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 September 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 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 16,548,344
$.10 per share
<PAGE>
INDEX
PART I FINANCIAL INFORMATION
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheet September 3
30, 1997 and December 31, 1996
Condensed Consolidated Statement Of Operations 5
Three Months and Nine Months Ended September
30, 1997 and September 30, 1996
Condensed Consolidated Statement Of Cash Flows 6
Nine Months Ended September 30, 1997 and
September 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 6. Exhibits And Reports On Form 8-K 10
SIGNATURES 11
EXHIBIT INDEX 12
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
SIBONEY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
ASSETS
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, 1996 (SEE
1997 NOTE BELOW)
--------------------------------------------------
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 449,123 $ 775,830
Accounts and notes receivable 217,009 152,437
Inventories (Note 3) 174,976 174,939
Prepaid expenses and deposits 164,586 160,033
----------- -----------
Total Current Assets 1,005,694 1,263,239
Property, Plant and Equipment 139,274 172,553
(Net of Accumulated Depreciation
of $496,195 at September 30, 1997
and $451,942 at December 31, 1996)
Investments in Natural Resources 5,101 5,101
----------- ------------
$ 1,150,069 $ 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>
<TABLE>
SIBONEY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(CONTINUED)
SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, 1996 (SEE
1997 NOTE BELOW)
---- -----------
<S> <C> <C>
Current Liabilities
Accounts payable $ 113,911 $ 75,280
Accrued expenses 91,314 91,191
----------- -----------
Total Current Liabilities 205,225 166,471
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
16,548,344 shares at 9/30/97 1,654,835 1,576,670
Additional paid-in capital 300 13,028
Retained earnings (deficit) (710,291) (315,276)
------------ ------------
Total Stockholders' Equity 944,844 1,274,422
------------ ------------
$ 1,150,069 $ 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.
4
<PAGE>
<TABLE>
SIBONEY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------------------------------------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues $1,561,480 1,690,704 412,258 509,122
Cost of Product Sales 261,103 318,620 83,731 112,853
Selling, General and
Administrative Expenses 1,639,361 1,583,195 518,480 554,259
--------- ----------- ----------- ----------
Loss from Operations
(338,984) (211,111) (189,953) (157,990)
--------- --------- ----------- -----------
Other Income (Expense)
Interest Income 13,120 17,775 4,444 6,343
Gain on Sale of Assets -- 118,288 -- 118,288
Miscellaneous (24,107) (32,052) (6,979) (10,208)
--------- ----------- ----------- -----------
Total Other Income (Expense) (10,987) 104,011 (2,535) 114,423
----------- ----------- ----------- -----------
Net Loss $ (349,971) $ (107,100) $ (192,488) $ (43,567)
=========== =========== =========== ===========
Weighted Average Shares Outstanding 16,168,756 15,566,694 16,168,756 15,566,694
=========== =========== =========== ===========
Loss Per Share $ (.022) $ (.007) $ (.012) $ (.003)
=========== =========== ============= ============
</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, 1997 AND 1996
<CAPTION>
1997 1996
-------------------- --------------------
<S> <C> <C>
Cash Flows From Operating Activities
Net loss from continuing operations $(349,971) $(107,100)
Adjustments to reconcile net loss
from continuing operations to net
cash provided by operating activities:
Depreciation 44,253 92,657
Gain on sale of assets -- (118,288)
Change in assets and liabilities:
Increase in accounts and notes (64,572) (52,589)
receivable
(Increase) decrease in inventory (37) 32,068
(Increase) decrease in prepaid expenses
and deposits (4,553) 8,810
Increase in accounts payable
and accrued expenses 38,754 133,255
---------- ---------
Net Cash Used In Operations (336,126) (11,187)
---------- ----------
Cash Flows From Investing Activities
Proceeds from sale of assets -- 230,000
Payments for equipment (10,964) (35,111)
---------- ----------
Net Cash Provided By (Used In) Investing Activities (10,964) 194,889
---------- ---------
Cash Flows From Financing Activities
Proceeds from issuance of common stock 20,383 --
---------- ---------
Net Cash Provided By Financing Activities 20,383 --
---------- ---------
Net Increase (Decrease) In Cash and Cash Equivalents (326,707) 183,702
Cash And Cash Equivalents - Beginning Of Period 775,830 599,924
---------- ---------
Cash And Cash Equivalents - End Of Period $ 449,123 $ 783,626
========== =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
<PAGE>
SIBONEY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997 AND 1996
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The condensed consolidated balance sheet as of September 30, 1997, the
condensed consolidated statement of operations for the nine-month periods
and the three-month periods ended September 30, 1997 and 1996 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, 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 September 30, 1997 are not necessarily indicative of
the operating results for the full year.
