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UNITED STATES
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


For the Quarterly Period Ended March 31, 2005



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)
    

325 North Kirkwood Road, Suite 300, St. Louis, MO 63122
(Address of principal executive offices)
(Zip Code)

314-822-3163
(Registrant’s telephone number, including area code)


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 [ ]

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

Title of class of
  
Number of shares outstanding
common stock
  
as of the date of this report
Common stock, par value
  
17,345,419
$.10 per share
    
 
 


INDEX
    
     
PART I   FINANCIAL INFORMATION
    
     
Item 1.   Unaudited Financial Statements
  
 
     
 
 
 3
     
 
 
 4
     
 
 
 5
     
 
 
 6
     
 
 7
     
 
 
 9
     
 
 
13
     
 
13
     
   
     
Item 1. Legal Proceedings
  
14
     
 
14
     
 
16
     
 
16
     
 
17


 
2
 

ITEM 1. UNAUDITED FINANCIAL STATEMENTS
          
PART I - FINANCIAL INFORMATION
  
 
Assets
  
   
March 31,
  
December 31,
 
   
2005 (Unaudited)
 
2004
 
Current Assets
          
Cash
  
$
236,154
  
$
686,642
  
Accounts receivable
   
1,357,615
   
1,379,006
 
Inventories
   
347,543
   
314,947
 
Refundable income taxes
    
700,769
   
620,769
 
Prepaid expenses
   
174,033
   
164,305
 
Deferred tax asset
    
185,600
   
116,000
 
           
Total Current Assets
    
3,001,714
   
3,281,669
 
           
Property and Equipment, Net
   
395,751
   
432,500
 
           
Goodwill, Net
    
1,045,015
   
1,045,015
 
           
Other Assets
   
1,774,292
   
1,627,648
 
           
Total Assets
  
$
6,216,772
  
$
6,386,832
  
           
           
Liabilities And Stockholders’ Equity
           
Current Liabilities
          
Notes payable
  
$
450,000
  
$
6,771
  
Current portion of capitalized lease obligation
    
25,917
   
25,686
 
Accounts payable
    
199,003
   
173,660
 
Accrued bonuses
    
52,566
   
88,677
 
Accrued commissions
    
68,483
   
36,817
 
Accrued vacation
    
87,223
   
87,223
 
Accrued royalties
    
102,150
   
311,886
 
Accrued severance
    
273,885
   
―
 
Other accrued expenses
    
95,808
   
48,093
 
Accrued litigation liability
    
100,000
   
100,000
 
Total Current Liabilities
    
1,455,035
   
878,813
 
           
           
Long-Term Liabilities
          
Long-term litigation liability
    
100,000
   
100,000
 
Capitalized lease obligation
    
4,593
   
11,116
 
Deferred tax liability
    
7,600
   
360,000
 
Total Long-Term Liabilities
    
112,193
   
471,116
 
           
Commitments and Contingencies (Note 5)
          
           
Stockholders’ Equity
          
Common stock:
          
Authorized 100,000,000 shares at $0.10 par value; issued and
          
outstanding 17,345,419 at March 31, 2005 and 17,407,919 at
         
December 31, 2004
    
1,734,542
   
1,740,792
 
Retained earnings
   
2,915,002
   
3,296,111
 
Total Stockholders’ Equity
    
4,649,544
   
5,036,903
 
           
Total Liabilities and Stockholders’ Equity
  
$
6,216,772
  
$
6,386,832
  
           
Note: The balance sheet at December 31, 2004 has been derived from the audited financial statements at that date.
See accompanying notes to unaudited consolidated financial statements.
              


3
 
SIBONEY CORPORATION AND SUBSIDIARIES
  
 
           
   
For The Three Months Ended March 31,
  
   
2005
 
2004
 
           
Revenues
  
$
1,773,875
  
$
2,656,853
  
           
Cost of Product Sales
    
443,153
   
536,239
 
           
Selling, General and Administrative Expenses
    
2,192,322
   
1,754,306
 
           
Income (Loss) From Operations
    
(861,600
)
  
366,308
 
           
Other Income (Expense)
         
Interest expense, net
    
(2,691
)
  
(497
)
Miscellaneous
    
988
   
679
 
Total Other Income (Expense)
    
(1,703
)
  
182
 
           
Income (Loss) Before Income Taxes
    
(863,303
)
  
