns
about the federal budget impasse and its effect on future
funding for school expenditures. Natural resource revenues
increased due to more mining activity, which increased royalty
payments earned by Siboney Coal. Future royalty payments are
dependent entirely on the level of mining operations
determined by the Company's lessee and are outside the control
of the Company.
Cost of product sales increased $30,858 to $523,055, which
represented a decrease in gross margins from 78.4% to 77.2%,
due primarily to the effect of increased material and overhead
costs.
Selling, general and administrative expenses increased
$222,745 to $1,974,356, primarily due to increased catalog and
magazine advertising costs of approximately $50,000 and an
increase in salaries and other costs totalling approximately
$75,000 associated with the formation of the Siboney Learning
Group Division.
The Company's loss from operations for 1995 was $137,919
compared to income from operations of $63,019 in 1994. The
increase in consolidated revenues was offset by the increases
in cost of sales and selling, general and administrative
expenses.
The Consolidated Statement Of Operations for 1995 reflects a
one-time charge against income of $66,368, which represents
the cumulative effect on prior years of a change in accounting
principle resulting from the implementation of Statement of
Position 93-7, "Reporting on Advertising Costs". (See Note 15
to the Consolidated Financial Statements).
In 1994, income from discontinued operations arose from an
adjustment to a liability reserve, which management determined
to be no longer necessary. Therefore, the remaining reserve
was written off in 1994.
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1994 IN COMPARISON WITH 1993:
During 1994, the Company's consolidated revenues increased
$246,362 to $2,306,827. Revenues from the educational
products segment increased $279,099 to $2,265,413 while
revenues from the natural resource segment decreased $32,737
to $41,414. Educational product revenues increased because
Gamco's sales of proprietary and nonproprietary software
increased due to new software titles which resulted from
increased research and development expenditures and expanded
catalog advertising that began in 1993. Natural resource
revenues declined due to less mining activity, which reduced
royalty payments earned by Siboney Coal.
Cost of sales increased $53,453 to $492,197, due primarily to
the increase in Gamco's sales.
Selling, general and administrative expenses increased
$189,622, to $1,751,611, primarily due to an increase in
catalog advertising expenditures, research and development
costs and the adoption of a 401(k) plan effective January 1,
1994.
The Company's income from operations for 1994 was $63,019
compared to $59,732 in 1993. The increase in consolidated
revenues was offset by an increase in selling, general and
administrative expenses.
Income from discontinued operations decreased $542,511 to
$60,691. In 1994, the income from discontinued operations
arose from an adjustment to the liability reserve, which
management determined to be no longer necessary. In 1993, the
adjustment was made to the liabilities relating to
discontinued operations as a result of the settlement of a
judgment for less than the related liability reserve.
LIQUIDITY AND CAPITAL RESOURCES
In 1995, cash and cash equivalents increased $29,733. This was
primarily due to net cash provided by continuing operations.
In 1994, cash and cash equivalents decreased $21,608. This was
primarily due to payments for equipment in excess of cash provided
by continuing operations.
At December 31, 1995, Gamco had a line of credit, expiring on
November 1, 1996, of $350,000, which is secured by certain assets
of Gamco. There was an outstanding loan balance of $1,000 at both
December 31, 1995 and 1994. The Company expects that the line-of-
credit agreement will be extended beyond November 1996.
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The Company considers its cash position and available line of
credit adequate to fund its anticipated operations and capital
expenditures.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data required by this
Item 8 are set forth at the pages indicated in Item 14.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information contained under the caption "Information
Concerning Nominees" and "Information Concerning Executive
Officers" in the Company's definitive proxy statement to be filed
under Regulation 14A for the Company's 1996 annual meeting of
stockholders, which involves the election of directors, is
incorporated herein by this reference.
