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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 1998
Commission File No. 1-3172
WEST INDIES SUGAR CORPORATION
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(Name of Small Business Issuer in its Charter)
Delaware 65-0723427
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(State or other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
9200 Dadeland Blvd., Miami, FL 33156
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(Address of Principal Executive Offices) (Zip Code)
(305) 670-9660
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(Issuer's Telephone Number, including Area Code)
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
None
This Report is filed pursuant to an undertaking contained in a registration
statement filed under the Securities act of 1933.
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Check whether the Issuer: (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
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:
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Check if there is no disclosure of delinquent filers in response to
Item 405 of regulation SB contained in this form, and no disclosure will be
contained, to the best of the Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB [X]
State Issuer's revenues for the fiscal year ended September 30, 1998:
$ 10,774
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There is no active market for the Issuer's voting stock and,
accordingly, no ability to calculate any value for the voting stock of
non-affiliates.
State the number of shares outstanding of each of the Issuer's classes
of common stock:
Class Number of Shares
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Common Stock, $1 par value 550,014
(Partial Liquidation Certificates)
Transitional Small Business Disclosure Format
Yes No X
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TABLE OF CONTENTS
Item Page
PART I
1. Description of Business 4
2. Description of Properties 9
3. Legal Proceedings 9
4. Submission of Matters to a Vote of Security Holders 9
PART II
5. Market for Common Equity and Related Stockholder Matters 10
6. Management's Discussion and Analysis or Plan of Operations 10
7. Financial Statements 12
8. Changes in and Disagreements with Accountants on Accounting 12
and Financial Disclosure.
PART III
9. Directors, Executive Officers, Promoters and Control 12
Persons; Compliance with Section 16(a) of the
Exchange Act
10. Executive Compensation 15
11. Security Ownership of Certain Beneficial Owners and 17
Management
12. Certain Relationships and Related Transactions 18
PART IV
13. Exhibits, List and reports on form 8-K 18
SIGNATURES 19
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 21
FINANCIAL STATEMENTS 22
EXHIBIT INDEX 35
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
West Indies Sugar Corporation ( herein, the "Company," "West Indies"
or the "Registrant") was incorporated in Delaware in 1932 as the successor to a
Cuban sugar business reorganized as a result of the Great Depression. For the
next several decades, West Indies operated a substantial sugar production,
refining and related agricultural business in the Caribbean basin focusing
primarily on Cuba, but also including substantial holdings in the Dominican
Republic.
As a producer of agricultural commodity products, the Company's
business was subject, among other things, to conditions of international trade.
These were characterized by wide price fluctuations and political factors
affecting the Company's geographic operating areas. Beginning in the 1950s,
conditions in these areas were marked by growing political instability, which
was unfavorable for the Company's long-term business outlook. Partly as a
result of such factors, the Company disposed of its sugar production properties
in the Dominican Republic in 1956 and distributed proceeds to its stockholders
in partial liquidation of its business.
Prior to 1960, the Company conducted operations in Cuba through six
wholly-owned subsidiaries, Compania Central Altagracia, S.A. ( "Altagracia"),
Miranda Sugar Estates ("Miranda"), Compania Agricola Hato del Medio, S.A.,
Compania Oriental Agricola y de Almacenes, S.A., Canera Cruces, S.A. and
Compania Agricola Maibio, S.A. The Company, through its subsidiaries, was
engaged primarily in the business of growing sugar cane and producing sugar and
molasses therefrom. Its refining and production facilities included four sugar
mills, three of which, Central Palma, Central Santa Ana and Central Alto Cedro,
were owned and operated by Altagracia and one, Central Miranda, was owned and
operated by Miranda. The remaining subsidiaries concentrated on the growing and
harvesting of cane and other agricultural products on owned or leased land.
The Cuban properties owned by the Company's subsidiaries included
approximately 246,000 acres composed of cane land, forests, pastures, farm land
and reserve land, all
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located in Cuba's then eastern most province of Oriente. (In recent years,
provincial boundary lines in Cuba have been changed, resulting in substantially
all the Company's properties being located in the current provinces of Santiago
de Cuba and Holguin.) Interspersed with these lands were towns, small
settlements, loading stations, utilities (including water supply systems, roads,
electric generating facilities and 300 miles of Company-owned standard gauge
railroad), dairies, livestock facilities, a tree nursery, quarries, a hospital,
airstrips, maintenance shops, office facilities, housing, stores and warehouses.
The Company's subsidiaries also owned a full range of vehicles and other
equipment necessary for operations, including 32 locomotives, 1,600 pieces of
rolling stock, an airplane, and a fleet of automobiles, trucks, farm and heavy
machinery.
As part of their operations, the Company's subsidiaries also had
agricultural products on hand and in the course of sale, cash on hand, accounts
receivable, prepaid items and all the normal and customary attributes of an
on-going business.
The Company's business in Cuba was materially and adversely affected by
developments stemming from the Cuban Revolution which culminated in the coming
to power of Fidel Castro Ruiz. Commencing in 1959 and throughout 1960, the new
revolutionary government of Cuba, principally through its "National Institute of
Agrarian Reform" ("INRA"), began systematically to intervene, appropriate,
nationalize or otherwise expropriate the properties of the Company's Cuban
subsidiaries. Officers and agents of the subsidiaries filed protests and took
such other steps, including the initiation of legal action, as they believed
were allowed by Cuban law against these activities.
In July 1960, a law was promulgated by the Cuban Council of Ministers
authorizing the President and the Prime Minister to order the "nationalization
through expropriation by eminent domain" of the property and enterprises of
United States nationals. According to the legislation, experts were to be
appointed to appraise the expropriated property and payment was to be made in
Cuban state bonds. The bonds were to bear interest at not less than 2% per
annum and to be amortized over 30 years. Thus, on its face, the legislation
recognized the obligation of the Cuban state to pay a fair price for the
Company's property taken for public purposes. However, under the law, both
interest and principal on the bonds were made contingent, to be payable only
from a special fund derived solely from earnings resulting from future Cuban
sugar sales to the United States in excess of thresholds unilaterally set by
the Cuban government. To the extent interest was not earned in any year, it
was deemed to be "extinguished". Consistent with a new Cuban Constitution
imposed by the revolutionary government, the legislation also removed
expropriation cases from the jurisdiction of the Cuban courts, thereby
rendering useless the legal actions filed by the Company's subsidiaries against
the taking. Finally, in August 1960, acting pursuant to the new law, the
President and Prime Minister adopted a resolution which directly and explicitly
ordered the nationalization by the Cuban state of the properties and rights of
the Company's Cuban subsidiaries (to the extent that they had not been taken
already).
