SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(X) Quarterly report for the quarterly period ended March 31, 1997
OR
( ) Transition Report Pursuant To Section 13 Or 15(d) of The Securities
Exchange Act of 1934
Commission file number 1-3952
SIBONEY CORPORATION
(Exact name of registrant as specified in its charter)
Maryland 73-0629975
(State or other jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
8000 Maryland Ave., Ste 1040, P.O. Box 16184, St. Louis, MO 63105
(Address of principal executive offices)
(Zip Code)
314-725-6141
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or such shorter period that the registrant was required
to file such reports) and (2) has been subject to such filing requirements for
the past 90 days: YES [X] NO [ ]
Title of class of Number of Shares
common stock outstanding as of this Report Date
------------ ----------------------------------
Common stock, par value 15,766,694
$.10 per share
<PAGE>
INDEX
PART I FINANCIAL INFORMATION
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheet March 31, 3
1997 and December 31, 1996
Condensed Consolidated Statement Of Operations 5
Three Months Ended March 31, 1997 and March
31, 1996
Condensed Consolidated Statement Of Cash Flows 6
Three Months Ended March 31,1997 and March
31, 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 10
EXHIBIT INDEX 11
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SIBONEY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 1997 AND DECEMBER 31, 1996
ASSETS
DECEMBER 31,
MARCH 31, 1996 (SEE
1997 NOTE BELOW)
CURRENT ASSETS $ 432,688 $ 775,830
Cash and cash equivalents 277,153 152,437
Accounts and notes receivable 182,127 174,939
Inventories (Note 3) 216,547 160,033
----------- ------------
Prepaid expenses and deposits 1,108,515 1,263,239
TOTAL CURRENT ASSETS
PROPERTY, PLANT AND EQUIPMENT (NET OF
ACCUMULATED DEPRECIATION OF $467,708 AT
MARCH 31, 1997 AND $451,942 AT DECEMBER
31, 1996) 163,745 172,553
INVESTMENTS IN NATURAL RESOURCES 5,101 5,101
----------- ------------
$ 1,277,361 $ 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.
3
<PAGE>
SIBONEY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(CONTINUED)
MARCH 31, 1997 AND DECEMBER 31, 1996
LIABILITIES AND STOCKHOLDERS' EQUITY
DECEMBER 31,
MARCH 31, 1996 (SEE
1997 NOTE BELOW)
---- -----------
CURRENT LIABILITIES
Accounts payable $ 93,453 $ 75,280
Accrued expenses 64,050 91,191
------------ -----------
TOTAL CURRENT LIABILITIES 157,503 166,471
STOCKHOLDERS' EQUITY
Common stock:
Authorized 20,000,000 shares
at $.10 par value; issued
and outstanding 15,766,694
shares 1,576,670 1,576,670
Additional paid-in capital 13,028 13,028
Retained earnings (deficit) (469,840) (315,276)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 1,119,858 1,274,422
------------ -----------
$ 1,277,361 $ 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>
SIBONEY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED
MARCH 31,
1997 1996
---- ----
REVENUES $ 530,623 546,202
COST OF PRODUCT SALES 89,203 121,989
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 592,187 520,804
----------- -----------
INCOME (LOSS) FROM OPERATIONS (150,767) (96,591)
----------- -----------
OTHER INCOME (EXPENSE)
Interest Income 4,796 6,008
Miscellaneous (8,593) (10,837)
----------- -----------
TOTAL OTHER INCOME (EXPENSE) (3,797) (4,829)
----------- -----------
NET INCOME (LOSS) $ (154,564) $ (101,420)
=========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING 15,766,694 15,566,694
=========== ===========
INCOME (LOSS) PER SHARE $ (.010) $ (.007)
=========== ===========
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
SIBONEY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
1997 1996
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss from continuing operations $(154,564) $(101,420)
Adjustments to reconcile net loss
from continuing operations to net
cash provided by operating activities:
Depreciation 15,766 31,368
Change in assets and liabilities:
Increase in accounts and notes (124,716) (102,392)
receivable
(Increase) decrease in inventory (7,188) 55,005
Increase in prepaid expenses
and deposits (56,514) (17,127)
Increase (decrease) in accounts
payable and accrued expenses (8,968) 31,180
---------- ---------
NET CASH USED IN OPERATIONS (336,184) (103,386)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for equipment (6,958) (9,416)
---------- ----------
NET CASH USED IN INVESTING ACTIVITIES (6,958) (9,416)
---------- ----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (343,142) (112,802)
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 775,830 599,924
---------- ---------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 432,688 $ 487,122
========== =========
See accompanying notes to condensed consolidated financial statements.
6
<PAGE>
SIBONEY CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997 AND 1996
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The condensed consolidated balance sheet as of March 31, 1997, the
condensed consolidated statement of operations for the three-month periods
ended March 31, 1997 and 1996 and the condensed consolidated statement of
cash flows for the three-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 March 31, 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 March 31, 1997 are not necessarily indicative of the
operating results for the full year.
