Letter to Stockholders

Dear Fellow Stockholders:

Once again, Siboney Corporation experienced another challenging year in 2007. Our revenues decreased 11% to $5.6 million from $6.3 million reported in 2006. Siboney Learning Group accounts for substantially all of our revenues and experienced an overall decline in software product sales of 15% from 2006 levels.

Appropriately, we lowered our selling, general and administrative expenses 26% to $4.4 million in 2007 from $6.0 million in 2006. We accomplished this by aggressive cost reduction initiatives, including lower headcount and salaries. We also received reimbursement for a significant portion of our operating expenses due to a strategic product development alliance we entered into in early 2007.

As a result of the foregoing, our loss from operations decreased to $542,858 for 2007 compared to a loss from operations of $1,497,225 for 2006 and approximately $2,000,000 in 2005.

At the end of 2007, Siboney Corporation recorded an extraordinary gain resulting from the sale of our claim filed with the United States Foreign Claims Commission for assets seized by the Castro-controlled government of Cuba. The Company received $1,018,725 cash for the claim. For financial statement purposes, this extraordinary gain was offset by $10,000 in direct costs and $384,000 in income tax expense.

On a consolidated basis, Siboney Corporation reported a net loss for 2007 of $853,676 after income tax expense of $715,099 and the net extraordinary gain of $624,725 compared to a net loss in 2006 of $1,012,772 after an income tax benefit of $654,000.

For a detailed understanding of the impact of income taxes, please refer to pages 37 and 38 of our 2007 Form 10-K, which is included in this report.

We are proud to report that our flagship product, Orchard Gold Star, was recognized by the Association of Educational Publishers with the very prestigious Golden Lamp Award, which is their highest award in our industry. Orchard was also a finalist for “Best Education Solution” in the Software and Information Industry Association’s CODiE awards, as well as being honored with several other national awards of excellence during the year.

As we write this letter, we are encouraged by increased revenues during the first two months of 2008 as compared to the like period of 2007. We continue to gain acceptance and orders from our new on-line test preparation product, PracticePlanet™. In late 2007, we belatedly released a new version of our premier product, Orchard Software, which is being well received as a district wide application for schools. Based on these developments, we are cautiously optimistic that in 2008 we may experience a reversal of the negative trends of the past few years.

In closing, we have found that looking into the future in our industry is very difficult because there are so many factors that can contribute to increasing or decreasing sales. Firstly, we are at the mercy of government funding and the current popular political sentiment about education. Then we must strive to gain access to dollars which are allocated primarily to teachers and buildings and fuel for transportation.

But we remain positive and are encouraged and enriched every day by our mission to better educate our children.

Sincerely,

Timothy J. Tegeler
Chairman and CEO