To the best of the Company's knowledge, no appraisers were ever
appointed and the Cuban government never complied with its own legislation. No
special payment fund was ever established, as relations between the United
States and Cuba soon deteriorated to the point where virtually no commerce was
carried on between the two countries. As a result, since the
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time of the compulsory expropriation of the Company's Cuban subsidiaries,
neither the Company nor any subsidiary has received any payment, nor tender of
payment, for the properties. The Company believes that the 1960 nationalization
legislation, in the form enacted and to the extent implemented, amounted to a
sham and did not provide fair and adequate compensation for the taking. The
Company does not believe that payment for valuable property rights purportedly
taken by eminent domain can be made contingent on arbitrary events controlled by
the entity doing the taking. Therefore, the Company believes that its Cuban
properties were confiscated in flagrant violation of settled principles of
international law. As a result, it is the Company's position that neither the
Cuban state nor anyone claiming through the Cuban state can have any lawful
title to the properties, unless and until the Company is properly compensated
for them.
In accordance with the United States International Claims Settlement
Act of 1949, the Company, in February 1966, filed with the Foreign Claims
Settlement Commission (the "FCSC") established under that act a detailed claim
relating to the taking of the Company's properties by the Cuban government. The
purpose of that filing was to document from available records the Company's
loss by means of a formal submission to a recognized tribunal, and to set a
value which would be recognized by the United States government at such time as
it might seek to negotiate or otherwise obtain reparations from Cuba on account
of claims held by United States nationals resulting from the expropriation.
Unlike some other countries, such as Canada where Cuban assets were seized and
used to satisfy the claims of those countries' nationals, in general, Cuban
assets in the United States were insufficient to satisfy claims of United
States private citizens. The Company has never received the benefit of any of
its claims being satisfied from Cuban or any other sources. In February 1971,
the FCSC issued a decision ultimately certifying the value of the loss suffered
by the Company at $ 84.9 million (in 1959 Dollars) and recognizing that
interest of 6% should accrue on the loss from August 1960 until settlement.
According to the records of the FCSC, the Company believes that its claim is
the sixth largest claim of a United States national among 5,911 claims
processed by the FCSC.
Based on the FCSC award and the passage of more than 38 years since
the incurrence of the loss, the Company's claim to date, including simple
interest, amounts to approximately $278 million.
Following the expropriation of the properties of its nationals in all
sectors of the Cuban economy, the United States enacted legislation and
implemented regulations resulting in an economic embargo of Cuba. The embargo
has remained in place, with various modifications from time to time, since
1962. In the intervening years, the economic embargo has come to include broad
sanctions prohibiting United States nationals from doing business with Cuba.
However, since the United States has not maintained a blockade of Cuba, that
country has continued to trade in international markets as circumstances have
permitted. In recent years, with the dissolution of the Soviet Union and its
Eastern European client states after 1989, a number of the principal trading
partners of the United States, including Canada, Mexico and the European
Community, have accounted for an increasing volume of trade with Cuba.
Nationals of those countries, encouraged by the Castro regime and their own
governments,
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have financed significant sectors of the Cuban economy and in some cases
acquired interests in Cuban state enterprises. The Company understands that
commerce with such nationals, whether through traditional forms of financial
support such as loans or the direct investment in property rights, has extended
to properties expropriated from United States nationals. As a result, foreign
nationals in Cuba are today carrying on business operations, and thereby
supporting the Cuban economy, making use of properties expropriated by Cuban
authorities from United States nationals without payment. Although the Company
has no direct knowledge at this time, such use and involvement by foreign
nationals could extend to properties and other assets formerly owned and
operated by the Company's Cuban subsidiaries.
The Company believes that one or more of its sugar mills remain in
productive operation, supported by their associated agricultural lands and
infrastructure. Moreover, the Company believes that the Cuban sugar industry
remains heavily dependent on foreign financing sources. The Company's belief is
based on information passed on by sources familiar with the Cuban sugar industry
and by general press reports. The Company believes that its four mills were
among the larger and more efficient mills in the industry when they were
expropriated and thus are more likely to have been kept in use and their lands
continued in cane cultivation.
In 1996, the United States Congress passed, and President Clinton
signed, the Cuban Liberty and Solidarity Act of 1996, popularly known as the
Helms-Burton Bill or "Libertad". Among other things, this statute sought to
confer on United States nationals who were claimants against Cuba for
expropriated property certain rights to recover up to treble damages (plus
interest) from persons defined in the law as "traffickers" in such property.
Recoveries were to be effected through the use of legal proceedings in United
States federal courts. While the underlying policy of Helms-Burton was to
accelerate a change to a transition government in Cuba, Title III of the law
created, for the first time since the 1960 expropriations, a private right of
action for American nationals to obtain monetary value for their claims by
authorizing lawsuits against private parties who were deemed to be dealing in
stolen property. Under Title III, the Company, as a "certified" claimant with a
claim passed on by the FCSC, would also be afforded certain procedural
advantages, such as priority in the initiation of an action, no new burden of
proof as to valuing the claim, and the FCSC decision as sufficient public notice
to traffickers of the Company's claim to title to the properties. Given the
widespread expropriation of American property and the significance of certified
claims, the law was expected to have a chilling effect on foreign investment in
the Cuban economy and thus accelerate the transition to a democratic form of
government in Cuba. The statute does not
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forbid foreign nationals to trade with Cuba. However, it does put them on
notice that if they deal with property stolen from American nationals they can
be sued for damages.
The implementation of Helms Burton has been opposed by other countries,
most vociferously by those whose nationals are believed to be dealing in the
stolen property. As enacted, the legislation allows the effectiveness of the
Title III right of action provisions to be suspended by the President
indefinitely for six month periods at a time, which suspension right the
President has exercised continuously in deference to principal US trading
partners. As a result of the continued suspensions, the Company cannot predict
whether the Title III provisions will ever become effective. Moreover, if they
do become effective and actions are brought, it is likely, in cases such as
these, that certain aspects of the law will be challenged and that resolution of
asserted claims will take a protracted period of time. Finally, the Company does
not have direct knowledge as to who, if anyone, subject to the jurisdiction of
the US may be trafficking (as defined by the law) in the expropriated property
of the Company's Cuban subsidiaries. The Company believes that such knowledge
can best be obtained from additional investigation, which likely would include
an on-site inspection of its former operating properties in Cuba. In seeking to
conduct any such investigation, the Company may not be able to gain access to
the necessary sites and it may not be able to obtain records necessary to
support trafficking claims.
In light of the Libertad statute, Management believes the Company
should be prepared to bring an action against persons found to be trafficking in
the Company's property, if that course of action will recover value for
stockholders. Management also believes that, whether or not connected with
Libertad, due consideration must be given to other courses of action leading to
some settlement of the Company's claim. The object of those efforts would be to
return value to the Company's stockholders.