ITEM 11. EXECUTIVE COMPENSATION
The information contained under the captions "Executive
Compensation" and "Information As To Stock Options" in the
Company's definitive proxy statement to be filed under Regulation
14A for the Company's 1996 annual meeting of stockholders, which
involves the election of directors is incorporated herein by this
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information regarding security ownership contained under the
caption "Information Concerning Nominees" in the Company's
definitive proxy statement to be filed under Regulation 14A for
the Company's 1996 annual meeting of stockholders, which involves
the election of directors, is incorporated herein by this
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information contained under the caption "Transactions With
Issuer And Others" in the Company's definitive proxy statement to
be filed under Regulation 14A for the Company's 1996 annual
meeting of stockholders, which involves the election of
directors, is incorporated herein by this reference.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, FINANCIAL STATEMENT
SCHEDULE AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
PAGE
<S> <C>
(A) (1) FINANCIAL STATEMENTS:
Report Of Independent Certified Public
Accountants . . . . . . . . . . . . . . . . . . . . . . . . 16
Consolidated Balance Sheets At
December 31, 1995 And 1994. . . . . . . . . . . . . . . . . 17
Consolidated Statements Of Stockholders'
Equity For The Years Ended December 31,
1995, 1994 And 1993 . . . . . . . . . . . . . . . . . . . . 18
Consolidated Statements Of Operations
For The Years Ended December 31,
1995, 1994 And 1993 . . . . . . . . . . . . . . . . . . . . 19
Consolidated Statements Of Cash Flows
For The Years Ended December 31, 1995,
1994 And 1993 . . . . . . . . . . . . . . . . . . . . . . . 20
Notes To Consolidated Financial
Statements. . . . . . . . . . . . . . . . . . . . . . .21 - 29
(A) (2) FINANCIAL STATEMENT SCHEDULE:
V VALUATION AND QUALIFYING ACCOUNTS -- 1995, 1994
AND 1993. . . . . . . . . . . . . . . . . . . . . . . . . . 30
All other schedules and financial statements of the Registrant
only are omitted because they are not required or the
Information is included in the financial statements or notes
thereto.
(A) (3) EXHIBIT INDEX . . . . . . . . . . . . . . . . . . . . . . . . 32
Management Contracts and Compensatory Plans or
arrangements required to be filed as Exhibits:
None
(B) REPORTS ON FORM 8-K
No Reports on Form 8-K were filed
during the fourth quarter of 1995.
</TABLE>
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REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Stockholders and Board of Directors
Siboney Corporation
St. Louis, Missouri
We have audited the accompanying consolidated balance sheet of Siboney
Corporation and subsidiaries as of December 31, 1995 and 1994 and the
related consolidated statements of operations, stockholders' equity and
cash flows for each of the three years in the period ended December 31,
1995, and the information as of December 31, 1995, 1994 and 1993 and for
the years then ended included in the supporting schedule which is listed
in the Index to Consolidated Financial Statements. These consolidated
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Siboney Corporation and subsidiaries as of December 31, 1995
and 1994 and the consolidated results of its operations and its cash flows
for each of the three years in the period ended December 31, 1995, in
conformity with generally accepted accounting principles, and the
supporting schedule present fairly the information required to be set forth
therein.
As described in Note 15 to the financial statements, the Company adopted
Statement of Position 93-7, "Reporting on Advertising Costs".
/s/ Rubin, Brown, Gornstein & Co. LLP
-------------------------------------
St. Louis, Missouri RUBIN, BROWN, GORNSTEIN & CO. LLP
February 8, 1996
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<TABLE>
SIBONEY CORPORATION AND SUBSIDIARIES
- -------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET
<CAPTION>
ASSETS
DECEMBER 31,
-------------------------------
1995 1994
-------------------------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 599,924 $ 570,191
Accounts receivable (Notes 3 and 7) 178,149 211,132
Inventories (Notes 4 and 7) 230,236 262,829
Prepaid expenses and deposits 306,423 391,894
- -------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 1,314,732 1,436,046
PROPERTY, PLANT AND EQUIPMENT (NOTES 5 AND 7) 376,599 433,910
INVESTMENTS IN NATURAL RESOURCES (NOTE 6) 5,101 5,101
- -------------------------------------------------------------------------------
$ 1,696,432 $ 1,875,057
===============================================================================
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES
Notes payable (Note 7) $ 1,000 $ 1,000
Accounts payable 29,683 29,120
Accrued expenses 81,551 95,966
- -------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 112,234 126,086
- -------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Common stock:
Authorized 20,000,000 shares at $0.10 par
value; issued and outstanding 15,566,694 in
1995 and 1994 1,556,670 1,556,670
Additional paid-in capital (Note 8) 27,528 6,152,403
Retained earnings (deficit) (Note 8) -- (5,960,102)
- -------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 1,584,198 1,748,971
- -------------------------------------------------------------------------------
$ 1,696,432 $ 1,875,057
===============================================================================
- ------------------------------------------------------------------------------
See the accompanying notes to consolidated financial statements. Page 17
</TABLE>
<PAGE> 18
<TABLE>
SIBONEY CORPORATION AND SUBSIDIARIES
- --------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YERAS ENDED DECEMBER 31, 1995, 1994 AND 1993
<CAPTION>
COMMON STOCK ADDITIONAL RETAINED TOTAL
------------------------------- PAID-IN EARNINGS STOCKHOLDERS'
SHARES AMOUNT CAPITAL (DEFICIT) EQUITY
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE - JANUARY 1, 1993 $ 15,366,694 $ 1,536,670 $ 6,166,903 $ (6,787,395) $ 916,178
ISSUANCE OF COMMON STOCK 200,000 20,000 (14,500) -- 5,500
NET INCOME -- -- -- 677,330 677,330
