----

**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**Washington,      D.C. 20549**

**FORM      10-Q**

**1-3952**

**SIBONEY      CORPORATION**

| **Maryland**                                                             |   | **73-0629975**                     |
|--------------------------------------------------------------------------|--------|------------------------------------|
| (State                or other jurisdiction of                           |   | (I.R.S.                Employer    |
| incorporation                or organization)                            |   | Identification                No.) |
|                                                                     |   |                               |
| **325                North Kirkwood Road, Suite 300**                    |   |                               |
| **St.                Louis, Missouri**                                   |   | **63122**                          |
| (Address                of principal executive offices)                  |   | (Zip                Code)          |
|                                                                     |   |                               |
| Registrant’s                telephone number, including area code: |   | **314-822-3163**                   |

----

**SIBONEY      CORPORATION**

**FORM      10-Q**

**INDEX**

|                                                                                                                                     | **Page**                |
|------------------------------------------------------------------------------------------------------------------------------------------|-------------------------|
|                                                                                                                                     |                    |
| **PART                I FINANCIAL INFORMATION**                                                                                          |                    |
|                                                                                                                                     |                    |
| **Item                1. Unaudited Financial Statements**                                                                                |                    |
|                                                                                                                                     |                    |
| Consolidated                Balance Sheet, March 31, 2007 and December                31, 2006                                           |                  3 |
| Consolidated                Statement of Operations, Three Months                Ended March 31, 2007 and 2006                      |                  4 |
| Consolidated                Statement of Stockholders’ Equity, Three                Months Ended March 31, 2007 and 2006 |                  5 |
| Consolidated                Statement of Cash Flows, Three Months Ended                March 31, 2007 and 2006                 |                  6 |
| Notes                to Unaudited Consolidated Financial                Statements                                                       |                  7 |
|                                                                                                                                     |                    |
| **Item                2. Management’s Discussion and Analysis of Financial                Condition and Results of Operations**    | 12                      |
|                                                                                                                                     |                    |
| **Item                3. Quantitative and Qualitative Disclosures About                Market Risk**                                     | 16                      |
|                                                                                                                                     |                    |
| **Item                4. Controls and Procedures**                                                                                       | 16                      |
|                                                                                                                                     |                    |
| **PART                II OTHER INFORMATION**                                                                                             |                    |
|                                                                                                                                     |                    |
| **Item                2. Unregistered Sales of Equity Securities and use                of Proceeds**                                    | 17                      |
|                                                                                                                                     |                    |
| **Item                6. Exhibits**                                                                                                      | 17                      |
|                                                                                                                                     |                    |
| **SIGNATURES**                                                                                                                           | 18                      |
|                                                                                                                                     |                    |
| **INDEX                TO EXHIBITS**                                                                                                     | 19                      |