According to provisions of the economic sanctions affecting United
States nationals, it is unlawful to conduct business, directly or indirectly,
with Cuba without a license. Licenses are issued on a case by case basis by the
Office of Foreign Assets Control ("OFAC") of the United States Treasury
Department. Prior to Title III of Libertad, the binding settlement of an
expropriation claim by a United States national could be construed as conducting
business with Cuba. Title III (which remains suspended by Presidential order)
contains an explicit provision which makes it clear that the prosecution (and
presumably the binding settlement) of a claim requires no license. Thus, the
authority of United States nationals to reach binding settlements of their
claims, especially where Cuban property interests are concerned, remains
unclear. However, in 1997 at least one United States national with a certified
claim accepted payments, in the nature of a limited release from Helms Burton
liability, from a foreign entity seeking to implement a venture involving the
claimant's expropriated Cuban assets. The Company understands that the
arrangement received a license from OFAC.
A number of efforts have been made from time to time to review
United States policies involving Cuba. Some proponents of these efforts
advocate harmonizing trade policies with principal partners, repealing Helms
Burton and removing sanctions. During 1998, those efforts intensified. The
Company cannot predict whether there will be any significant policy changes
while the Castro Regime remains in power, or what effect any such change will
have on the Company's claim.
Pending resolution of Helms Burton and related issues, the Company
will also explore the possible settlement of its claim with any interested
parties, including without limitation foreign nationals seeking to make Cuban
investments or Cuban governmental entities, which it deems to have reasonable
prospects of realizing value for the Company's stockholders. Thus far, the
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Company has had some preliminary indications of interest, but no negotiations on
this subject. In the event that the prosecution of the Company's claim or any
related settlement discussions so require, the Company may seek to obtain such
licenses as it can from United States authorities as would facilitate its
efforts. The Company is not able to predict, if any such license were applied
for, what would be the outcome of such application. The failure to obtain a
license under circumstances where the United States otherwise would claim that
a binding settlement violated the embargo regulations could materially and
adversely affect the Company's ability to obtain value for stockholders.
Due to the more rapid development of events with Cuba in recent years,
Management will follow more closely such events as affect the Company's claim.
In the past, the Company was inclined to allow United States government
agencies, such as the Department of State, to represent its interests as part of
a general pattern of settlement of the claims of American nationals against
Cuba. However, in view of the long passage of time without results from
governmental channels, the increasing activities in the private sector, and the
seeming unwillingness of the current US administration to implement effective
measures to assist American nationals to recover value on their claims.
Management believes that the Company must depend more on its own efforts to
prosecute its claim for value, rather than on the efforts of others.
As a result of the foregoing, the Company's sole remaining business
activity is the pursuit of its claim against the Peoples' Republic of Cuba for
the expropriation of the Company's Cuban properties without compensation. The
Company intends to pursue that claim vigorously by all lawful means.
ITEM 2. DESCRIPTION OF PROPERTIES.
The Registrant's operating properties were expropriated by the Cuban
government in 1960. It currently has no tangible properties. See Item 1 for a
description of the Registrant's properties prior to the expropriation.
ITEM 3. LEGAL PROCEEDINGS.
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no matters submitted to a vote of the Registrant's
security holders for a number of years. The Registrant has completed the
process of bringing current its required filings with the Securities and
Exchange Commission. In 1998, the Registrant took action, as permitted by its
by-laws to reconstitute its Board of Directors by electing two new directors to
replace its sole director. See Item 9.
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The Registrant will consider taking such stockholder action as it deems
advisable to further reconstitute its Board of Directors or to consider such
amendments to its constituent instruments (its Certificate of Incorporation and
By-laws) as the Board of Directors recommends.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Registrant's only class of security outstanding is Common Stock,
$1 par value, as evidenced by Partial Liquidation Certificates ("Common
Stock"). After the Registrant's properties were expropriated in 1960 (see Item
1), the Registrant's Common Stock was delisted by the New York Stock Exchange.
To the best of the Registrant's knowledge, there is no active trading market
for the Common Stock. At the present time, according to such records as are
available to the Registrant, there are 550,014 shares of Common Stock
outstanding owned by approximately 1,400 holders of record.
No dividends have been paid by the Registrant since its stockholders
approved a Plan of Complete Liquidation in 1960. All remaining assets have been
reserved for pursuit of the Registrant's claim arising from the expropriation
and the orderly liquidation of its affairs. As a result, the Registrant does not
expect to pay dividends or make similar payments to stockholders, except in
connection with its liquidation or other payment resulting from obtaining value
on its Cuban claim. However, the Registrant has no contractual restrictions on
its ability to pay dividends.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The Registrant's only business relates to carrying out a plan of
complete liquidation, which it expects will involve the prosecution and/or
settlement of its claim against Cuba for expropriating the Registrant's
operating subsidiaries and their property. Since the Registrant has no ongoing
operations and its only activities since 1960 have been related to the claim,
Management believes that period-to-period differences in financial results are
not particularly meaningful, except as a general measurement of the
Registrant's financial capability to pursue its claim from existing sources of
funds. Because the Registrant essentially remained dormant for many years, it
required minimal expenditures to monitor the Cuban claim and administer its
affairs. However, due to political and other developments affecting relations
with Cuba (which have tended to increase claims settlement prospects), the
Registrant's level of activities has increased in recent periods. Consequently,
Management believes that the cost of administering the Registrant's affairs is
also likely to continue to increase in the near term. To a significant degree,
such costs result from the Registrant's continued status as technically a
"public" company under the federal securities laws, which require compiling
information and filing reports and thereby entail greater compliance costs for
professional and other fees. The Registrant's assets capable of being devoted
to these ends are very limited. As a result, Management is considering whether
other steps may have to be taken, such as incurring debt or seeking additional
equity from existing stockholders or outside parties, in order to fund increased
expenditures. At this time, Management cannot predict whether any such
financing will be necessary or, if it becomes necessary, when that will occur,
or on what terms it may be available.
FORWARD LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward looking statements. In addition to historical information,
this report may be construed to contain forward looking statements that are
subject to risks and uncertainties that could cause financial results to differ
materially from expected results. Such statements are based on Management's
beliefs and assumptions made on information currently available to it. The
Registrant is under no obligation to publicly update or revise any forward
looking statements, whether as a result of new information, future events or
otherwise.
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YEAR 2000 COMPLIANCE
The Company conducts no operations or business activities, other than
pursuing its Cuban claim as part of its liquidation. Accordingly, it has made no
expenditures for and plans to make no expenditures for, Year 2000 compliance
activities. The Company believes that the scope of its activities is so limited
and insensitive to these types of technological issues that Year 2000 compliance
measures are immaterial to its business.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued a new
disclosure standard. Results of operations and financial position will be
unaffected by implementation of this new standard. Statement of Financial
Accounting Standards (SFAS) No. 130, Reporting Comprehensive Income, establishes
standards for reporting and display of comprehensive income, its components and
accumulated balances. Comprehensive income is defined to include all changes in
equity except those resulting from investments by owners and distributions to
owners. Among other disclosures, SFAS No. 130 requires that all items that are
required to be recognized under current accounting standards as components of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements. This new standard is
effective for financial statements for periods beginning after December 15, 1997
and requires comparative information for earlier years to be restated. Due to
the recent issuance of this standard, management has been unable to fully
evaluate the impact, if any, it may have on future financial statement
disclosures.