366,490
 
           
Income Tax Benefit (Expense)
   
502,000
   
(144,290
)
           
Net Income (Loss)
 
$
(361,303
)
$
222,200
  
           
Earnings (Loss) Per Common Share - Basic
  
$
(0.02
)
$
0.01
  
           
Earnings (Loss) Per Common Share - Diluted
  
$
(0.02
)
$
0.01
  
           
Weighted Average Number of Common
          
Shares Outstanding - Basic
    
17,357,266
    
17,591,461
  
           
Weighted Average Number of Common
          
Shares Outstanding - Diluted
    
17,820,076
    
17,706,704
  
           
See accompanying notes to unaudited consolidated financial statements.
      

4
 
SIBONEY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (Unaudited)
               
Total
 
   
Common Stock
  
Retained
 
Stockholders’
 
   
Shares
 
Amount
 
Earnings
 
Equity
 
                   
                   
Balance - December 31, 2004
    
17,407,919
 
$
1,740,792
  
$
3,296,111
  
$
5,036,903
  
                   
Stock Repurchase
    
(62,500
)
  
(6,250
)
  
(19,806
)
  
(26,056
)
                   
Net Income (Loss)
    
—
   
—
   
(361,303
)
  
(361,303
)
                   
Balance - March 31, 2005
    
17,345,419
 
$
1,734,542
  
$
2,915,002
  
$
4,649,544
  
                   
See accompanying notes to unaudited consolidated financial statements.
        

 
5

SIBONEY CORPORATION AND SUBSIDIARIES
  
           
 
   For The Three Months Ended March 31, 
     
2005
   
2004
 
Cash Flows From Operating Activities
          
Net income (loss)
 
$
(361,303
)
$
222,200
  
Adjustments to reconcile net income (loss) to net
         
cash provided by (used in) operating activities:
          
Depreciation
    
57,451
   
53,066
 
Amortization
    
135,002
   
155,930
 
Deferred income taxes
    
(422,000
)
  
87,200
 
Change in assets and liabilities:
          
(Increase) decrease in accounts receivable
    
21,392
   
(289,489
)
(Increase) decrease in inventories
    
(32,596
)
  
26,448
 
Increase in refundable income taxes
    
(80,000
)
  
―
 
Increase in prepaid expenses
    
(9,728
)
  
(22,652
)
Increase in income tax payable
    
―
   
32,800
 
Increase (decrease) in accounts payable and
         
accrued expenses
    
132,762
   
(56,970
)
                
Net Cash Provided By (Used In) Operating Activities
    
(559,020
)
  
208,533
 
           
Cash Flows From Investing Activities
          
Payments for equipment
    
(20,703
)
  
(68,520
)
Payments for software development costs
    
(281,645
)
  
(108,312
)
Net Cash Used In Investing Activities
    
(302,348
)
  
(176,832
)
           
Cash Flows From Financing Activities
          
Proceeds from issuance of common stock
    
—
   
868
 
Payments under stock buy back program
    
(26,056
)
  
—
 
Borrowings on line-of-credit
    
450,000
   
—
 
Principal payments on capital lease obligation
    
(6,293
)
  
(6,257
)
Principal payments on long-term debt
    
(6,771
)
  
(89,015
)
Net Cash Provided By (Used In) Financing Activities
    
410,880
   
(94,404
)
           
Net Decrease In Cash
    
(450,488
)
  
(62,703
)
           
Cash - Beginning of Period
    
686,642
   
1,102,608
 
           
Cash - End of Period
  
$
236,154
  
$
1,039,905
  
           
Supplemental Disclosure of Cash Flow Information
          
Interest paid
  
$
5,853
  
$
2,419
  
Income taxes paid
  
$
—
  
$
24,692
  
           
See accompanying notes to unaudited consolidated financial statements.
              

 
6
 

SIBONEY CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2004 AND 2005
 
1.   CONSOLIDATED FINANCIAL STATEMENTS

The consolidated balance sheet as of March 31, 2005, the consolidated statement of operations for the three-month periods ended March 31, 2005 and 2004, the consolidated statement of stockholders’ equity for the three-month period ended March 31, 2005 and the consolidated statement of cash flows for the three-month periods ended March 31, 2005 and 2004, have been prepared by the Company, without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position at March 31, 2005 and the results of operations for all of the periods reported have been made.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted. These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2004. The results of operations for the period ended March 31, 2005 are not necessarily indicative of the operating results for the full year.

