SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(X) Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 1997 or
( ) Transition report pursuant to Section 13 or 15(d)of the
Securities Exchange Act of 1934
For the transition period from ___________to___________
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 per od 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 16,543,344
$.10 per share
<PAGE>
INDEX
PART I FINANCIAL INFORMATION
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheet June 30, 3
1997 and December 31, 1996
Condensed Consolidated Statement Of Operations 5
Three Months and Six Months Ended June 30, 1997
and June 30, 1996
Condensed Consolidated Statement Of Cash Flows 6
Six Months Ended June 30,1997 and June 30, 1996
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 4. Submission of Matters to a Vote of Security Holders 10
ITEM 6. Exhibits And Reports On Form 8-K 10
SIGNATURES 10
EXHIBIT INDEX 11
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
SIBONEY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1997 AND DECEMBER 31, 1996
ASSETS
<CAPTION>
DECEMBER 31,
JUNE 30, 1996 (SEE
1997 NOTE BELOW)
----------------- ----------------
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 495,952 $ 775,830
Accounts and notes receivable 283,865 152,437
Inventories (Note 3) 170,371 174,939
Prepaid expenses and deposits 148,688 160,033
----------- ------------
Total Current Assets 1,098,876 1,263,239
Property, Plant and Equipment (Net of 152,183 172,553
Accumulated Depreciation of $482,313 at
June 30, 1997 and $451,942 at December
31, 1996)
Investments in Natural Resources 5,101 5,101
----------- ------------
$ 1,256,160 $ 1,440,893
=========== ============
</TABLE>
NOTE: The balance sheet at December 31, 1996 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)
JUNE 30, 1997 AND DECEMBER 31, 1996
LIABILITIES AND STOCKHOLDERS' EQUITY
DECEMBER 31,
JUNE 30, 1996 (SEE
1997 NOTE BELOW)
------------- --------------
Current Liabilities
Accounts payable $ 49,455 $ 75,280
Accrued expenses 70,173 91,191
------------ -----------
Total Current Liabilities 119,628 166,471
Stockholders' Equity
Common stock:
Authorized 20,000,000 shares at $.10
Par value; issued and outstanding
15,766,694 shares at 12/31/96 and
16,543,344 shares at 6/30/97 1,654,335 1,576,670
Additional paid-in capital -- 13,028
Retained earnings (deficit) (517,803) (315,276)
------------ -----------
Total Stockholders' Equity 1,136,532 1,274,422
------------ -----------
$ 1,256,160 $ 1,440,893
============ ===========
NOTE: The balance sheet at December 31, 1996 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>
SIX MONTHS ENDED THREE MONTHS ENDED
JUNE 30, JUNE 30,
----------------------------------------- -----------------------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues $1,149,222 1,181,582 618,599 635,380
Cost of Product Sales 177,372 205,767 88,169 83,778
Selling, General and
Administrative Expenses 1,120,881 1,028,936 528,694 508,132
----------- ----------- ----------- ----------
Income (Loss) from
Operations (149,031) (53,121) 1,736 43,470
----------- ----------- ----------- ----------
Other Income (Expense)
Interest Income 8,676 11,432 3,880 5,424
Miscellaneous (17,128) (21,844) (8,535) (11,007)
--------- ----------- --------- -----------
Total Other Income (Expense) (8,452) (10,412) (4,655) (5,583)
----------- ----------- ----------- -----------
Net Income (Loss) $ (157,483) $ (63,533) $ (2,919) $__ 37,887
----------- =========== =========== ==========
Weighted Average Shares
Outstanding 15,978,108 15,566,694 15,978,108 15,566,694
=========== =========== =========== ==========
Income (Loss) Per Share $ (.010) $ (.004) $ .000 $ .002
=========== =========== =========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
SIBONEY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
1997 1996
---------- ----------
Cash Flows From Operating Activities
Net loss from continuing operations $(157,483) $ (63,533)
Adjustments to reconcile net loss
from continuing operations to net
cash provided by operating activities:
Depreciation 30,371 64,256
Change in assets and liabilities:
Increase in accounts and notes (131,428) (89,554)
receivable
Decrease in inventory 4,568 20,437
Decrease in prepaid expenses
and deposits 11,345 84,402
Increase (decrease) in accounts
payable and accrued expenses (46,843) 16,253
---------- ---------
Net Cash Provided By (Used In) Operations (289,470) 32,261
---------- ---------
Cash Flows From Investing Activities
Payments for equipment (10,001) (23,935)
---------- ----------
Net Cash Used In Investing Activities (10,001) (23,935)
---------- ----------
Cash Flows From Financing Activities
Proceeds from issuance of common stock 19,593 --
Net Cash Provided By Financing Activities 19,593 --
Net Increase (Decrease) In Cash and Cash Equivalents (279,878) 8,326
Cash And Cash Equivalents - Beginning Of Period 775,830 599,924
---------- ---------
Cash And Cash Equivalents - End Of Period $ 495,952 $ 608,250
========== =========
See accompanying notes to condensed consolidated financial statements.