In June 1998, the Financial Accounting Standards Board Issued SFAS 133,
Accounting for Derivative Instruments and Hedging Activities. SFAS 133 requires
companies to recognize all derivatives contracts as either assets or liabilities
in the balance sheet and to measure them at fair value. If certain conditions
are met, a derivative may be specifically designated as a hedge, the objective
of which is to match the timing of gain or loss recognition on the hedging
derivative with the recognition of (i) the changes in the fair value of the
hedged asset or liability that are attributable to the hedged risk or (ii) the
earnings effect of the hedged forecasted transaction. For a derivative not
designated as a hedging instrument, the gain or loss is recognized in income in
the period of change. SFAS 133 is effective for all fiscal quarters of fiscal
years beginning after June 15, 1999.
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Historically, the Company has not entered into derivatives contracts wither to
hedge existing risks or for speculative purposes. Accordingly, the Company does
not expect adoption of the new standard on August 1, 1999 to affect its
financial statements.
ITEM 7. FINANCIAL STATEMENTS
The financial statements required to be filed pursuant to this Item 7.
are included in this Annual Report on Form 10-KSB. A list of the financial
statements filed herewith is set forth in Item 13. "Exhibits, List and Reports
on Form 8-K".
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
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The Registrant's Certificate of Incorporation calls for it to be
managed by a Board of Directors consisting of such number of directors as are
fixed in the By-laws from time to time, but in no event less than five
directors. At the time of the approval by the Registrant's stockholders of its
liquidation in 1960, the number of directors had been fixed at eight. Since that
time, the number of directors had dropped to a sole director, Mr. Elliot Stein,
who also served as Chairman of the Board since 1996. Effective June 4, 1998,
the Registrant's then sole director elected the two directors shown below and
retired from his positions. The Registrant's Board of Directors may elect one
or more additional persons to serve on the Board (or may call for stockholder
action to do so, or for other purposes). Such stockholder action may also
include additional changes to the Registrant's Certificate of Incorporation
in order to reflect changes in Delaware law and the current nature of the
Registrant after the 38 years since its properties were expropriated.
The table below shows the Registrant's current directors and its
executive officers, all the latter of whom have been elected to serve at the
pleasure of the Board of Directors and until the next meeting of the
Registrant's stockholders, and provides certain information concerning those
persons.
PRINCIPAL OCCUPATION/
NAME & POSITION AGE EMPLOYMENT
- --------------- --- ----------
Wendy Norris 37 Director since June 1998; 1986 to 1991,
executrix of Estate of Bruce Norris; 1991
to present, trustee of testamentary trust
of Bruce Norris; 1995 to present, President
of the Registrant.
James A. Star 37 Director since June 1998; 1994 to present,
Vice President-Investments, Henry Crown and
Company, a privately owned holding Company
based in Chicago, IL; prior to 1994, portfolio
manager and investment analyst at Harris
Associates, L.P., a Chicago, IL investment
advisory firm.
Roger Trombino 59 Business consultant; 1992 to
present, director of Affiliated,Inc., a
software development/publishing firm;
1995 to present, Executive Vice
President of the Registrant; 1996 to
present, Vice President & Treasurer of
Independent Purchasing Cooperative,
Inc., a Subway franchisee-owned organization
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Steven L. Risi 43 1988 to present, Chief Financial Officer
of Risi Holdings Group, an investment
company; 1995 to present, Treasurer of
the Registrant; 1996 to present,
director of Nashville Country Club,
Inc., a publicly traded entertainment
company.
James A. Testa 50 Attorney; Partner, Testa & Monfried,
Princeton, NJ, April 1997 to present;
Shareholder, Buchanan Ingersoll,
Princeton, NJ, October 1994 to
April 1997; Partner, Willkie Farr &
Gallagher, New York prior to March 1994;
Secretary of the Registrant for more
than the last five years.
The Registrant is filing this report pursuant to Section 15(d) of the
Exchange Act. The Registrant is required to file reports pursuant to that
section because of an undertaking contained in a registration statement filed
under the Securities Act of 1933. The Registrant's duty to file such reports
would be suspended for any fiscal year at the beginning of which it had less
than 300 stockholders of record. Because of a substantial number of very small
stockholdings by individuals, however, the Registrant consistently has been
owned by more than 300 stockholders of record. Although it has minimal assets
(excepting its claim against Cuba) and believes that such assets, together with
its number of stockholders, would not require it to register its securities and
report initially as a public company under Section 12(g) of the Exchange Act
(where the test is at least $1.0 million in assets and not less than 500 record
stockholders), nevertheless, the Registrant believes its Section 15(d)
undertaking remains operative.
Based on the fact that the Registrant is filing this Report pursuant
to the above-referenced Section 15(d) and does not have a class of security
registered under Section 12(g), the Registrant believes that Regulation S-K,
Item 405, concerning certain disclosures of non-compliance with Section 16(a)
of the Exchange Act is not applicable to it in this Report.
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ITEM 10. EXECUTIVE COMPENSATION.
For the fiscal years ended September 30, the Registrant paid
compensation to its chief executive officer and principal executive officers
(the "named executives") for services in all capacities as shown in the
following table:
SUMMARY COMPENSATION TABLE (1)
- --------------------------------------------------------------------------------
Name and Principal Position Year Annual Compensation-
Other Annual
Compensation ($)
- --------------------------------------------------------------------------------
Wendy Norris, President and 1998 -0-
Chief Executive Officer (2) 1997 -0-
1996 -0-
Roger Trombino, Executive Vice 1998 $48,000
President (2) 1997 55,750
1996 39,000 (3)
Steven L. Risi, Treasurer (2) 1998 $48,000
1997 55,968
1996 33,900 (3)
- --------------------------------------------------------------------------------
(1) Pursuant to regulations of the Securities and Exchange Commission, certain
columns in the form of Summary Compensation Table which are not applicable have
been omitted.
(2) Ms. Norris, Mr. Trombino and Mr. Risi were elected to their respective
positions in 1995.
(3) Prior to September 1, 1997, Messrs. Trombino and Risi were remunerated
through consulting fees based on time spent in pursuit of the Company's
business. Effective September, 1997, the Company entered into consulting
agreements with Messrs. Trombino and Risi, terminable by either party on 30 days
notice, providing compensation to each at the rate of $4,000 per month.
Effective September 1, 1998, the consulting agreements were terminated and
Messrs. Trombino and Risi are remunerated through consulting fees at agreed-upon
hourly rates (plus expenses) for services as requested by the President of
the Registrant.