----

**PART      I FINANCIAL INFORMATION**

**Item      1. Unaudited Financial Statements**

**SIBONEY      CORPORATION AND SUBSIDIARIES**

**CONSOLIDATED        BALANCE SHEET**

|                                                                                                                                                                |   |   | **(Unaudited)**              |   |   |                            |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|------------------------------|--------|--------|---------------------------------|--------|
|                                                                                                                                                           |   |   | **March                31,** |   |   | **December                31,** |   |
|                                                                                                                                                           |   |   | **2007**                     |   |   | **2006**                        |   |
| **Assets**                                                                                                                                                     |   |   |                         |   |   |                            |   |
| **Current                Assets**                                                                                                                              |   |   |                         |   |   |                            |   |
| Cash                                                                                                                                                           |   | **$**  | **374,838**                  |   | $      | 226,486                         |   |
| Accounts                receivable, net                                                                                                                        |   |   | **427,469**                  |   |   | 746,458                         |   |
| Inventories,                net                                                                                                                                |   |   | **293,228**                  |   |   | 297,398                         |   |
| Refundable                income taxes                                                                                                                         |   |   | **8,970**                    |   |   | 8,719                           |   |
| Prepaid                expense                                                                                                                                 |   |   | **103,952**                  |   |   | 111,720                         |   |
| Deferred                tax                asset                                                                                                               |   |   | **128,000**                  |   |   | 114,000                         |   |
| **Total                Current Assets**                                                                                                                        |   |   | **1,336,457**                |   |   | 1,504,781                       |   |
|                                                                                                                                                           |   |   |                         |   |   |                            |   |
| **Property                and Equipment, Net**                                                                                                                 |   |   | **105,388**                  |   |   | 131,677                         |   |
|                                                                                                                                                           |   |   |                         |   |   |                            |   |
| **Long-term                Note Receivable**                                                                                                                   |   |   | **159,295**                  |   |   | 163,839                         |   |
|                                                                                                                                                           |   |   |                         |   |   |                            |   |
| **Capitalized                Software, Net**                                                                                                                   |   |   | **2,120,581**                |   |   | 2,174,239                       |   |
|                                                                                                                                                           |   |   |                         |   |   |                            |   |
| **Goodwill**                                                                                                                                                   |   |   | **1,045,015**                |   |   | 1,045,015                       |   |
|                                                                                                                                                           |   |   |                         |   |   |                            |   |
| **Deferred                Tax Asset**                                                                                                                          |   |   | **1,113,000**                |   |   | 991,000                         |   |
|                                                                                                                                                           |   |   |                         |   |   |                            |   |
| **Other                Assets**                                                                                                                                |   |   | **12,246**                   |   |   | 12,778                          |   |
|                                                                                                                                                           |   |   |                         |   |   |                            |   |
| **Total                Assets**                                                                                                                                |   | **$**  | **5,891,982**                |   | $      | 6,023,329                       |   |
|                                                                                                                                                           |   |   |                         |   |   |                            |   |
| **Liabilities                and Stockholders' Equity**                                                                                                        |   |   |                         |   |   |                            |   |
| **Current                Liabilities**                                                                                                                         |   |   |                         |   |   |                            |   |
| Current                portion of long-term debt                                                                                                               |   | **$**  | **84,375**                   |   | $      | 56,250                          |   |
| Accounts                payable                                                                                                                                |   |   | **204,735**                  |   |   | 234,978                         |   |
| Accrued                expenses                                                                                                                                |   |   | **454,538**                  |   |   | 296,596                         |   |
| Deferred                revenue                                                                                                                                |   |   | **92,941**                   |   |   | 190,708                         |   |
| Interest                payable (related party)                                                                                                                |   |   | **556**                      |   |   | —                         |   |
| **Total                Current Liabilities**                                                                                                                   |   |   | **837,145**                  |   |   | 778,532                         |   |
|                                                                                                                                                           |   |   |                         |   |   |                            |   |
| **Long-Term                Liabilities**                                                                                                                       |   |   |                         |   |   |                            |   |
| Line                of                credit                                                                                                                   |   |   | **1,400,000**                |   |   | 1,500,000                       |   |
| Long-term                debt                                                                                                                                  |   |   | **1,040,625**                |   |   | 1,068,750                       |   |
| Subordinated                debt (related party)                                                                                                               |   |   | **171,258**                  |   |   | —                         |   |
| Other                long-term liabilities                                                                                                                     |   |   | **23,900**                   |   |   | —                         |   |
| **Total                Long-Term Liabilities**                                                                                                                 |   |   | **2,635,783**                |   |   | 2,568,750                       |   |
|                                                                                                                                                           |   |   |                         |   |   |                            |   |
| **Commitments                and Contingencies**                                                                                                               |   |   |                         |   |   |                            |   |
|                                                                                                                                                           |   |   |                         |   |   |                            |   |
| **Stockholders'                Equity**                                                                                                                        |   |   |                         |   |   |                            |   |
| Common                stock:                                                                                                                                   |   |   |                         |   |   |                            |   |
| Authorized                100,000,000 shares at $0.10 par value; issued and                                                                                    |   |   |                         |   |   |                            |   |
| outstanding                16,920,419 at March 31, 2007 and December 31, 2006                                                                                  |   |   | **1,692,042**                |   |   | 1,692,042                       |   |
| Additional                paid-in capital                                                                                                                      |   |   | **65,432**                   |   |   | 38,296                          |   |
| Retained                earnings                                                                                                                               |   |   | **661,580**                  |   |   | 945,709                         |   |
|                                                                                                                                                           |   |   |                         |   |   |                            |   |
| **Total                Stockholders' Equity**                                                                                                                  |   |   | **2,419,054**                |   |   | 2,676,047                       |   |
|                                                                                                                                                           |   |   |                         |   |   |                            |   |
| **Total                Liabilities and Stockholders' Equity**                                                                                                  |   | **$**  | **5,891,982**                |   | $      | 6,023,329                       |   |
|                                                                                                                                                           |   |   |                         |   |   |                            |   |
| Note:                The                balance sheet at December 31, 2006 has been derived from the audited                financial statements at that date. |
| See                accompanying notes to unaudited consolidated financial                statements.                                                           |   |   |                         |   |   |                            |   |