- --------------------------------------------------------------------------------------------------------
BALANCE - DECEMBER 31, 1993 15,566,694 1,556,670 6,152,403 (6,110,065) 1,599,008
NET INCOME -- -- -- 149,963 149,963
- --------------------------------------------------------------------------------------------------------
BALANCE - DECEMBER 31, 1994 15,566,694 1,556,670 6,152,403 (5,960,102) 1,748,971
NET LOSS -- -- -- (164,773) (164,773)
EQUITY TRANSFER (NOTE 8) -- -- (6,124,875) 6,124,875 --
- --------------------------------------------------------------------------------------------------------
BALANCE - DECEMBER 31, 1995 $ 15,566,694 $ 1,556,670 $ 27,528 $ -- $ 1,584,198
========================================================================================================
- ------------------------------------------------------------------------------
See the accompanying notes to consolidated financial statements. Page 18
</TABLE>
<PAGE> 19
<TABLE>
SIBONEY CORPORATION AND SUBSIDIARIES
- --------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF OPERATIONS
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------------------
1995 1994 1993
-----------------------------------------------
<S> <C> <C> <C>
REVENUES $ 2,359,492 $ 2,306,827 $ 2,060,465
COST OF PRODUCT SALES 523,055 492,197 438,744
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 1,974,356 1,751,611 1,561,989
- --------------------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS (137,919) 63,019 59,732
- --------------------------------------------------------------------------------------------
OTHER INCOME (EXPENSE)
Interest income 26,005 20,131 14,468
Interest expense (103) (88) (95)
Gain (loss) on sale and disposition of assets 8,119 (1,273) (4,554)
Miscellaneous 5,493 7,483 4,577
- --------------------------------------------------------------------------------------------
TOTAL OTHER INCOME (EXPENSE) 39,514 26,253 14,396
- --------------------------------------------------------------------------------------------
INCOME (LOSS) BEFORE PROVISION FOR
INCOME TAXES AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE (98,405) 89,272 74,128
PROVISION FOR INCOME TAX (NOTE 10) -- -- --
- --------------------------------------------------------------------------------------------
INCOME (LOSS) FROM CONTINUING
OPERATIONS (98,405) 89,272 74,128
INCOME FROM DISCONTINUED
OPERATIONS (NOTE 14) -- 60,691 603,202
- --------------------------------------------------------------------------------------------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING PRINCIPLE (98,405) 149,963 677,330
CUMULATIVE EFFECT ON PRIOR YEARS OF
CHANGE IN ACCOUNTING PRINCIPLE (NOTE 15) (66,368) -- --
- --------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ (164,773) $ 149,963 $ 677,330
============================================================================================
EARNINGS (LOSS) PER SHARE
Continuing operations $ (0.006) $ 0.005 $ 0.005
Discontinued operations -- 0.004 0.037
Cumulative effect on prior years of
change in accounting principle (0.004) -- --
- --------------------------------------------------------------------------------------------
$ (0.010) $ 0.009 $ 0.042
============================================================================================
- ------------------------------------------------------------------------------
See the accompanying notes to consolidated financial statements. Page 19
</TABLE>
<PAGE> 20
<TABLE>
SIBONEY CORPORATION AND SUBSIDIARIES
- ------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------------------
1995 1994 1993
--------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATIONS
Net income (loss) from continuing operations $ (164,773) $ 89,272 $ 74,128
Adjustments to reconcile net income (loss) from continuing
operations to net cash provided by continuing operations:
Depreciation 130,202 124,162 118,503
(Gain) loss on sales and disposition of assets (8,119) 1,273 4,554
Change in assets and liabilities:
(Increase) decrease in accounts and notes
receivable 32,983 (36,937) 7,221
(Increase) decrease in inventories 32,593 (22,108) (24,278)
(Increase) decrease in prepaid expenses and
deposits 85,471 (51,052) (48,855)
Increase (decrease) in accounts payable and
accrued expenses (13,852) 21,101 38,024
- ------------------------------------------------------------------------------------------------------------
Net cash provided by continuing operations 94,505 125,711 169,297
- ------------------------------------------------------------------------------------------------------------
Net income from discontinued operations -- 60,691 603,202
Adjustments to reconcile net income to net
cash used in discontinued operations:
Change in operating assets and liabilities in
discontinued operations:
Decrease in net liabilities relating to
discontinued operations -- (60,691) (673,332)
- ------------------------------------------------------------------------------------------------------------
Net cash used in discontinued operations -- -- (70,130)
- ------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATIONS 94,505 125,711 99,167
- ------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for equipment (73,322) (147,844) (44,734)
Proceeds from sale of assets 8,550 525 --
- ------------------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (64,772) (147,319) (44,734)
- ------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock -- -- 5,500
Net repayments under line-of-credit agreement -- -- (4,000)
- ------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES -- -- 1,500
- ------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 29,733 (21,608) 55,933
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 570,191 591,799 535,866
- ------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS - END OF YEAR $ 599,924 $ 570,191 $ 591,799
============================================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 367 $ 88 $ 95
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
See the accompanying notes to consolidated financial statements. Page 20
</TABLE>
<PAGE> 21
SIBONEY CORPORATION AND SUBSIDIARIES
- ------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the
accounts of Siboney Corporation and its wholly-owned subsidiaries.