The Registrant has no other benefit or remuneration plans or programs
in effect at the present time. It has no other contracts in effect with
any of the named executives.
There are no standard arrangements or fees regarding service as a
director of the
15
<PAGE> 16
Registrant. It has been the Registrant's historical practice to reimburse
directors and officers for travel expenses in connection with attendance at
meetings.
Until June 1998, the Registrant had one director comprising its entire
Board of Directors. Since that time, there have been two directors. Accordingly,
there is no compensation committee of the Board of Directors. Given the nature
of the Registrant's status, i.e. in liquidation since 1960, and its resources,
i.e. all remaining liquid assets appropriated for the expenses of liquidation
and prosecution of the claim against the Cuban government, the Board of
Directors has not established policies relating to compensating the chief
executive officer or any of the other named executives. It is not possible to
predict at this time what policies, if any, will be adopted.
16
<PAGE> 17
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth the shares of Common Stock, the only
class of voting securities of the Registrant, owned beneficially by each person
who is known by the Registrant to own beneficially at least five percent of such
securities:
- --------------------------------------------------------------------------------
NAME & ADDRESS AMOUNT PERCENT OF
CLASS
- --------------------------------------------------------------------------------
Wendy Norris, as Trustee of 136,886 24.9
Testamentary Trust of Bruce A. Norris (1)
3 Tondan Lane
Lattingtown, NY 11560
Alphabet Investment Fund et al. (2) 128,480 23.4
222 North LaSalle Street
Chicago, IL 60601
Louis W. Triay, as Trustee of the Julio Lobo 125,000 22.7
Trust (3)
Regal House, Suite C, 2nd Floor
P O Box 147
Queensway
Gibraltar
- --------------------------------------------------------------------------------
(1) Wendy Norris is a beneficiary and the sole trustee of the trust. As such,
she exercises sole investment and voting power with respect to the shares held
therein.
(2) According to a filing with the Securities and Exchange Commission, Alphabet
Investment Fund (the "Fund") held 124,775 shares. The Registrant understands
that the Fund is an investment vehicle consisting of a number of trusts for
members of the Crown Family who are the partners thereof. Members of the Crown
Family, trusts for the benefit of members of the Crown Family, entities in
which such members have interests and affiliates own an additional number of
shares as follows: Income Charitable Fund C u/w of Edward Crown 3,277 shares;
Lester Crown, Trustee of the Exempt Trust u/w of Ann Chemer 321 shares; and
Clinton Realty, L.L.C. 107 shares. The Registrant understands that the General
Partners of the Fund, the trustees under the Income Charitable Fund C and the
trustee under the Exempt Trust each has sole investment and voting power over
the shares held therein. The Crown Family members of Clinton Realty, L.L.C.
have informed the Registrant that they share investment and voting power with
an unrelated third party over the shares held in that entity.
17
<PAGE> 18
(3) The Registrant understands that the above trust was established in and is
being administered in accordance with the laws of Gibraltar. The property held
in the trust includes the outstanding shares of three Panamanian corporations,
Sugar Trading & Shipping Company S.A., Memphis Securities Corp. and Pacific
Securities Corp., which hold of record 57,051 shares, 23,009 shares and 44,940
shares, respectively. The Registrant understands that the principal
beneficiaries of the trust were the two daughters of Julio Lobo, Maria Luisa
Lobo and Leonor Lobo de Gonzalez, that the trustee of the trust currently
exercises sole investment and voting power over the shares (through its holdings
in the Panamanian corporations), and that a proceeding is in progress in
Gibraltar to wind up the trust and cause the distribution of its assets to the
beneficiaries. The Registrant further understands that the children of Maria
Luisa Lobo succeeded to her interest in the trust upon her death in 1998.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None
PART IV
ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K.
(a) (1) Financial Statements
REPORT OF INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS 21
Balance Sheet 22
Statements of operations 23
Statements of stockholders' equity 24
Statements of cash flows 25
Notes to financial statements 26
(2) Financial Statement Schedules
None
(3) Exhibits
The Registrant intends to file any required exhibits when
available by amendment to this report.
(b) Reports on Form 8-K
None
18
<PAGE> 19
SIGNATURES
Pursuant to the requirements of Section 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized this 29th day of
December, 1998.
WEST INDIES SUGAR CORPORATION
By /s/ Wendy Norris
----------------------------
Title: President
19
<PAGE> 20
Pursuant to the requirements of the Securities Exchange act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ Wendy Norris President and Chief Executive December 29, 1998
- ----------------- Officer (principal executive officer;
Director)
/s/ Steven Risi Treasurer (principal financial December 29, 1998
- ----------------- and accounting officer)
/s/ James A. Star Director December 29, 1998
- -----------------
20
<PAGE> 21
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
West Indies Sugar Corporation
Miami, Florida
We have audited the accompanying balance sheet of West Indies Sugar Corporation
as of September 30, 1998 and the related statements of operations, stockholders'
equity and cash flows for the years ended June 30, 1998 and 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of West Indies Sugar Corporation,
at September 30, 1998 and the results of its operations and its cash flows for
the two years then ended in conformity with generally accepted accounting
principles.
Miami, Florida
November 13, 1998 /S/ BDO Seidman, LLP
21
<PAGE> 22
<TABLE>
<CAPTION>
WEST INDIES SUGAR CORPORATION
BALANCE SHEET
====================================================================================
September 30, 1998
- ------------------------------------------------------------------------------------
<S> <C>
ASSETS
CURRENT
Cash and short-term investments $ 196,932
Other 1,372
- ------------------------------------------------------------------------------------
Total current assets 198,304
- ------------------------------------------------------------------------------------
$ 198,304
====================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT
Accounts payable and accrued expenses $ 3,570
- ------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 3,570
- ------------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, $1 par; 550,231 shares authorized;
550,014 shares outstanding 550,014
Deficit (355,280)
- ------------------------------------------------------------------------------------
Total stockholders' equity 194,734
- ------------------------------------------------------------------------------------
$ 198,304
====================================================================================
</TABLE>
See accompanying notes to financial statements.
22
<PAGE> 23
<TABLE>
<CAPTION>
WEST INDIES SUGAR CORPORATION
STATEMENTS OF OPERATIONS
============================================================================================
Years ended September 30, 1998 1997
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Interest income $ 10,774 $ 18,509
- --------------------------------------------------------------------------------------------
Consulting and professional fees 152,214 177,405
General and administrative expenses 8,940 7,352
- --------------------------------------------------------------------------------------------
Total expenses 161,154 184,757
- --------------------------------------------------------------------------------------------
NET LOSS $(150,380) $(166,248)
============================================================================================
Weighted average number of common shares outstanding 550,014 550,014
============================================================================================
Net loss per common share $ (.27) $ (0.30)
============================================================================================
</TABLE>
See accompanying notes to financial statements.