----

**SIBONEY        CORPORATION AND SUBSIDIARIES**

**UNAUDITED        CONSOLIDATED STATEMENT OF        OPERATIONS**

|                                                                                                                                                           |   | **For                    the Three Months Ended****March                  31,** |           |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------|----------------|
|                                                                                                                                                           |   | **2007**                                                                        |           | **2006** |   |
|                                                                                                                                                           |   |                                                                            |           |   |   |
| **Revenues**                                                                                                                                                   |   | **$**                                                                           | **1,187,083**  |   | $ | 1,495,404 |   |
|                                                                                                                                                           |   |                                                                            |           |   |   |   |   |
| **Cost                  of Product Sales**                                                                                                                     |   |                                                                            | **427,874**    |   |   | 433,272 |   |
|                                                                                                                                                           |   |                                                                            |           |   |   |   |   |
| **Gross                  Profit**                                                                                                                              |   |                                                                            | **759,209**    |   |   | 1,062,132 |   |
|                                                                                                                                                           |   |                                                                            |           |   |   |   |   |
| **Selling,                  General and Administrative**Expenses                                                                                               |   |                                                                            | **1,092,878**  |   |   | 1,641,772 |   |
|                                                                                                                                                           |   |                                                                            |           |   |   |   |   |
| **Loss                  From Operations**                                                                                                                      |   |                                                                            | **(333,669**   | **)** |   | (579,640 | ) |
|                                                                                                                                                           |   |                                                                            |           |   |   |   |   |
| **Other                  Income (Expense)**                                                                                                                    |   |                                                                            |           |   |   |   |   |
| Interest                  expense, net                                                                                                                         |   |                                                                            | **(51,960**    | **)** |   | (28,254 | ) |
| Loss                  on sale                  and disposition of assets                                                                                       |   |                                                                            | **—**    |   |   | (1,441 | ) |
| Miscellaneous                                                                                                                                                  |   |                                                                            | **—**    |   |   | 207 |   |
| **Total                  Other Expense**                                                                                                                       |   |                                                                            | **(51,960**    | **)** |   | (29,488 | ) |
|                                                                                                                                                           |   |                                                                            |           |   |   |   |   |
| **Loss                  Before Income Taxes**                                                                                                                  |   |                                                                            | **(385,629**   | **)** |   | (609,128 | ) |
|                                                                                                                                                           |   |                                                                            |           |   |   |   |   |
| **Income                  Tax Benefit**                                                                                                                        |   |                                                                            | **136,000**    |   |   | 243,000 |   |
|                                                                                                                                                           |   |                                                                            |           |   |   |   |   |
| **Net                  Loss**                                                                                                                                  |   | **$**                                                                           | **(249,629**   | **)** | $ | (366,128 | ) |
|                                                                                                                                                           |   |                                                                            |           |   |   |   |   |
| **Net                  Loss per Share:**                                                                                                                       |   |                                                                            |           |   |   |   |   |
| Basic                                                                                                                                                          |   | **$**                                                                           | **(0.01**      | **)** | $ | (0.02 | ) |
| Fully                  Diluted                                                                                                                                 |   | **$**                                                                           | **(0.01**      | **)** | $ | (0.02 | ) |
|                                                                                                                                                           |   |                                                                            |           |   |   |   |   |
| **Weighted                  Average Number of Shares:**                                                                                                        |   |                                                                            |           |   |   |   |   |
| Basic                                                                                                                                                          |   |                                                                            | **16,920,419** |   |   | 16,930,419 |   |
| Fully                  Diluted                                                                                                                                 |   |                                                                            | **16,920,419** |   |   | 16,930,419 |   |
|                                                                                                                                                           |   |                                                                            |           |   |   |   |   |
| Note:                  Options                  to purchase common stock and the outstanding warrants were excluded                  from                  the |   |                                                                            |           |   |   |   |   |
| calculation                  of loss per share as their effect would have been                  anti-dilutive.                                                 |   |                                                                            |           |   |   |   |   |
|                                                                                                                                                           |   |                                                                            |           |   |   |   |   |
| See                  accompanying notes to unaudited consolidated financial                  statements.                                                       |   |                                                                            |           |   |   |   |   |