All significant intercompany transactions have been eliminated in
consolidation.
ESTIMATES AND ASSUMPTIONS
Management uses estimates and assumptions in preparing financial
statements. Those estimates and assumptions affect the reported
amounts of assets and liabilities, the disclosure of contingent
assets and liabilities, and the reported revenues and expenses.
CASH AND CASH EQUIVALENTS
The Company considers all investment instruments purchased with a
maturity of three months or less to be cash equivalents. The
carrying amount approximates fair value because of the short
maturity of those instruments.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
The Company provides an allowance for doubtful accounts equal to
the estimated collection losses that will be incurred in collection
of all receivables. The estimated losses are based on historical
experience coupled with a review of the current status of the
existing receivables.
INVENTORIES
Raw materials inventory is valued at the lower of cost (first-in,
first-out method) or market. Finished goods inventory is valued
at the lower of cost or market of raw materials and an allowance
for overhead, not in excess of market.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are carried at cost, less accumulated
depreciation computed principally using the straight-line method.
Assets are depreciated over periods ranging from two to thirty-five
years.
When assets are retired or otherwise disposed of, the cost of the
assets and the related accumulated depreciation are removed from
the respective accounts and any gain or loss realized from
disposition is reflected in operations.
NATURAL RESOURCES
The investments in coal, oil and gas leases are carried at cost,
less accumulated depreciation and
- ------------------------------------------------------------------------------
Page 21
<PAGE> 22
SIBONEY CORPORATION AND SUBSIDIARIES
- ------------------------------------------------------------------------------
Notes To Consolidated Financial Statements (Continued)
depletion. Depreciation was provided using the straight-line
method over three years, while cost depletion was provided
primarily on the units-of-production method for producing
properties.
RESEARCH AND DEVELOPMENT
Research and development costs are expensed in the year incurred
and totalled approximately $391,000, $345,000 and $260,000 in 1995,
1994 and 1993, respectively.
WARRANTY COSTS
The Company provides warranties on sales of educational products
and all significant warranty costs are charged to operations as
incurred.
EARNINGS PER SHARE
Earnings per share is computed by dividing net income by the
weighted average number of common and common equivalent shares
outstanding of 16,366,287 in 1995, 16,422,782 in 1994, and
16,204,465 in 1993.
For 1995, 1994 and 1993, the weighted average number of common and
common equivalent shares consisted of the following:
<TABLE>
<CAPTION>
1995 1994 1993
----------------------------------------------
<S> <C> <C> <C>
Common shares outstanding for the
whole year 15,566,694 15,566,694 15,366,694
Common shares issued during the
year - weighted average -- -- 1,643
Common equivalent shares due to
common stock options 799,593 856,088 836,128
-------------------------------------------------------------------------------------------
16,366,287 16,422,782 16,204,465
===========================================================================================
</TABLE>
REVENUES FROM MAJOR CUSTOMER AND MAJOR PRODUCT
Revenue from proprietary educational software and other related
products accounted for 79%, 81% and 83% of Gamco's revenue in
1995, 1994 and 1993, respectively. In addition, 13%, 10%, and
8% of Gamco's revenues were generated from catalog sales through
one dealer in 1995, 1994 and 1993, respectively.
- ------------------------------------------------------------------------------
Page 22
<PAGE> 23
SIBONEY CORPORATION AND SUBSIDIARIES
- ------------------------------------------------------------------------------
Notes To Consolidated Financial Statements (Continued)
INCOME TAXES
Income taxes are provided for the tax effects of transactions
reported in the financial statements and consist of taxes
currently due adjusted for the deferred taxes assets recognized
for operating losses that are available to offset future taxable
income and tax credits that are available to offset future
federal income taxes. The Company accounts for investment tax
credits using the flow-through method, and thus, they reduce
income tax expense in the year the related assets are placed in
service or qualified progress payments are made.