2. STOCKHOLDERS' EQUITY
During the three months ended March 31, 1997, stockholders' equity was
changed solely by the net loss for the period.
3. INVENTORIES
Inventories consist of the following:
MARCH 31, 1997 DECEMBER 31, 1996
-------------- -----------------
Raw materials $ 81,943 $135,710
Finished goods 100,184 39,229
-------- --------
$182,127 $174,939
======== ========
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 Macintosh, Apple II, IBM and IBM compatible computers. Of Gamco's
total sales for the quarter ended March 31, 1997, approximately 94% was
generated by proprietary software, and the remainder was represented by
nonproprietary educational software and other related products. Sales
are made to private and public 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.
In September 1996, Siboney Learning Group entered into a software licensing and
distribution agreement with Merit Audio Visual of New York, New York. Under the
license agreement, Siboney Learning Group received a license to use and market
21 software programs which teach skills for reading and writing to elementary
through high school students. During the first quarter of 1997, the Company
released 21 DOS versions and 12 Macintosh versions of these software programs.
It is anticipated that the remaining Macintosh versions and all Windows versions
of the programs will be released during 1997. Gamco has historically been
strongest in areas relating to mathematics. Consequently, the acquisition of
these products and their addition to the Company's product line added an
important dimension to the products offered by the Company.
The Company is in the process of converting its existing 106 Apple II and DOS
products to Macintosh and Windows platforms, which have become the predominant
computer systems used in schools. During the first quarter of 1997, three new
Macintosh products were released along with the Company's first nine Windows
products. The Company expects to produce an additional 20 Macintosh titles and
15 Windows titles along with its first five hybrid Macintosh/Windows CD-ROM
products during the current year.
As a result, the Company's total educational software product offerings and the
breadth of its educational coverage have expanded significantly in the current
school year and will continue to do so in the 1997-1998 school year. Siboney
Learning Group will use Gamco's established distribution channels, as well as
new distribution programs, to sell these new and improved software programs.
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 covered by 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 MARCH 31, 1997 vs. MARCH 31, 1996
Revenues decreased during the three month period ended March 31,1997 compared to
the same period in 1996. Sales at Gamco for the three month period were lower,
as was the trend in the educational software industry. Gamco is releasing more
new products on current platforms (Macintosh, Windows and CD-ROM), which is
expected to result in increased sales in the future.
Royalties earned by Siboney Coal Company increased slightly for the quarter.
Revenues from its coal lease are dependent on third party mining operations,
which are temporarily suspended from time to time.
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 18.9% compared to 24.6%
in the prior year.
Selling, general and administrative expenses increased during the quarter
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.
As a result of the above mentioned factors, net income decreased for the quarter
ended March 31, 1997 compared to the same period in 1996.
LIQUIDITY AND CAPITAL RESOURCES
Cash decreased at March 31, 1997 compared to December 31, 1996 due to the impact
of expenses exceeding income and due to higher levels of accounts receivable,
prepaid expenses and inventories.
The increase in accounts receivable at the end of the first quarter of 1997 was
due to larger sales volume at Gamco during March 1997 compared with December
1996, which was consistent with Gamco's experience in the previous year. In
addition, Siboney Coal had a receivable for the annual minimum royalty payment,
which was received after the close of the first quarter of fiscal 1997,
consistent with the terms of the coal lease.
Prepaid expenses increased at March 31, 1997, primarily due to the cost of a
catalog mailing during January 1997.
Accounts payable increased at March 31, 1997, primarily due to outstanding
invoices for the printing of the Company's Annual Report and legal expenses.
Accrued expenses decreased at March 31, 1997, compared to December 31, 1996. At
the fiscal year end, amounts had been accrued for payment to the Company's
auditors and for executive compensation. These payments were made during the
first quarter of 1997.
9
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits: See Exhibit Index on page 11 hereof.
b) Reports on Form 8-K: No reports on Form 8-K were filed by the
Registrant during the quarter ended March 31, 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: May 15,1997 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
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from the
Statement of Financial Condition at March 31, 1997 (Unaudited) and the Statement
of Operations for the Three Months Ended March 31, 1997 (Unaudited) and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 432,688
<SECURITIES> 0
<RECEIVABLES> 323,707
<ALLOWANCES> 46,554
<INVENTORY> 182,127
<CURRENT-ASSETS> 1,108,515
<PP&E> 631,453
<DEPRECIATION> 467,708
<TOTAL-ASSETS> 1,277,361
<CURRENT-LIABILITIES> 157,503
<BONDS> 0
0
0
<COMMON> 1,576,670
<OTHER-SE> (456,812)
<TOTAL-LIABILITY-AND-EQUITY> 1,277,361
<SALES> 471,727
<TOTAL-REVENUES> 530,623
<CGS> 89,203
<TOTAL-COSTS> 89,203
<OTHER-EXPENSES> 592,187
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (154,564)
<INCOME-TAX> 0
<INCOME-CONTINUING> (154,564)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (154,564)
<EPS-PRIMARY> (0.010)
<EPS-DILUTED> (0.010)
</TABLE>