2.   INVENTORIES

Inventories consist of:
 
  
March 31, 2005
 December 31, 2004
  
Raw materials
  
$
264,072
  
$
259,998
  
Finished goods
    
130,570
 
  
94,549
 
Reserve for obsolescence
    
(47,100
 )   (39,600 )
   
$
347,543
  
$
314,947
  

3.   OTHER ASSETS
 
Other assets consist of:
 
   
 March 31, 2005
  December 31, 2004
  
Software development costs, net of accumulated amortization of $1,960,667 in 2005 and $1,825,665 in 2004
  
$
1,763,099
  
$
1 ,616,455
  
Deposits
    
11,193
    
11,193
  
   
$
1,774,292
  
$
1,627,648
  

 
 
7
 
The Company capitalizes costs associated with the development of computer software for sale. Costs are capitalized at the point the Company determines that it is technologically feasible to produce the software title. Such costs are amortized on a straight-line basis over four years.
 
Amortization expense charged against earnings amounted to $135,002 and $155,930 in 2005 and 2004, respectively.

4.   STOCK BASED COMPENSATION

The Company applies APB Opinion No. 25 and related interpretations in accounting for all its stock option plans. Accordingly, no compensation cost has been recognized under these plans. The Company has adopted the disclosure-only provisions of SFAS No. 123, “Accounting for Stock-Based Compensation,” and SFAS No. 148, “Accounting for Stock-Based Compensation-Transition and Disclosure,” which was released in December 2002 as an amendment to SFAS No. 123. The following table illustrates the effect on net income and earnings per share if the fair value based method had been applied to all awards.

   
Three Months Ended March 31,
  
     
2005
    
2004
  
Reported net income (loss)
 
$
(361,303
)
$
222,200
  
Stock-based employee compensation expense determined under the fair value based method, net of related tax
effects
    
(23,163
)
  
(20,159
)
Pro forma net income (loss)
 
$
(384,466
)
$
202,041
  
               
Earnings (loss) per share (basic and diluted):
As reported
Pro forma
  
$
$
(0.02
(0.02
)
)
$
$
0.01
0.01
  

5.   COMMITMENTS AND CONTINGENCIES

On June 25, 2004, Merit Audio Visual, Inc. d/b/a Merit Software (“Merit”) filed a lawsuit in the Federal District Court for the Eastern District of Missouri against Siboney Corporation, Siboney Learning Group, Inc., and Ernest R. Marx (collectively “Siboney”), alleging copyright infringement and breach of contract and seeking damages of $3,450,000, injunctive relief, attorney’s fees, and costs. The lawsuit arose from a long-term relationship between the parties established in 1996 with a licensing agreement which grants Siboney the right to “create, market, sell, lease and distribute in the schools market” software products which incorporate certain Merit software. The complaint alleged that Siboney had sold software bundles incorporating certain Merit software under the name “Orchard Home” outside of the
 
8
 
“schools market,” allegedly breaching the licensing agreement and infringing Merit’s alleged copyright in its software. The complaint also alleged other miscellaneous breaches of the licensing agreement, including failing to obtain Merit’s consent for certain changes to Merit’s software, and disputing the amount of royalties due. Siboney filed a counterclaim against Merit, seeking damages for breach of the licensing agreement by Merit and a declaratory judgment of noninfringement of Merit’s alleged copyright. In December 2004, Siboney entered into a definitive agreement with Merit to settle all claims in the lawsuit. The principal terms of this agreement are as follows: none of the parties admit liability for any of the claims in the lawsuit; the software licensing agreement will be terminated as of a future date; Siboney will pay royalties due under the licensing agreement through its termination; Siboney paid to Merit $465,000 upon execution of the settlement agreement and will pay additional payments of $100,000 in each 2005 and 2006; and Merit returned approximately $50,000 of the royalty payments previously made by Siboney.

ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

The Company’s principal subsidiary, Siboney Learning Group, Inc., publishes standards-based educational software products for reading, language, mathematics, science and English as a Second Language, primarily for K-12 schools and school districts. The Company publishes five product lines, including two comprehensive software product lines—Orchard Software for Your State and Journey—and three titles-based product lines—GAMCO Educational Software, Teacher Support Software, and Educational Activities Software. This strategy allows the Company to appeal to the different budgets and spending patterns found in classrooms, schools, school districts and adult learning centers.