2. OPERATIONS
The Company's continuing operations consist of the following two
segments:
1) The manufacture and sale of educational software, teaching
aids and related supplies through the Company's subsidiary,
Gamco Industries, Inc. (Gamco). Sales are made throughout
the country by the distribution of catalogs printed by Gamco
and through independent distributors.
2) The holding of interests in certain natural resources,
including coal, oil and gas, through several subsidiaries.
(See Note 6.)
Segment information which highlights the relative importance of
each line of business is presented in Footnote 11 to the
consolidated financial statements.
Discontinued operations relate primarily to Siboney
Communications, Inc. (SCI), a subsidiary of the Company.
SCI's Board of Directors determined that it was in the best
interest of SCI to liquidate SCI. On October 4, 1985 a petition
under Chapter 7 of the United States bankruptcy Code was filed
by SCI. Substantially all of SCI's assets were sold and
distributed in 1986. The Company gave recognition to this
decision in the December 31, 1984 financial statements.
In 1993 and 1994, income from discontinued operations consisted
primarily of reductions of estimated liabilities.
- ------------------------------------------------------------------------------
Page 23
<PAGE> 24
SIBONEY CORPORATION AND SUBSIDIARIES
- ------------------------------------------------------------------------------
Notes To Consolidated Financial Statements (Continued)
3. ACCOUNTS RECEIVABLE
<TABLE>
Accounts receivable consist of:
<CAPTION>
1995 1994
----------------------------------
<S> <C> <C>
Accounts receivable $ 225,279 $ 263,902
Less: Allowance for doubtful accounts 47,130 52,770
---------------------------------------------------------------------------
$ 178,149 $ 211,132
===========================================================================
</TABLE>
Accounts receivable are pledged as collateral for notes payable
(see Note 7).
4. INVENTORIES
<TABLE>
Inventories are summarized as follows:
<CAPTION>
1995 1994
----------------------------------
<S> <C> <C>
Raw materials $ 128,063 $ 132,700
Finished goods 102,173 130,129
---------------------------------------------------------------------------
$ 230,236 $ 262,829
===========================================================================
</TABLE>
Inventories are pledged as collateral for notes payable (see Note 7).
Inventories are net of reserve for obsolescence of $53,775 and
$51,966 in 1995 and 1994, respectively.
5. PROPERTY, PLANT AND EQUIPMENT
<TABLE>
Property, plant and equipment consist of:
<CAPTION>
1995 1994
----------------------------------
<S> <C> <C>
Land and improvements $ 23,997 $ 23,997
Buildings and improvements 431,893 406,594
Machinery and equipment 792,816 799,047
Office equipment, furniture and fixtures 239,083 216,256
---------------------------------------------------------------------------
1,487,789 1,445,894
Less: Accumulated depreciation 1,111,190 1,011,984
---------------------------------------------------------------------------
$ 376,599 $ 433,910
===========================================================================
</TABLE>
Depreciation charged against income amounted to $130,202 in 1995,
$124,162 in 1994 and $118,503 in 1993.
The building and certain equipment is pledged as collateral for
notes payable (see Note 7).
- ------------------------------------------------------------------------------
Page 24
<PAGE> 25
SIBONEY CORPORATION AND SUBSIDIARIES
- ------------------------------------------------------------------------------
Notes To Consolidated Financial Statements (Continued)
6. INVESTMENTS IN NATURAL RESOURCES
<TABLE>
Investments in natural resources consist of:
<CAPTION>
1995 1994
----------------------------------
<S> <C> <C>
Canadian exploratory permits $ 5,101 $ 5,101
Oil and Gas leases - Texas 145,821 145,821
---------------------------------------------------------------------------
150,922 150,922
Less: Accumulated depreciation and
cost depletion 145,821 145,821
---------------------------------------------------------------------------
$ 5,101 $ 5,101
===========================================================================
</TABLE>
COAL PROPERTIES - KENTUCKY
Siboney Coal Company, Inc., a wholly-owned subsidiary, collects
royalties under a twenty-five year lease with Mountaineer Land
Company entered into in May 1987, under which Siboney Coal
Company, the lessor, receives minimum annual payments of $30,000
plus royalties per ton of coal mined. The lessee can cancel the
lease upon thirty days' prior written notification. The Company
earned $70,596 under the lease in 1995, $35,814 in 1994 and
$68,878 in 1993. Future royalty revenues from the coal lease are
dependent on third party mining operations and at certain times
have been, and may in the future be, discontinued.