----

**SIBONEY      CORPORATION AND SUBSIDIARIES**

**UNAUDITED      CONSOLIDATED STATEMENT OF STOCKHOLDERS'      EQUITY**

|                                                                                                     |   | **For                    the Three Months Ended****March                    31,** |          |
|----------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------|---------------|
|                                                                                                     |   | **2007**                                                                          |          | **2006** |   |
|                                                                                                     |   |                                                                              |          |   |   |
| **COMMON                  STOCK**                                                                        |   |                                                                              |          |   |   |
| Balance                  at                  the beginning of the period                                 |   | **$**                                                                             | **1,692,042** |   | $ | 1,693,042 |   |
|                                                                                                     |   |                                                                              |          |   |   |   |   |
| Balance                  at                  the end of the period                                       |   | **$**                                                                             | **1,692,042** |   | $ | 1,693,042 |   |
|                                                                                                     |   |                                                                              |          |   |   |   |   |
| **ADDITIONAL                  PAID-IN CAPITAL**                                                          |   |                                                                              |          |   |   |   |   |
| Balance                  at                  the beginning of the period                                 |   | **$**                                                                             | **38,296**    |   | $ | — |   |
| Stock-based                  compensation expense                                                        |   |                                                                              | **4,395**     |   |   | 11,397 |   |
| Issuance                  of                  warrants to related party                                  |   |                                                                              | **22,741**    |   |   | — |   |
|                                                                                                     |   |                                                                              |          |   |   |   |   |
| Balance                  at                  the end of the period                                       |   | **$**                                                                             | **65,432**    |   | $ | 11,397 |   |
|                                                                                                     |   |                                                                              |          |   |   |   |   |
| **RETAINED                  EARNINGS**                                                                   |   |                                                                              |          |   |   |   |   |
| Balance                  at                  the beginning of the period                                 |   | **$**                                                                             | **945,709**   |   | $ | 1,958,481 |   |
| Cumulative                  effect of adoption of FIN 48                                                 |   |                                                                              | **(34,500**   | **)** |   | — |   |
| Net                  loss                                                                                |   |                                                                              | **(249,629**  | **)** |   | (366,128 | ) |
|                                                                                                     |   |                                                                              |          |   |   |   |   |
| Balance                  at                  the end of the period                                       |   | **$**                                                                             | **661,580**   |   | $ | 1,592,353 |   |
|                                                                                                     |   |                                                                              |          |   |   |   |   |
| **STOCKHOLDERS'                  EQUITY AT END OF PERIOD**                                               |   | **$**                                                                             | **2,419,054** |   | $ | 3,296,792 |   |
|                                                                                                     |   |                                                                              |          |   |   |   |   |
|                                                                                                     |   |                                                                              |          |   |   |   |   |
| See                  accompanying notes to unaudited consolidated financial                  statements. |   |                                                                              |          |   |   |   |   |