23
<PAGE> 24
<TABLE>
<CAPTION>
WEST INDIES SUGAR CORPORATION
STATEMENTS OF STOCKHOLDERS' EQUITY
===============================================================================================================
Common Stock Total
-------------------------- Stockholders'
Shares Amount Deficit Equity
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at September 30, 1996 550,014 $550,014 $ (38,652) $ 511,362
Net (loss) -- -- (166,248) (166,248)
- ---------------------------------------------------------------------------------------------------------------
Balance at September 30, 1997 550,014 $550,014 $(204,900) $ 345,114
Net (loss) -- -- (150,380) (150,380)
- ---------------------------------------------------------------------------------------------------------------
Balance at September 30, 1998 550,014 $550,014 $(355,280) $ 194,734
===============================================================================================================
</TABLE>
See accompanying notes to financial statements.
24
<PAGE> 25
<TABLE>
<CAPTION>
WEST INDIES SUGAR CORPORATION
STATEMENTS OF CASH FLOWS
====================================================================================================================
Years ended September 30, 1998 1997
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES:
NET LOSS $(150,380) $(166,248)
Adjustments to reconcile net (loss) to cashflows used in
operating activities:
Decrease in other current assets 1,197 6,061
Decrease in accounts payable and
accrued expenses (65) (41,434)
Decrease in income taxes payable -- (28,604)
- --------------------------------------------------------------------------------------------------------------------
Net cash used in operating activities (149,248) (230,225)
Cash and other short term investments,
beginning of period 346,180 576,405
- --------------------------------------------------------------------------------------------------------------------
Cash and other short term investments, end of period $ 196,932 $ 346,180
====================================================================================================================
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest $ -- $ 9,841
Cash paid for taxes $ -- $ 37,743
</TABLE>
See accompanying notes to financial statements.
25
<PAGE> 26
WEST INDIES SUGAR CORPORATION
NOTES TO FINANCIAL STATEMENTS
================================================================================
1. SUMMARY OF SIGNIFICANT Organization and Business
ACCOUNTING POLICIES -------------------------
The Company was organized in Delaware in 1932
and has been inactive since 1960. (See Note
3). In February 1960, the stockholders of the
Company approved a plan of complete
liquidation of the Company.
Preparation of Financial Statements
-----------------------------------
The preparation of financial statements in
conformity with generally accepted accounting
principles requires management to make
estimates and assumptions that affect the
reported amounts of assets and liabilities
and disclosure of contingent assets and
liabilities at the date of the financial
statements and the reported amounts of
revenues and expenses during the reporting
period. Actual results could differ from
those estimates.
Cash and Cash Equivalents
-------------------------
The Company considers all short-term deposits
with a maturity of three months or less to be
cash equivalents.
Net Loss Per Common Share
-------------------------
Net loss per common share is based on the
weighted average number of shares of common
stock outstanding.
In February 1997 the Financial Accounting
Standards Board ("FASB") issued Statement of
Financial Accounting Standards No. 128
"Earnings Per Share". FAS No. 128 simplifies
the standards for computing earnings per
share ("EPS") previously found in APB No. 15
"Earnings per Share" and requires the
restatement of all prior periods. It replaces
the presentation of primary EPS with a
presentation of basic EPS. It also requires
dual presentation of basic and diluted EPS on
the face of the income statement for all
entities with complex capital structures and
requires a reconciliation of the numerator
and denominator of the diluted EPS
computation. The Company has adopted FAS No.
128 as of March 1, 1997 and its
26
<PAGE> 27
WEST INDIES SUGAR CORPORATION
NOTES TO FINANCIAL STATEMENTS
================================================================================
implementation did not have an effect on the
current or prior year financial statements.
Recent Accounting Pronouncements
--------------------------------
In June 1997, the Financial Accounting
Standards Board issued a new disclosure
standard. Results of operations and financial
position will be unaffected by implementation
of this new standard. Statement of Financial
Accounting Standards (SFAS) No. 130,
Reporting Comprehensive Income, establishes
standards for reporting and display of
comprehensive income, its components and
accumulated balances. Comprehensive income is
defined to include all changes in equity
except those resulting from investments by
owners and distributions to owners. Among
other disclosures, SFAS No. 130 requires that
all items that are required to be recognized
under current accounting standards as
components of comprehensive income be
reported in a financial statement that is
displayed with the same prominence as other
financial statements. This new standard is
effective for financial statements for
periods beginning after December 15, 1997 and
requires comparative information for earlier
years to be restated. Due to the recent
issuance of this standard, management has
been unable to fully evaluate the impact, if
any, it may have on future financial
statement disclosures.
In June 1998, the Financial Accounting
Standards Board Issued SFAS 133, Accounting
for Derivative Instruments and Hedging
Activities. SFAS 133 requires companies to
recognize all derivatives contracts as either
assets or liabilities in the balance sheet
and to measure them at fair value. If certain
conditions are met, a derivative may be
specifically designated as a hedge, the
objective of which is to match the timing of
gain or loss recognition on the hedging
derivative with the recognition of (i) the
changes in the fair value of the hedged asset
or liability that are attributable to the
hedged risk or (ii) the earnings effect of
the hedged forecasted transaction. For a
derivative not designated as a hedging
instrument, the gain or loss is recognized in
income in the period of change. SFAS 133 is
effective for all fiscal quarters of fiscal
years beginning after June 15, 1999.
27
<PAGE> 28
WEST INDIES SUGAR CORPORATION
NOTES TO FINANCIAL STATEMENTS
================================================================================
Historically, the Company has not entered
into derivatives contracts either to hedge
existing risks or for speculative purposes.
Accordingly, the Company does not expect
adoption of the new standard on August 1,
1999 to affect its financial statements.
Income Taxes
------------
The Company has adopted the provisions of
Statement of Financial Accounting Standards
(SFAS) 109, Accounting for Income taxes.
Under the asset and liability method of SFAS
109, deferred taxes are recognized for
differences between financial statement and
income tax bases of assets and liabilities.
2. INCOME TAXES The Company has available a net operating
loss carryforward, totaling approximately
$419,000, which expires through the year
2013. This net operating loss would result in
a potential deferred tax asset of
approximately $155,000.
Additionally, the Company has a deferred tax
asset of approximately $6.9 million related
to the write-down of the Cuban property.
The Company has established a valuation
allowance against the balance of the deferred
tax assets, as realization of the asset is
not considered more likely than not.
3. CLAIMS Prior to 1960, the Company conducted
operations in Cuba through six wholly owned
subsidiaries, Compania Central Altagracia,
S.A. ("Altagracia"), Miranda Sugar Estates
("Miranda"), Compania Agricola Hato del
Medio, S.A., Compania Oriental Agricola y de
Almacenes, S.A., Canera Cruces, S.A. and
Compania Agricola Maibio, S.A. The Company,
through its subsidiaries, was engaged
primarily in the business of growing sugar
cane and producing sugar and molasses
therefrom. Its refining and production
facilities included four sugar mills, three
of which, Central Palma, Central Santa Ana
and Central Alto Cedro were owned and
28
<PAGE> 29
WEST INDIES SUGAR CORPORATION
NOTES TO FINANCIAL STATEMENTS
================================================================================
operated by Altagracia and one, Central
Miranda, was owned and operated by Miranda.