OIL AND GAS LEASES IN TEXAS
Siboney Resources - Texas, Inc., a wholly-owned subsidiary has
royalty interests in certain oil and gas leases in Texas.
Revenues from such leases are not a material factor in the
Company's consolidated revenues.
CANADIAN EXPLORATORY PERMITS
Axel Heiberg Oil Company ("Axel"), a wholly-owned subsidiary of
the Company, holds a 2.28% working interest in oil and gas
property rights on 1,843 acres in the Canadian Arctic Islands.
Due to the high cost of exploration and recovery of oil and gas
from this region, it is not anticipated that revenues will be
generated in the foreseeable future.
SUPPLEMENTAL OIL AND GAS DISCLOSURES
Revenue and income after tax from oil and gas related operations
are not significant to the Company. The present value of
estimated future net oil and gas reserves is not presently
determinable.
- ------------------------------------------------------------------------------
Page 25
<PAGE> 26
SIBONEY CORPORATION AND SUBSIDIARIES
- ------------------------------------------------------------------------------
Notes To Consolidated Financial Statements (Continued)
7. NOTES PAYABLE
At December 31, 1995 and 1994, Gamco had a line of credit
totalling $350,000, with an outstanding balance of $1,000 each
year. The line of credit is secured by the building, accounts
receivable, inventories and certain equipment of Gamco and bears
interest at the prime commercial rate plus 1.5% and is due
November 1996.
The weighted average interest rate was 10.33%, 8.76% and 6.91%
for the years ended December 31, 1995, 1994 and 1993,
respectively.
8. EQUITY TRANSFER
Under Maryland General Corporation law, a Company may apply any
part of its additional paid-in capital for the reduction or
elimination of a retained deficit.
The Board of Directors of the Company unanimously determined, by
resolution, to eliminate the retained deficit reflected in the
Stockholders' Equity section of the consolidated balance sheet
at December 31, 1995 in the amount of $6,124,875.
9. DEFERRED COMPENSATION PLAN
On January 1, 1994, the Company adopted a qualified, defined
contribution profit sharing plan covering eligible full-time and
part-time employees. The plan is also qualified under Section
401(k) of the Internal Revenue Code, and allows employees to
contribute on a tax deferred basis. The plan provides for
matching contributions on a graduated scale, up to 3-1/2% of the
employee's annual qualified wages. The plan also provides for
nonelective or discretionary contributions by the Company in such
amounts as the Board of Directors may annually determine. The
Company's contribution to the 401(k) plan was $ 35,029 in 1995
and $36,994 in 1994.
- ------------------------------------------------------------------------------
Page 26
<PAGE> 27
SIBONEY CORPORATION AND SUBSIDIARIES
- ------------------------------------------------------------------------------
Notes To Consolidated Financial Statements (Continued)
10. INCOME TAXES
There is no provision for federal income taxes reflected in the
financial statements due to the availability of net operating
loss carryovers.
<TABLE>
The net deferred tax asset includes the following components:
<CAPTION>
1995 1994 1993
--------------------------------------------------------
<S> <C> <C> <C>
Deferred tax asset $ 1,603,000 $ 1,555,400 $ 1,587,400
Deferred tax asset valuation
allowance (1,603,000) (1,555,400) (1,587,400)
-----------------------------------------------------------------------------------------
$ -- $ -- $ --
=========================================================================================
</TABLE>
State income taxes are shown as part of selling, general and
administrative expenses.
The Company has net operating loss carryovers for federal income
tax purposes of approximately $5,337,000 at December 31, 1995
available to reduce future taxable income, if any. The majority
of the carryover expires at December 31, 2001 through December
31, 2010. Under the Tax Reform Act of 1986, the amount available
for carryover could be reduced upon a substantial change in
ownership.
In addition, the Company has investment tax credit carryovers of
approximately $53,000 available to reduce future income taxes,
if any, through December 31, 2000. This amount also creates a
deferred tax asset of a like amount, which is offset completely
by a valuation allowance.
11. SUPPLEMENTAL CASH FLOW INFORMATION
The Company had no significant noncash investing or financing
activities for the years ended December 31, 1995, 1994 and 1993.
12. SEGMENT INFORMATION
The Company's business is primarily comprised of two industry
segments: educational products and natural resources. The
educational products segment principally sells educational
software and teaching aids to school districts. The natural
resources segment principally receives royalties from its
properties.