----

**SIBONEY      CORPORATION AND SUBSIDIARIES**

**UNAUDITED      CONSOLIDATED STATEMENT OF CASH      FLOWS**

|                                                                                                     |   | **For                    the Three Months Ended****March                      31,** |         |
|----------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------|--------------|
|                                                                                                     |   | **2007**                                                                            |         | **2006** |   |
| **Cash                  Flows From Operating Activities**                                                |   |                                                                                |         |   |   |   |   |
| Net                  loss                                                                                |   | **$**                                                                               | **(249,629** | **)** | $ | (366,128 | ) |
| Adjustments                  to reconcile net loss to net cash                                           |   |                                                                                |         |   |   |   |   |
| provided                  by                  (used in) operating activities:                            |   |                                                                                |         |   |   |   |   |
| Depreciation                                                                                             |   |                                                                                | **29,272**   |   |   | 52,556 |   |
| Amortization                                                                                             |   |                                                                                | **210,357**  |   |   | 164,846 |   |
| Amortization                  of subordinated debt costs                                                 |   |                                                                                | **399**      |   |   | — |   |
| Deferred                  income taxes                                                                   |   |                                                                                | **(136,000** | **)** |   | (243,000 | ) |
| Stock-based                  compensation expense                                                        |   |                                                                                | **4,395**    |   |   | 11,397 |   |
| Loss                  on                  disposition of assets                                          |   |                                                                                | **—**  |   |   | 1,441 |   |
| Abandonment                  of software development in process                                          |   |                                                                                | **11,404**   |   |   | — |   |
| Reserves                  and                  allowances for accounts receivable                        |   |                                                                                | **9,456**    |   |   | 12,431 |   |
| Reserve                  for                  obsolescence of inventory                                  |   |                                                                                | **4,500**    |   |   | 9,000 |   |
| Change                  in                  assets and liabilities:                                      |   |                                                                                |         |   |   |   |   |
| Accounts                  and                  notes receivable                                          |   |                                                                                | **314,077**  |   |   | (227,047 | ) |
| Inventories                                                                                              |   |                                                                                | **(330**     | **)** |   | (41,834 | ) |
| Refundable                  income taxes                                                                 |   |                                                                                | **(251**     | **)** |   | 9,900 |   |
| Prepaid                  expenses and other assets                                                       |   |                                                                                | **8,300**    |   |   | 50,287 |   |
| Accounts                  payable, accrued expenses                                                      |   |                                                                                |         |   |   |   |   |
| and                  deferred                  revenue                                                   |   |                                                                                | **13,488**   |   |   | (148,069 | ) |
| **Net                  Cash Provided By (Used In) Operating Activities**                                 |   |                                                                                | **219,438**  |   |   | (714,220 | ) |
|                                                                                                     |   |                                                                                |         |   |   |   |   |
| **Cash                  Flows From Investing Activities**                                                |   |                                                                                |         |   |   |   |   |
| Payments                  for                  equipment                                                 |   |                                                                                | **(2,983**   | **)** |   | (13,730 | ) |
| Proceeds                  from                  sale of assets                                           |   |                                                                                | **—**  |   |   | 500 |   |
| Payments                  for                  software development costs                                |   |                                                                                | **(168,103** | **)** |   | (212,351 | ) |
| **Net                  Cash Used In Investing Activities**                                               |   |                                                                                | **(171,086** | **)** |   | (225,581 | ) |
|                                                                                                     |   |                                                                                |         |   |   |   |   |
| **Cash                  Flows From Financing Activities**                                                |   |                                                                                |         |   |   |   |   |
| Proceeds                  (payment) on line of credit                                                    |   |                                                                                | **(100,000** | **)** |   | 900,000 |   |
| Principal                  payment on promissory note                                                    |   |                                                                                | **—**  |   |   | (75,000 | ) |
| Proceeds                  from                  issuance of related party                                |   |                                                                                |         |   |   |   |   |
| subordinated                  debt and warrants                                                          |   |                                                                                | **200,000**  |   |   | — |   |
| Principal                  payments on capital lease obligation                                          |   |                                                                                | **—**  |   |   | (6,640 | ) |
| **Net                  Cash Provided By Financing Activities**                                           |   |                                                                                | **100,000**  |   |   | 818,360 |   |
|                                                                                                     |   |                                                                                |         |   |   |   |   |
| **Change                  In Cash**                                                                      |   |                                                                                | **148,352**  |   |   | (121,441 | ) |
|                                                                                                     |   |                                                                                |         |   |   |   |   |
| **Cash                  - Beginning of Period**                                                          |   |                                                                                | **226,486**  |   |   | 270,987 |   |
|                                                                                                     |   |                                                                                |         |   |   |   |   |
| **Cash                  - End of Period**                                                                |   | **$**                                                                               | **374,838**  |   | $ | 149,546 |   |
|                                                                                                     |   |                                                                                |         |   |   |   |   |
| See                  accompanying notes to unaudited consolidated financial                  statements. |   |                                                                                |         |   |   |   |   |