The remaining subsidiaries concentrated on
the growing and harvesting of cane and other
agricultural products on owned or leased
land.
The Cuban properties owned by the Company's
subsidiaries included approximately 246,000
acres of land composed of cane lands,
forests, pastures, farm land and reserve
land, all located in the province of Oriente.
(In recent years, provincial boundary lines
in Cuba have been changed, resulting in
substantially all the Company's properties
being located in the current provinces of
Santiago de Cuba and Holguin.) Interspersed
with these lands were towns, small
settlements, loading stations, utilities
(including water supply systems, roads,
electric generating facilities and 300 miles
of company-owned standard gauge railroad)
dairies, livestock facilities, housing,
stores and warehouses. The Company's
subsidiaries also owned a full range of
vehicles and other equipment necessary for
operations, including 32 locomotives, 1,600
pieces of rolling stock, an airplane, and a
fleet of automobiles, trucks, farm and heavy
machinery.
As part of their operations, the Company's
subsidiaries also had agricultural products
on hand and in the course of sale, cash on
hand, accounts receivable, prepaid items and
all the normal and customary attributes of an
ongoing business.
The Company's business in Cuba was materially
and adversely affected by developments
stemming from the Cuban Revolution which
culminated in the overthrow of the Battista
regime and the coming to power of Fidel
Castro Ruiz.
Commencing in 1959 and throughout 1960, the
new revolutionary government of Cuba,
principally through its "Natural Institute of
Agrarian Reform" ("INRA") whose head was
Fidel Castro Ruiz, began systematically to
intervene, appropriate, nationalize or
otherwise expropriate the properties of the
Company's Cuban subsidiaries. Offices and
agents of the subsidiaries filed protests and
took such other steps, including the
initiation of legal action, as they believed
were allowed by Cuban law against these
activities.
29
<PAGE> 30
WEST INDIES SUGAR CORPORATION
NOTES TO FINANCIAL STATEMENTS
================================================================================
In July 1960, a law was promulgated by the
Cuban Council of Ministers authorizing the
President and Prime Minister to order the
"nationalization, through expropriation by
eminent domain," of property and enterprises
of United States nationals. According to the
legislation, experts were to be appointed to
appraise the expropriated property and
payment was to be made in Cuban state bonds.
The bonds were to bear interest at not less
than 2% per annum and to be amortized over
not less than 30 years. Thus, on its face,
the legislation seemed to recognize the
obligation of the Cuban state to pay a fair
price for the Company's property taken for
public purposes. However, under the
legislation, interest and principal on the
bonds were made contingent, to be payable
only from a special fund derived solely from
earnings resulting from future Cuban sugar
sales to the United States in excess of
thresholds unilaterally set by the Cuban
government. To the extent interest was not
earned in any year, it was deemed to be
"extinguished." Consistent with a new Cuban
Constitution, imposed by the revolutionary
government, the legislation also removed
expropriation cases from the jurisdiction of
the Cuban courts, thereby rendering useless
the legal actions filed by the Company's
subsidiaries against the taking. Finally, in
August 1960, acting pursuant to the new law,
the President and Prime Minister adopted a
resolution which directly and explicitly
ordered the nationalization by the Cuban
state of the properties and rights of the
Company's Cuban subsidiaries.
To the best of the Company's knowledge, no
appraisers were ever appointed and the Cuban
government never complied with its own
legislation. No special payment fund was ever
established, as relations between the United
States and Cuba soon deteriorated to the
point where virtually no commerce was carried
on between the two countries. As a result,
since the compulsory expropriation of the
Company's Cuban subsidiaries, neither the
Company nor any subsidiary has received any
payment, nor tender of payment, for the
properties. The Company believes that the
1960 nationalization legislation, in the form
enacted and to the extent implemented,
amounted to a sham and did not provide fair
and adequate compensation for the taking. The
Company does not believe that payment for
valuable property rights purportedly taken by
eminent domain can be made contingent on
arbitrary events controlled by the entity
doing the taking. Therefore, the Company
believes that its Cuban properties were
confiscated in flagrant violation of settled
principles of international law. As a result,
it is the Company's position that neither the
Cuban state nor anyone claiming through the
Cuban state can have any lawful title to the
properties, unless and until the Company is
properly compensated for them.
In accordance with the International Claims
Settlement Act of 1949, the Company, in
February 1966, filed with the United States
Foreign Claims Settlement Commission (the
"FCSC") a detailed claim relating to the
taking of its properties by the Cuban
government. The purpose of that filing was to
document, from available records, the
Company's loss by means of a formal
30
<PAGE> 31
WEST INDIES SUGAR CORPORATION
NOTES TO FINANCIAL STATEMENTS
================================================================================
submission to a recognized tribunal, and to
set a value which would be recognized by the
United States Government at such time as it
might seek to negotiate or otherwise obtain
reparations from Cuba on account of claims
held by United States nationals resulting
from the expropriation. Unlike some other
countries, such as Canada where Cuban assets
were seized and used to satisfy the claims of
those countries' nationals, in general, Cuban
assets in the United States were insufficient
to satisfy claims of United States private
citizens. The Company has never received the
benefit of any of its claims being satisfied
from Cuban or any other sources. In February
1971, the FCSC issued a decision certifying
the value of the loss suffered by the Company
at $84.9 million and recognizing that
interest of 6% should accrue on the loss from
August 1960 until settlement. According to
the records of the FCSC, the Company's claim
is the sixth largest claim among 5,911 Cuban
claims processed by the FCSC.
Based upon the FCSC award and the passing of
nearly 38 years since the incurrance of the
loss, the Company's claim to date, including
simple interest, amounts to approximately
$278 million.
Following the expropriation of the properties
of its nationals, the United States enacted
legislation and regulations resulting in an
economic embargo of Cuba, which has remained
in place, with modifications from time to
time, since 1962. In the intervening years,
the economic embargo has come to include a
broad range of sanctions prohibiting United
States nationals from doing business in Cuba.
However, since the United States has not
maintained a blockade of Cuba, that country
has continued to trade in international
markets as circumstances have permitted. In
recent years, with the dissolution of the
Soviet Union and its Eastern European client
states after 1989, a number of the principal
trading partners of the United States,
including Canada, Mexico and the European
Community, have accounted for an increasing
volume of trade with Cuba. Nationals of those
countries, encouraged by the Castro regime
and their own governments,
31
<PAGE> 32
have financed significant sectors of the
Cuban economy and in some cases acquired
interests in Cuban state enterprises. The
Company understands that commerce with such
nationals, whether through traditional forms
of financial support such as loans or the
direct investment in property rights, has
extended to properties expropriated from
United States nationals. As a result, foreign
nationals in Cuba are today carrying on
business operations, and thereby supporting
the Cuban economy, making use of properties
expropriated by Cuban authorities from United
States nationals without payment. Although
the Company has no direct knowledge at this
time, such use and involvement by foreign
nationals could extend to properties and
other assets formerly owned and operated by
the Company's Cuban subsidiaries.