6
<PAGE>
SIBONEY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997 AND 1996
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The condensed consolidated balance sheet as of June 30, 1997, the condensed
consolidated statement of operations for the six-month periods and the
three-month periods ended June 30, 1997 and 1996 and the condensed
consolidated statement of cash flows for the six-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 June 30, 1997 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, 1996. The results of operations
for the period ended June 30, 1997 are not necessarily indicative of the
operating results for the full year.
2. INVENTORIES
Inventories consist of the following:
JUNE 30, 1997 DECEMBER 31, 1996
------------- -----------------
Raw materials $ 65,752 $ 135,710
Finished goods 104,619 39,229
------- --------
$ 170,371 $ 174,939
======== ========
3. STOCKHOLDERS' EQUITY
During the six months ended June 30, 1997, stockholders' equity was changed
by the net loss for the period, which was partially offset by proceeds from
issuance of common stock upon exercise of certain stock options.
<TABLE>
<CAPTION>
Common Stock Additional Retained
---------------------------------------- Paid in Earnings
Shares Amount Capital (Deficit) Totals
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance -
January 1,1997 15,766,694 $1,576,670 $ 13,028 $(315,276) $1,274,422
Issuance of
Common Stock 776,650 77,665 (13,028) (45,044) 19,593
Net Loss -- -- -- (157,483) (157,483)
- --------------------------------------------------------------------------------------------------------------------------
Balance - 16,543,344 $1,654,335 $ -- $(517,803) $1,136,532
June 30, 1997
==========================================================================================================================
</TABLE>
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 wholly-owned subsidiary, in the
publishing and distribution of educational software and teaching aids. The
Company has been serving the educational market for more than 35 years. The
Company's proprietary educational software is produced for use on IBM, IBM
compatible, Macintosh and Apple II computers. Of Gamco's total sales,
approximately 96% is generated by proprietary software, and the remainder
is represented by non-proprietary educational software and other related
products. Sales are made to public and private schools, grades 1 through
12, through a network of independent distributors throughout the United
States as well as through its own catalogs. Popular Gamco software titles
include Money Challenge, Discover Time, Undersea Reading for Meaning and
the Touchdown Math series.
2) The holding of interests in certain natural resources, including coal, oil
and gas, through several subsidiaries.
The Company has 127 educational software products, which it is actively involved
in converting to the Macintosh and Windows platforms which have become the
predominant systems used in schools. Of such products, 46 have already been
converted to a Macintosh platform and the Company plans to convert an additional
five products during the current year. Fifteen programs have been converted to a
Windows format, with an additional 26 to be converted this year. The Company
anticipates the release of its first CD-ROM products this Fall with 16 titles
converted to a hybrid Macintosh/Windows format.
The Company has also licensed 12 Macintosh/Windows hybrid multimedia CD-ROM
titles, which help young readers from kindergarten through third grade develop
their reading and writing skills. These new titles should be available this
Fall.
During the same period, the Company has also expanded its distribution network.
In connection with this expansion, it recently launched a new product line
called Orchard: Teacher's Choice Software through a network of exclusive dealers
who will sell Siboney Learning Group software as a larger "curriculum" solution
for students who are struggling to master key skills. In addition, the Company
recently expanded its inside sales efforts by hiring additional sales
representatives who will focus on selling proprietary software by a
telemarketing effort addressed to its customer base of over 10,000 schools.
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.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)
THREE MONTHS ENDED JUNE 30, 1997 vs. JUNE 30, 1996
Revenues decreased during the three month period ended June 30,1997 compared to
the same period in 1996 due to lower royalties earned by Siboney Coal Company.
Revenues from its coal lease are dependent on third party mining operations,
which are temporarily suspended from time to time.
The revenues of the Siboney Learning Group division and Gamco increased slightly
during the quarter compared to the same period in 1996. Siboney Learning Group
and Gamco are currently in the process of converting and adding new products
which are being released on current platforms (Macintosh, Windows and CD-ROM),
which is resulting in increased sales.