The passage and implementation of the No Child Left Behind Act (“NCLB”) in 2002 placed higher standards for accountability, research-based products, instructional improvement and data-driven decision making upon all public schools in the United States. As a result, the Company has focused on the development, upgrading, selling and marketing of its Orchard Software for Your State (“Orchard”) product line. The Company believes that Orchard is a cost-effective solution for schools facing growing pressures to demonstrate Adequate Yearly Progress and instructional improvement as mandated by NCLB.

Starting in school year 2005-2006, the NCLB Act requires that every public school must conduct annual assessments in reading and math based upon each state’s academic standards for every student in grades three through eight. Each school must meet state-specific annual mandates for Adequate Yearly Progress or be classified as a failing school. Failing schools face serious consequences up to loss of accreditation and possible take over. NCLB requires 100% minimal proficiency in reading and math for all public school students in grades three through eight by school year 2013-2014 which places increasingly difficult demands upon schools for instructional improvement and satisfactory progress towards 100% minimal proficiency.

Orchard integrates assessment based upon standards in 35 states with individualized instruction from over 150 Skill Trees (i.e., software programs) in K-12 reading, language,
 
9
 
mathematics and science. Orchard’s assessment identifies specific areas of academic weakness for each student within his/her state’s grade-specific standards of learning. Orchard then prescribes an individualized learning path for each student as students interact with a wide variety of motivating instructional approaches that appeal to different learning styles. Orchard’s management system tracks standards-based student progress for teachers and administrators who are facing increasing pressure for data-driven decision making as mandated by NCLB. Interim assessment tools can be used to measure educational gains and to prepare students for their high-stakes state test.

Over 6,000 schools and school districts use Orchard in computer labs, learning centers and classrooms to supplement core instruction. Unlike many competitive comprehensive solutions, Orchard’s solution is delivered as an unlimited network/site license with no required recurring fees. Orchard’s scalable product configurations allow schools with limited budgets to make a modest initial investment by purchasing individual Skill Trees and then to grow their Orchard solution with future purchases of larger curriculum bundles with multiple titles and state-specific assessment.

The Company employs approximately 20 people in its product development team who develop new instructional content, upgrade product features, ensure compatibility with new hardware and network operating systems and test for quality assurance. The Company has recently released a new version of Orchard – Orchard Gold Star – with significantly improved options for interim formative assessment and curriculum mapping, upgraded management and progress reports, upgraded content and content sequencing, a new application that will allow Orchard to aggregate student data at the school district level, and more advanced technology, including a Structured Query Language (“SQL”) database foundation that improves performance and scalability within schools and school districts.

Orchard is sold through a network of resellers and direct field and inside sales representatives who actively call on schools to sell comprehensive curriculum- and technology-based learning solutions. A majority of the Company’s Orchard business is repeat business from schools or school districts that build up their Orchard implementation through repeat purchases. The Company believes that Orchard has become a recognized competitor in the growing comprehensive instructional software market as a result of its motivating and research-based instructional content, its strong correlations to state objectives and tests, and its cost-effective and scalable pricing structures. Orchard contributed 70.4% and 72.3% of the Company’s revenue for the three months ended March 31, 2005 and 2004, respectively.

In addition to Orchard Software for Your State, the Company publishes four other instructional software product lines:

GAMCO Educational Software (“GAMCO”), the Company’s original product line, provides schools with single titles and series which the Company believes are highly motivating. GAMCO products are sold through the major national and regional school software catalog dealers, the Company’s inside sales force, its direct catalogs and direct promotions. All GAMCO titles include management features that track student progress and allow teachers to modify the instruction to meet individual learning needs. Popular titles include Touchdown
 
 
10
 
Math, Math Concepts, Language Concepts and Phonics.

The Teacher Support Software (“TSS”) product line, which was acquired in 2000, is best known for its popular tools for teachers, including Worksheet Magic, and its reading programs, including WordWorks. TSS products are now sold through all of the Company’s sales channels as single-title solutions and as part of comprehensive Orchard solutions. The Company has actively upgraded older TSS products to be compatible with the computers and networks found in schools today.