- ------------------------------------------------------------------------------
Page 27
<PAGE> 28
SIBONEY CORPORATION AND SUBSIDIARIES
- ------------------------------------------------------------------------------
Notes To Consolidated Financial Statements (Continued)
<TABLE>
The Company's consolidated results of operations by business
segment are as follows:
<CAPTION>
(IN THOUSANDS)
1995 1994 1993
----------------------------------------------------
<S> <C> <C> <C>
NET SALES
Educational products $ 2,284 $ 2,266 $ 1,986
Natural resources 75 41 74
-------------------------------------------------------------------------------------------
Continuing operations $ 2,359 $ 2,307 $ 2,060
===========================================================================================
OPERATING INCOME (LOSS)
Educational products (52) $ 209 $ 189
Natural resources 69 36 58
General corporate (259) (182) (187)
-------------------------------------------------------------------------------------------
Continuing operations $ (138) $ 63 $ 60
===========================================================================================
IDENTIFIABLE ASSETS
Educational products $ 1,584 $ 1,802 $ 1,658
Natural resources 81 50 80
General corporate 31 23 27
-------------------------------------------------------------------------------------------
Continuing operations $ 1,696 $ 1,875 $ 1,765
===========================================================================================
CAPITAL EXPENDITURES
Educational products $ 71 $ 147 $ 39
Natural resources -- -- --
General corporate 2 1 6
-------------------------------------------------------------------------------------------
Continuing operations $ 73 $ 148 $ 45
===========================================================================================
DEPRECIATION, DEPLETION AND
AMORTIZATION
Educational products $ 129 $ 122 $ 117
Natural resources -- -- --
General corporate 1 2 2
-------------------------------------------------------------------------------------------
Continuing operations $ 130 $ 124 $ 119
===========================================================================================
13. STOCK OPTIONS
In 1992, the Company granted options to purchase an aggregate of
1,025,000 shares to the directors of the Company. In addition,
the Company granted options to purchase 175,000 shares to
employees of Gamco Industries. All previously issued options
either expired or were canceled prior to the issuance of the 1992
options. In 1995, the Company granted options to purchase an
aggregate of 200,000 shares to a newly hired executive.
- ------------------------------------------------------------------------------
Page 28
<PAGE> 29
SIBONEY CORPORATION AND SUBSIDIARIES
- ------------------------------------------------------------------------------
Notes To Consolidated Financial Statements (Continued)
</TABLE>
<TABLE>
<CAPTION>
Outstanding and exercisable stock options at December 31, 1995,
1994 and 1993 consist of the following:
OPTION
YEAR YEAR EXERCISE
GRANTED EXPIRING PRICE 1995 1994 1993
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1995 2000 0.165 200,000 -- --
1992 1997 0.0275 975,000 975,000 975,000
1992 1997 0.05 25,000 25,000 25,000
Outstanding options - end of year 1,200,000 1,000,000 1,000,000
</TABLE>
No options were exercised in 1995 or 1994. During the year ended
December 31, 1993, options for 200,000 shares were exercised at
$.0275 per share.
14. DISCONTINUED OPERATIONS
In 1994, income from discontinued operations arose from an
adjustment to a previously established liability reserve relating
to SCI which management determined to be no longer necessary.
During 1993, the Company settled a judgment relating to SCI for
$70,130, which reduced the related liability by $511,535. This
amount is included as part of income from discontinued operations
for the year ended December 31, 1993.
15. ADVERTISING - CHANGE IN ACCOUNTING PRINCIPLE
During 1995, in accordance with a required change in generally
accepted accounting principles, the Company changed its
accounting method for advertising costs to comply with the
Statement of Position 93-7 "Reporting on Advertising Costs". The
cumulative effect on prior years of this change in accounting
principle is a one-time charge to income of $66,368. Financial
statements for prior years have not been restated.
The Company expenses the costs of advertising the first time the
advertising takes place except for direct response advertising,
which is capitalized and amortized over its expected period of
future benefits.
Direct response advertising consists primarily of catalog
advertising to which sales orders are directly attributed. The
capitalized cost of the advertising is amortized over a 12-month
period following the issuance of the catalog.
At December 31, 1995, $270,498 of advertising costs were
capitalized. Advertising expense amounted to $547,850 in 1995,
$498,167 in 1994 and $426,809 in 1993.