----

**SIBONEY      CORPORATION AND SUBSIDIARIES**

**NOTESTO      UNAUDITED CONSOLIDATED FINANCIAL      STATEMENTS**

**MARCH      31, 2007 AND 2006**

**1.      BASIS OF PRESENTATION AND CONSOLIDATION**

**Basis      of Presentation**

**Basis      of Consolidation**

**2.      REVENUE RECOGNITION**

*Software      Revenue Recognition*
*Modification      of SOP 97-2, Software Revenue Recognition, With Respect to Certain      Transactions*

|   | · | Persuasive                evidence of an agreement exists. |
|--------|--------|------------------------------------------------------------|
|   | · | Delivery                of the software has occurred.      |
|   | · | The                fee is fixed or determinable.           |
|   | · | Collectibility                is probable.                 |

----

**3.      ACCOUNTS RECEIVABLE**

|                                                  |   | **March                31,** |  **December                31,**  |
|-------------------------------------------------------|--------|------------------------------|---------------------------------------------|
|                                                  |   | **2007**                     |                                        | **2006**  |
|                                                  |   |                         |                                        |   |   |
| Accounts                receivable                    |   | **$**                        | **562,838**                                 |   | $ | 874,237 |   |
| Allowance                for doubtful accounts, sales |   |                         |                                        |   |   |   |   |
| credits                and returns                    |   |                         | **(135,369**                                | **)** |   | (127,779 | ) |
|                                                  |   |                         |                                        |   |   |   |   |
|                                                  |   | **$**                        | **427,469**                                 |   | $ | 746,458 |   |

**4.      INVENTORIES**

|                                    |   | **March                31,** |  **December                31,**  |
|-----------------------------------------|--------|------------------------------|---------------------------------------------|
|                                    |   |                         | **2007**                                    |   |   | **2006**  |
|                                    |   |                         |                                        |   |   |   |   |
| Finished                goods           |   | **$**                        | **155,382**                                 |   | $ | 178,740 |   |
| Raw                materials            |   |                         | **173,346**                                 |   |   | 149,658 |   |
| Reserve                for obsolescence |   |                         | **(35,500**                                 | **)** |   | (31,000 | ) |
|                                    |   |                         |                                        |   |   |   |   |
|                                    |   | **$**                        | **293,228**                                 |   | $ | 297,398 |   |

**5.      CAPITALIZED SOFTWARE DEVELOPMENT COSTS**

|                                                  |   | **March                31,** |  **December                31,**  |
|-------------------------------------------------------|--------|------------------------------|---------------------------------------------|
|                                                  |   | **2007**                     |                                        | **2006**  |
|                                                  |   |                         |                                        |   |   |
| Software                development in progress       |   | **$**                        | **487,907**                                 |   | $ | 379,308 |   |
| Capitalized                software development costs |   |                         | **5,119,060**                               |   |   | 5,070,960 |   |
| Accumulated                amortization               |   |                         | **(3,486,386**                              | **)** |   | (3,276,029 | ) |
|                                                  |   |                         |                                        |   |   |   |   |
|                                                  |   | **$**                        | **2,120,581**                               |   | $ | 2,174,239 |   |