Selling, general and administrative expenses increased during the quarter
compared to the same period in 1996, primarily due to higher legal fees and the
expenses associated with Company's Annual Report and Annual Meeting of
Stockholders.
As a result of the above mentioned factors, net income decreased for the quarter
ended June 30, 1997, compared to the same period in 1996.
SIX MONTHS ENDED JUNE 30, 1997 vs. JUNE 30, 1996
Revenues decreased during the six month period ended June 30, 1997 compared to
the same period in 1996. While revenues of the Siboney Learning Group and Gamco
were slightly lower for the first six months of 1997 compared to 1996, their
sales were higher during the second quarter of 1997 compared to 1996.
Cost of product sales decreased during the six month period compared to the
previous year as a result of a successful effort to increase the percentage of
proprietary sales versus non-proprietary product sales. As a result, Gamco's
cost of product sales as a percentage of revenue was reduced to 16.3% compared
to 18.5% in the prior year.
Selling, general and administrative expenses increased during the six month
period ended June 30, 1997 compared to the same period in 1996 due to higher
employment expenses, costs associated with outsourcing product conversion to new
platforms, increased advertising costs, higher legal fees and the expense of
printing the Company's Annual Report at an outside printer.
LIQUIDITY AND CAPITAL RESOURCES
Cash decreased at June 30, 1997 compared to December 31, 1996 due to the impact
of expenses exceeding income, an increase in the level of accounts receivable,
and a reduction in accounts payable and accrued expenses.
The increase in accounts receivable at the end of the six month period of 1997
was due to larger sales volume at Gamco during June 1997 compared with December
1996, which was consistent with Gamco's experience in the previous year.
Accounts payable decreased at June 30, 1997, primarily due to nonrecurring
expenses which were accrued at year end and paid in 1997.
Accrued expenses decreased at June 30, 1997, primarily due to fees accrued for
accounting and compensation expenses at year end that were paid in 1997.
9
<PAGE>
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's annual meeting of stockholders held May 8, 1997, stockholders
voted in favor of:
Proposal 1
The election of all candidates for director, who were elected for a term of one
year by the following votes:
SHARES VOTED FOR SHARES WITHHELD
---------------- ---------------
Rebecca M. Braddock 9,779,588 shares 121,386 shares
James P. Connaughton 9,779,288 shares 121,686 shares
Alan G. Johnson 9,764,388 shares 136,586 shares
Thomas G. Keeton 9,779,688 shares 121,286 shares
Ernest R. Marx 9,762,888 shares 138,086 shares
Timothy J. Tegeler 9,776,138 shares 124,836 shares
Proposal 2
The adoption of the Siboney Corporation 1997 Incentive Stock Option Plan, by a
favorable vote of 7,592,411 votes, which was in excess of a majority of the
8,196,424 votes present at the meeting in person or by proxy and entitled to
vote on this matter, with 343,463 votes against, 260,550 votes abstaining and
1,813,220 broker non-votes.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits: See Exhibit Index on page 11.
b) Reports on Form 8-K: No reports on Form 8-K were filed by the
Registrant during the quarter ended June 30, 1997.
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: August 1, 1997 By: \s\ Timothy J. Tegeler
----------------------
Timothy J. Tegeler
President, Chief Executive
Officer and Chief Financial
Officer
10
<PAGE>
EXHIBIT INDEX
Exhibit Number Description Page
-------------- ----------- ----
27(a) Financial Data Schedule 12
(Filed in EDGAR version
only)
11
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-1-1997
<PERIOD-END> JUN-30-1997
<CASH> 495,952
<SECURITIES> 0
<RECEIVABLES> 331,469
<ALLOWANCES> 47,604
<INVENTORY> 170,371
<CURRENT-ASSETS> 1,098,876
<PP&E> 634,496
<DEPRECIATION> 482,313
<TOTAL-ASSETS> 1,256,160
<CURRENT-LIABILITIES> 119,628
<BONDS> 0
0
0
<COMMON> 1,654,335
<OTHER-SE> (517,803)
<TOTAL-LIABILITY-AND-EQUITY> 1,256,160
<SALES> 1,086,508
<TOTAL-REVENUES> 1,149,222
<CGS> 177,372
<TOTAL-COSTS> 177,372
<OTHER-EXPENSES> 1,120,881
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (157,483)
<INCOME-TAX> 0
<INCOME-CONTINUING> (157,483)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (157,483)
<EPS-PRIMARY> (0.010)
<EPS-DILUTED> (0.010)
</TABLE>