- ------------------------------------------------------------------------------
Page 29
<PAGE> 30
<TABLE>
<CAPTION>
SIBONEY CORPORATION
- ------------------------------------------------------------------------------------------------------------------
SCHEDULE V - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
ADDITIONS DEDUCTIONS
- ------------------------------------------------------------------------------------------------------------------
BALANCE AT CHARGED TO CHARGES FOR BALANCE AT
BEGINNING COSTS AND WHICH RESERVE END
DESCRIPTION OF PERIOD EXPENSES OTHER WAS CREATED OF PERIOD
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Reserves deducted in the balance sheet
from the assets to which they apply:
Accounts receivable allowance
for doubtful accounts
1993 $ 50,000 $ 4,295 $ -- $ 1,394 $ 52,901
1994 52,901 2,474 -- 2,605 52,770
1995 52,770 (1,945) -- (3,695) 47,130
Inventory valuation account
1993 69,543 8,488 -- 15,912 62,119
1994 62,119 23,094 -- 33,247 51,966
1995 51,966 7,001 -- 5,192 53,775
Investments in natural resources
allowance for depreciation and
cost depletion of natural resources
1993 145,821 -- -- -- 145,821
1994 145,821 -- -- -- 145,821
1995 145,821 -- -- -- 145,821
</TABLE>
Page 30
<PAGE> 31
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated.
SIBONEY CORPORATION
Date: March 20, 1996 BY: /s/ Timothy J. Tegeler
-------------------------
Timothy J. Tegeler
President and Chief Executive
and Financial Officer and
Principal Accounting Officer
Date: March 20, 1996 BY: /s/ Timothy J. Tegeler
-------------------------
Timothy J. Tegeler, Director
Date: March 20, 1996 BY: /s/ Thomas G. Keeton
----------------------
Thomas G. Keeton, Director
Date: March 20, 1996 BY: /s/ Rebecca M. Braddock
--------------------------
Rebecca M. Braddock, Director
Date: March 20, 1996 BY: /s/ Alan G. Johnson
----------------------
Alan G. Johnson, Director
Date: March 20, 1996 BY: /s/ James P. Connaughton
--------------------------
James P. Connaughton, Director
- ------------------------------------------------------------------------------
Page 31
<PAGE> 32
<TABLE>
<CAPTION>
EXHIBIT INDEX
- ---------------------------------------------------------------------------------------------------
EXHIBIT NO. DESCRIPTION PAGE
<C> <S> <C>
3(a) Amended and Restated Articles of
Incorporation, filed as Exhibit
3(a) to the Company's Report on
Form 10-K for the year ended
December 31, 1986 (the "1986
10-K") and incorporated herein
by this reference . . . . . . . . . . . . . . . . . . N/A
3(b) Bylaws, filed as Exhibit 3(b) to
the 1986 10-K and incorporated
herein by this reference. . . . . . . . . . . . . . . N/A
21 Subsidiaries of the Company, filed
herewith. . . . . . . . . . . . . . . . . . . . . . . 33
</TABLE>
- ------------------------------------------------------------------------------
Page 32
<PAGE> 33
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE COMPANY
<TABLE>
<CAPTION>
The following are wholly-owned subsidiaries of the Company at December 31, 1995:
YEAR OF
INDUSTRY SEGMENT SUBSIDIARY INCORPORATION ORGANIZATION
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CONTINUING OPERATIONS:
Educational Products Gamco Industries, Inc. Texas 1968
(part of Siboney Learning Group
Division)
Natural Resources Axel Heiberg Oil Company Delaware 1968
Natural Resources Siboney Resources - Texas, Inc. Texas 1968
Natural Resources Siboney Coal Company, Inc. Kentucky 1978
DISCONTINUED OPERATIONS:
Audiovisual Equipment Siboney Communications, Inc. Texas 1950
</TABLE>
- ------------------------------------------------------------------------------
Page 33
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from SEC
Form 10-K for the year ended December 31, 1995, and is qualified in its
entirety by reference to such financial statements.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-1-1995
<PERIOD-END> DEC-31-1995
<CASH> 599,924
<SECURITIES> 0
<RECEIVABLES> 225,279
<ALLOWANCES> 47,130
<INVENTORY> 230,236
<CURRENT-ASSETS> 1,314,732
<PP&E> 1,487,789
<DEPRECIATION> 1,111,190
<TOTAL-ASSETS> 1,696,432
<CURRENT-LIABILITIES> 112,234
<BONDS> 0
<COMMON> 1,556,670
0
0
<OTHER-SE> 27,528
<TOTAL-LIABILITY-AND-EQUITY> 1,696,432
<SALES> 2,284,529
<TOTAL-REVENUES> 2,359,492
<CGS> 523,055
<TOTAL-COSTS> 523,055
<LOSS-PROVISION> 0
<OTHER-EXPENSES> 1,974,356
<INTEREST-EXPENSE> 103
<INCOME-PRETAX> (98,405)
<INCOME-TAX> 0
<INCOME-CONTINUING> (98,405)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (66,368)
<NET-INCOME> (164,773)
<EPS-PRIMARY> (0.010)
<EPS-DILUTED> (0.010)
</TABLE>