The Company’s Educational Activities Software (“EAS”) line, which was acquired in 2001, has been a leading publisher of software for the middle school to adult learner market for more than 20 years. Best known for its Diascriptive Reading Series, EAS has traditionally sold its products to schools, community colleges, adult learning centers and correctional facilities through a network of independent representatives. EAS is the Company’s primary product offering for the adult learning market and allows the Company to achieve incremental sales growth in the market for instruction in basic skills for adults. In addition, the Company sells selected EAS titles to its K-12 school customers and has developed a comprehensive solution with universal management called Real Achievement based upon EAS titles and appropriate titles from the Company’s portfolio of other software products. The Company has committed development resources to upgrading these products and to web-enable selected titles since the older learner market appears to be increasingly responsive to software delivered to students over the Internet.

Journey, the comprehensive software product line acquired in 2001, has been upgraded to make it more competitive with other structured comprehensive solutions.

The Company also has generated sales of selected products which have been revised for the home market and sold through a direct-to-the-home marketer of educational software. This alliance allows the Company to achieve incremental sales in the home market without incurring the costs of expensive retail distribution.

The Company also has certain natural resources interests, including coal, oil and gas, through Siboney Coal Company, Inc. and several other subsidiaries which are not believed to be material to the Company’s ongoing results of operations or financial condition.

Results of Operations

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 consolidated financial statements.

Three Months Ended March 31, 2005 Compared To March 31, 2004

Total revenues decreased 33.2% or $882,978 to $1,773,875 from $2,656,853 during the three-month period ended March 31, 2005 compared to the first quarter of 2004. This decrease was due primarily to two large district-wide orders which were sold in the first quarter of 2004 and accounted for $755,318 in revenue during that quarter.

Cost of product sales decreased 17.4% or $93,086 to $443,153 from $536,239 during the
 
11
 
first quarter of 2005 compared to the first quarter of the previous year. This decrease was a result of lower product sales and higher material costs due to increased sales of lower margin products. Gross profit margin decreased from 80% in the first quarter of 2004 to 75% in the first quarter of 2005 due to the impact of higher material costs and the impact of spreading fixed software amortization and overhead costs over lower revenues.

Selling, general and administrative expenses increased 25% or $438,016 to $2,192,322 from $1,754,306 during the quarter ended March 31, 2005 compared to the first quarter of 2004 primarily due to higher professional fees related to recruiting sales representatives, increased salary expenses as a result of hiring additional content development expertise in our Chicago office and $274,000 of accrued severance expenses recorded in the first quarter of 2005.

The Company’s net loss for the first quarter of 2005, primarily for the reasons described above, was $361,303 after income tax benefit of $502,000 compared to net income of $222,200 after income tax expense of $144,290 for the first quarter of 2004. The Company's effective tax rate for the first quarter of 2005 is higher than what would be expected if the statutory rate were applied to income before income taxes primarily because of certain expenses deductible for financial reporting purposes that are not deductible for tax purposes. Loss per common share, basic and diluted, was $0.02 for the first quarter of 2005 compared to income of $0.01 per share, basic and diluted for the first quarter of 2004.

Liquidity and Capital Resources

Cash decreased 65.5% or $450,488 to $236,154 at March 31, 2005 compared to $686,642 at December 31, 2004 reflecting decreased sales of Siboney Learning Group.

Prepaid expenses increased 5.9% to $174,033 compared to $164,305 at December 31, 2004.

Short-term debt increased $443,229 to $450,000 at March 31, 2005 from $6,771 at December 31, 2004 primarily due to seasonal borrowing on the line of credit.

Accounts payable increased 14.6% or $25,343 to $199,003 from $173,660 primarily due to higher corporate payables for legal expenses and annual report printing expenses.
 
Accrued expenses increased 18.8% or $107,419 to $680,115 at March 31, 2005 from $572,696 primarily due to accrued severance expenses.

During the first quarter of 2005, the Company purchased 62,500 shares of common stock of the Company for a total of $26,057.00. The Company used cash on hand to purchase these shares.

The Company has financed its business primarily with cash generated from operating activities, accessing its bank revolving line of credit and purchase money financing provided by the sellers of companies acquired. The line of credit agreement, which was renewed April 2005, provides for maximum borrowings of $1.5 million and is secured by the Company’s accounts receivable, equipment and inventory. The loan agreement requires the Company to maintain a net worth of at least $2.5 million. As of March 31, 2005, the Company reported a net worth of $4.6 million and had a balance of $450,000 outstanding under the Company’s line of credit. The Company renewed its line of credit and believes that its available capital
 
12
 
resources are adequate to support its current business levels.

ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company presently does not use any derivative financial instruments to hedge its exposure to adverse fluctuations in interest rates, foreign exchange rates, fluctuations in commodity prices or other market risks, nor does the Company invest in speculative financial instruments. Borrowings with the bank bear interest at prime rate and 0.25% per annum above prime rate.

Due to the nature of the Company’s borrowings, it has concluded that there is no material market risk exposure and, therefore, no quantitative tabular disclosures are required.
 
ITEM 4.   CONTROLS AND PROCEDURES

Based on their evaluation as of March 31, 2005, Timothy J. Tegeler, the Company’s Chief Executive Officer and William D. Edwards, Jr., the Company’s Chief Financial Officer, have concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) are effective. There have been no changes in internal controls over financial reporting during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Forward-Looking Statements

This report contains “forward-looking statements” as that term is defined in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Any forward-looking statements are necessarily subject to significant uncertainties and risks. When used in this report, the words “believes,” “anticipates,” “intends,” “expects” and similar expressions are intended to identify forward-looking statements. Actual results could be materially different as a result of various possibilities.

Factors that could cause actual results to differ materially from the forward-looking statements include, but are not limited to, the following: (1) customers’ dependence on government funding to purchase the Company’s products; (2) constant changes in the technologies used to build and deliver the Company’s products; (3) well-established and well-funded competitors; (4) the Company’s ability to retain key personnel; (5) the Company’s ability to motivate its independent dealer representatives to sell the Company’s products; (6) changes in the market acceptance and demand for curriculum-based educational software; and (7) the risks detailed from time to time in the Company’s filings with the Securities and Exchange Commission (“SEC”).

No assurances can be given that the results contemplated in any forward-looking statements will be achieved or will be achieved in any particular timetable. The Company assumes no obligation to publicly correct or update any forward-looking statements as a result of events or developments subsequent to the date of this report. The reader is advised, however, to consult any further disclosures the Company makes on related subjects in reports to the SEC.
 
 
13
 
PART II - OTHER INFORMATION


ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

The following table presents information with respect to purchases of common stock made during the three months ended March 31, 2005 by the Company.


         
Period
(a) Total
Number of
Shares
Purchased
(b)
Average
Price Paid
per Share
(c) Total Number
of Shares
Purchased as
Part of Publicly
Announced
Plans or
Programs(1)
(d) Maximum Number
of Shares that May Yet
Be Purchased Under
the Plans or Programs
Month #1
(January 1,
2005 -
January 31,
2005)
 
 
40,000
 
 
$0.42
 
 
40,000
 
 
750,000
Month #2
(February 1,
2005 - February
28, 2004)
 
 
22,500
 
 
$0.41
 
 
22,500
 
 
727,500
Month #3
(March 1, 2005
- March 31,
2005)
 
 
―
 
 
―
 
 
―
 
 
―
 
Total
 
62,500
 
$0.415
 
62,500
 
  727,500(2)
 
 
(1)
On March 8, 2004, the Board of Directors authorized a stock repurchase program under which the Company may purchase up to 1,000,000 shares of the Company’s common stock from time to time in the open market or in privately negotiated transactions.
 
(2)
On May 11, 2005, the Board of Directors authorized the purchase of up to an additional 1,000,000 shares of the Company’s common stock from time to time in the open market or in privately negotiated transactions.


14
 
ITEM 6. EXHIBITS

Exhibits: Exhibits required as part of this report are listed in the index appearing on page 16.

 




 
 SIGNATURES


Pursuant to the requirements 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
     
 
  By: 
/s/ William D. Edwards, Jr.
 
  
William D. Edwards, Jr.
 
 
Executive Vice President and Chief Financial Officer
(Authorized officer and principal financial officer)


 
May 16, 2005
 
 
15

Index to Exhibits

Exhibits
 
31.1
Certification by Chief Executive Officer pursuant to Rule 13a - 14(a) or Rule 15d - 14(a) of the Securities Exchange Act of 1934

31.2
Certification by Chief Financial Officer pursuant to Rule 13a - 14(a) or Rule 15d - 14(a) of the Securities Exchange Act of 1934

32.1
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002