----

**6.      INCOME TAXES**

*Accounting      for Income Taxes*

*Accounting      for Uncertainty in Income Taxes, an interpretation of FASB Statement      109*

----

**7.      DEBT**

|   | · | We                will make three quarterly principal payments of $28,125 on the note                starting July 1, 2007 with the remaining $1,040,625 due April 1,                2008.                                        |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | · | The                line of credit has been extended to April 1, 2008 when the outstanding                balance is due.                                                                                                          |
|   | · | Our                stockholders’ equity plus subordinated debt must be at least $2,300,000 as                of March 31, 2007 and $2,700,000 as of June 30, 2007.                                                          |
|   | · | Our                liabilities as a percent of stockholders’ equity plus subordinated debt                must be less than 1.50:1.00 as of March 31, 2007 and 1.25:1.00 as                of June                30, 2007. |
|   | · | We                were required to obtain $200,000 of subordinated debt from two of                our                Directors. (See Note 8 “Related Party Subordinated                Debt”.)                       |

**8.      RELATED PARTY SUBORDINATED DEBT**

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**9.      STATEMENT OF CASH FLOWS SUPPLEMENTAL DISCLOSURES**

|                                                           |   | **For                  the Three Months Ended****March                    31,** |       |
|----------------------------------------------------------------|--------|---------------------------------------------------------------------------------|------------|
|                                                           |   | **2007**                                                                        |       | **2006** |   |
|                                                           |   |                                                                            |       |   |   |
| Interest                paid                                   |   | **$**                                                                           | **54,132** |   | $ | 28,289 |   |
| Income                taxes paid                               |   | **$**                                                                           | **427**    |   | $ | 1,300 |   |
|                                                           |   |                                                                            |       |   |   |   |   |
| Noncash                financing transactions related to the   |   |                                                                            |       |   |   |   |   |
| related                party subordinated debt issuance:       |   |                                                                            |       |   |   |   |   |
| Warrants                recorded as original issuance discount |   | **$**                                                                           | **22,741** |   | $ | — |   |
| Accrual                of debt issuance costs                  |   | **$**                                                                           | **6,400**  |   | $ | — |   |

**10.      RECENT ACCOUNTING PRONOUNCEMENTS**

*How      Taxes Collected from Customers and Remitted to Governmental Authorities Should      Be Presented in the Income Statement (That Is, Gross versus Net      Presentation)*

*Accounting      for Planned Major Maintenance Activities*

*The      Fair Value Option for Financial Assets and Financial      Liabilities*

*Accounting      for Collateral Assignment Split-Dollar Life Insurance      Agreements*

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

**General      **

**Business      - General Description And Current Developments**
**-**

|   | · | Orchard                Software for Your State (“Orchard”) |
|--------|--------|------------------------------------------------------------------------|
|   | · | Journey                                                                |

|   | · | GAMCO                Educational Software      |
|--------|--------|------------------------------------------------|
|   | · | Teacher                Support Software        |
|   | · | Educational                Activities Software |

----

----

**Results      of Operations**

**Three      Months Ended March 31, 2007 Compared To March 31, 2006**

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**Liquidity      and Capital Resources**

|   | · | We                will make three quarterly principal payments of $28,125 on the note                starting July 1, 2007 with the remaining $1,040,625 due April 1,                2008.                                        |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | · | The                line of credit has been extended to April 1, 2008 when the outstanding                balance is due.                                                                                                          |
|   | · | Our                stockholders’ equity plus subordinated debt must be at least $2,300,000 as                of March 31, 2007 and $2,700,000 as of June 30,                2007.                                 |
|   | · | Our                liabilities as a percent of stockholders’ equity plus subordinated debt                must be less than 1.50:1.00 as of March 31, 2007 and 1.25:1.00 as                of June                30, 2007. |
|   | · | We                were required to obtain $200,000 of subordinated debt from two of                our                Directors.                                                                                                  |