2. INVENTORIES
Inventories consist of the following:
SEPTEMBER 30, 1997 DECEMBER 31, 1996
------------------ -----------------
Raw materials $ 58,505 $ 135,710
Finished goods 116,471 39,229
--------- ---------
$ 174,976 $ 174,939
========= =========
3. STOCKHOLDERS' EQUITY
During the nine months ended September 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 Paid in Retained Totals
Capital Earnings
(Deficit)
Shares Amount
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance - January 15,766,694 $1,576,670 $ 13,028 $(315,276) $1,274,422
1,1997
Issuance of Common 781,650 78,165 (12,728) (45,044) 20,393
Stock
Net Loss -- -- -- (349,971) (349,971)
- ---------------------------------------------------------------------------------------------------------------------------
Balance - September 16,548,344 $1,654,835 $ 300 $(710,291) $ 944,844
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. 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 97% 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, 49 have already been
converted to a Macintosh platform and the Company plans to convert an additional
two products during the current year. Fifteen programs have been converted to a
Windows format, with an additional 24 scheduled to be converted this year. The
Company has released its first CD-ROM products this Fall with 10 titles
converted to a hybrid Macintosh/Windows format, with an additional 24 scheduled
to be converted this year.
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 were released this Fall.
During 1997, the Company has also expanded its distribution network. In
connection with this expansion, it launched a new product line called Orchard:
Teacher's Choice Software through a network of 25 exclusive dealers who will
sell Siboney Learning Group software as a broader 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 SEPTEMBER 30, 1997 vs. SEPTEMBER 30, 1996
Revenues decreased during the three month period ended September 30,1997
compared to the same period in 1996 due to the discontinued marketing of
non-proprietary products and resulting lower sales of these products at Gamco.
Siboney Learning Group and Gamco are currently in the process of converting and
adding new products on current platforms (Macintosh, Windows and CD-ROM), which
is expected to result in increased sales in the future.
Cost of product sales decreased during the 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 20.4% compared to 22.2%
in the prior year.
Selling, general and administrative expenses decreased during the quarter
compared to the same period in 1996. While research and development costs at
Gamco were 35% higher, other selling, general and administrative costs were 15%
lower for the three month period.
Other income decreased during the three month period ended September 30, 1997
compared to the same period in 1996 due to the sale of Gamco's print shop
equipment during the third quarter of 1996.
As a result of the lower level of sales, net loss increased for the quarter
ended September 30, 1997, compared to the same period in 1996.
NINE MONTHS ENDED SEPTEMBER 30, 1997 vs. SEPTEMBER 30. 1996
Revenues decreased during the nine month period ended September 30, 1997
compared to the same period in 1996, primarily due to lower revenues by 7% of
Siboney Learning Group and Gamco.
In addition, royalties earned by Siboney Coal Company decreased 20% for the nine
month period compared to the same period in 1996. Coal lease revenues are
dependent on third party mining operations, which are temporarily suspended from
time to time.
Cost of product sales decreased during the nine month period compared to the
previous year as a result of a successful effort to increase the percentage of
proprietary (currently 97%) versus non-proprietary product sales. As a result,
Gamco's cost of product sales as a percentage of revenue was reduced to 17.4%,
compared to 19.8% in the prior year.
Selling, general and administrative expenses increased during the nine month
period ended September 30, 1997 compared to the same period in 1996, due to
higher employment expenses, the expense of printing the Company's Annual Report
at an outside printer and higher legal fees.
Other income decreased during the nine month period ended September 30, 1997
compared to the same period in 1996 due to the sale of Gamco's print shop
equipment during the third quarter of 1996.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)
LIQUIDITY AND CAPITAL RESOURCES
Cash decreased at September 30, 1997 compared to December 31, 1996 due to the
impact of expenses exceeding income and an increase in the level of accounts
receivable. The Company considers its cash position adequate to fund its
anticipated operations and capital expenditures.
The increase in accounts receivable at the end of the nine month period of 1997
was due to larger sales volume at Gamco during September 1997 compared with
December 1996, which was consistent with Gamco's experience in the previous
year.
Accounts payable increased at September 30, 1997, primarily due to the amount
which became payable for the printing of Gamco's latest catalog, which amount
will be paid during the 4th quarter.
PART II - OTHER INFORMATION
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 September 30, 1997.
10
<PAGE>
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 12, 1997 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-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 449,123
<SECURITIES> 0
<RECEIVABLES> 265,836
<ALLOWANCES> 48,827
<INVENTORY> 174,976
<CURRENT-ASSETS> 1,005,694
<PP&E> 635,469
<DEPRECIATION> 496,195
<TOTAL-ASSETS> 1,150,069
<CURRENT-LIABILITIES> 205,225
<BONDS> 0
0
0
<COMMON> 1,654,835
<OTHER-SE> (709,991)
<TOTAL-LIABILITY-AND-EQUITY> 1,150,069
<SALES> 1,497,781
<TOTAL-REVENUES> 1,561,480
<CGS> 261,103
<TOTAL-COSTS> 261,103
<OTHER-EXPENSES> 1,639,361
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (349,971)
<INCOME-TAX> 0
<INCOME-CONTINUING> (394,971)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (349,971)
<EPS-PRIMARY> (.022)
<EPS-DILUTED> (.022)
</TABLE>