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**ITEM      3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET      RISK**

**ITEM      4. CONTROLS AND PROCEDURES**

|   | · | Developing                and implementing a formal policy governing all key aspects of accounting                for income taxes.                                                                                                                                                                                                                                                                                                                       |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | · | Increasing                the training of our corporate accountants on accounting for income                taxes                and other complex accounting issues.                                                                                                                                                                                                                                                                                     |
|   | · | If                necessary, retaining outside experts to supplement our core knowledge                of                the complexities around both current and deferred income tax accounts.                We                believe these resources, when combined with our existing resources,                will                enable us to comply with the technical complexities of accounting                for                income taxes. |

**FORWARD-LOOKING      STATEMENTS**

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|   | · | Risks                related to our customers’ dependence on government funding to purchase our                products.                                                                                 |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | · | Risks                associated with our ability to access capital to finance our                business.                                                                                                     |
|   | · | Risks                associated with our ability to compete with well-established and                well-funded competitors.                                                                                  |
|   | · | Risks                associated with the constant changes in the technologies used to                build and                deliver our products.                                                            |
|   | · | Our                ability to retain key personnel.                                                                                                                                                            |
|   | · | Our                ability to motivate our independent dealer representatives to sell                our                products.                                                                              |
|   | · | Changes                in market acceptance and demand for curriculum-based educational                software,                including the effects of possible changes to NCLB                requirements. |
|   | · | Risks                associated with acceptance of statistical studies.                                                                                                                                        |

**PART      II - OTHER INFORMATION**

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

**ITEM      6. EXHIBITS**

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**SIGNATURES**

|   | **SIBONEY              CORPORATION**                                                                        |
|--------|-------------------------------------------------------------------------------------------------------------|
|   |                                                                                                        |
|   |                                                                                                        |
|   |                                                                                                        |
|   |                                                                                                        |
| By:    | /s/                William D. Edwards, Jr.                                                                  |  |
|   | William                D. Edwards, Jr.                                                                      |
|   | Executive                Vice President, Chief Operating Officer and Chief Financial                Officer |
|   | (Authorized                officer and principal financial                officer)                          |

----

**Index      to Exhibits**

**Exhibits**

| 10.1   | Promissory                Note executed in favor of Southwest Bank of St. Louis by Siboney                Learning                Group, Inc. and Siboney Corporation dated January 1, 2007 incorporated                by                reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K                filed on January 19, 2007. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                            |
| 10.2   | Promissory                Note executed in favor of Southwest Bank of St. Louis by Siboney                Learning                Group, Inc. and Siboney Corporation dated January 1, 2007 incorporated                by                reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K                filed on January 19, 2007. |
|   |                                                                                                                                                                                                                                                                                                                                                            |
| 10.3   | Letter                Agreement between Southwest Bank of St. Louis and Siboney Learning                Group,                Inc. and Siboney Corporation dated April 2, 2007 incorporated by                reference                to Exhibit 10(h) to the Company’s Annual Report on Form 10-K filed on                March 23, 2007.               |
|   |                                                                                                                                                                                                                                                                                                                                                            |
| 10.4   | Promissory                Note executed in favor of Southwest Bank of St. Louis by Siboney                Learning                Group, Inc. and Siboney Corporation dated April 2, 2007 incorporated                by                reference to Exhibit 10(i) to the Company’s Annual Report on Form 10-K                filed on March 23, 2007.    |
|   |                                                                                                                                                                                                                                                                                                                                                            |
| 10.5   | Promissory                Note executed in favor of Southwest Bank of St. Louis by Siboney                Learning                Group, Inc. and Siboney Corporation dated April 2, 2007 incorporated                by                reference to Exhibit 10(j) to the Company’s Annual Report on Form 10-K                filed on March 23, 2007.    |
|   |                                                                                                                                                                                                                                                                                                                                                            |
| 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                                                                                                                                                                                             |