The Company believes that one or more of its
sugar mills remain in productive operation,
supported by their associated agricultural
lands and infrastructure. Moreover, the
Company believes that the Cuban sugar
industry remains heavily dependent on foreign
financing sources. The Company's belief is
based on information passed on by sources
familiar with the Cuban sugar industry and by
general press reports. The Company believes
that its four mills were among the larger and
more efficient mills in the industry when
they were expropriated and thus are more
likely to have been kept in use and their
lands continued in cane cultivation.
In 1996, the United States Congress passed,
and President Clinton signed, the Cuban
Liberty and Solidarity Act of 1996, popularly
known as the Helms-Burton Bill or "Libertad".
Among other things, this statute sought to
confer on United States nationals who were
claimants against Cuba for expropriated
property certain rights to recover up to
treble damages (plus interest) from persons
defined in the law as "traffickers" in such
property. Recoveries were to be effected
through the use of legal proceedings in
United States federal courts. While the
underlying policy of Helms-Burton was to
accelerate a change to a transition
government in Cuba, Title III of the law
created, for the first time since the 1960
expropriations, a private right of action for
American nationals to obtain monetary value
for their claims by authorizing lawsuits
against private parties who were deemed to be
dealing in stolen property. Under Title III,
the Company, as a "certified" claimant with a
claim passed on by the FCSC, would also be
afforded certain procedural advantages, such
as priority in the initiation of an action,
no new burden of proof as to valuing the
claim, and the FCSC decision as sufficient
public notice to traffickers of the Company's
claim to title to the properties. Given the
widespread expropriation of American property
and the significance of certified claims, the
law was expected to have a chilling effect on
foreign investment in the Cuban economy and
thus accelerate the transition to a
democratic form of government in Cuba. The
statute does not
32
<PAGE> 33
forbid foreign nationals to trade with Cuba.
However, it does put them on notice that if
they deal with property stolen from American
nationals they can be sued for damages.
The implementation of Helms Burton has been
opposed by other countries, most vociferously
by those whose nationals are believed to be
dealing in the stolen property. As enacted,
the legislation allows the effectiveness of
the Title III right of action provisions to
be suspended by the President indefinitely
for six month periods at a time, which
suspension right the President has exercised
continuously in deference to principal US
trading partners. As a result of the
continued suspensions, the Company cannot
predict whether the Title III provisions will
ever become effective. Moreover, if they do
become effective and actions are brought, it
is likely, in cases such as these, that
certain aspects of the law will be challenged
and that resolution of asserted claims will
take a protracted period of time. Finally,
the Company does not have direct knowledge as
to who, if anyone, subject to the
jurisdiction of the US may be trafficking (as
defined by the law) in the expropriated
property of the Company's Cuban subsidiaries.
The Company believes that such knowledge can
best be obtained from additional
investigation, which likely would include an
on-site inspection of its former operating
properties in Cuba. In seeking to conduct any
such investigation, the Company may not be
able to gain access to the necessary sites
and it may not be able to obtain records
necessary to support trafficking claims.
In light of the Libertad statute, Management
believes the Company should be prepared to
bring an action against persons found to be
trafficking in the Company's property, if
that course of action will recover value for
stockholders. Management also believes that,
whether or not connected with Libertad, due
consideration must be given to other courses
of action leading to some settlement of the
Company's claim. The object of those efforts
would be to return value to the Company's
stockholders.
According to provisions of the economic
sanctions affecting United States nationals,
it is unlawful to conduct business, directly
or indirectly, with Cuba without a license.
Licenses are issued on a case by case basis
by the Office of Foreign Assets Control
("OFAC") of the United States Treasury
Department. Prior to Title III of Libertad,
the binding settlement of an expropriation
claim by a United States national could be
construed as conducting business with Cuba.
Title III (which remains suspended by
Presidential order) contains an explicit
provision which makes it clear that the
prosecution (and presumably the binding
settlement) of a claim requires no license.
Thus, the authority of United States
nationals to reach binding settlements of
their claims, especially where Cuban property
interests are concerned, remains unclear.
However, in 1997 at least one United States
national with a certified claim accepted
payments, in the nature of a limited release
from Helms Burton liability, from a foreign
entity seeking to implement a venture
involving the claimant's expropriated Cuban
assets. The Company understands that the
arrangement received a license from OFAC.
A number of efforts have been made from time
to time to review United States policies
involving Cuba. Some proponents of these
efforts advocate harmonizing trade policies
with principal partners, repealing Helms
Burton and removing sanctions. During 1998,
those efforts intensified. The Company cannot
predict whether there will be any significant
policy changes while the Castro Regime
remains in power, or what effect any such
change will have on the Company's claim.
Pending resolution of Helms Burton and
related issues, the Company will also explore
the possible settlement of its claim with any
interested parties, including without
limitation foreign nationals seeking to make
Cuban investments or Cuban governmental
entities, which it deems to have reasonable
prospects of realizing value for the
Company's stockholders. Thus far, the
33
<PAGE> 34
WEST INDIES SUGAR CORPORATION
NOTES TO FINANCIAL STATEMENTS
================================================================================
Company has had some preliminary indications
of interest, but no negotiations on this
subject. In the event that the prosecution of
the Company's claim or any related settlement
discussions so require, the Company may seek
to obtain such licenses as it can from United
States authorities as would facilitate its
efforts. The Company is not able to predict,
if any such license were applied for, what
would be the outcome of such application. The
failure to obtain a license under
circumstances where the United States
otherwise would claim that a binding
settlement violated the embargo regulations
could materially and adversely affect the
Company's ability to obtain value for
stockholders.
Due to the more rapid development of events
with Cuba in recent years, Management will
follow more closely such events as affect the
Company's claim. In the past, the Company was
inclined to allow United States government
agencies, such as the Department of State, to
represent its interests as part of a general
pattern of settlement of the claims of
American nationals against Cuba. However, in
view of the long passage of time without
results from governmental channels, the
increasing activities in the private sector,
and the seeming unwillingness of the current
US administration to implement effective
measures to assist American nationals to
recover value on their claims. Management
believes that the Company must depend more on
its own efforts to prosecute its claim for
value, rather than on the efforts of others.
As a result of the foregoing, the Company
does not believe it would be prudent to
assign an estimated value to the investment
in its Cuban subsidiaries or to the related
claim, and, accordingly, the carrying value
thereof has been fully reserved.
4. FAIR VALUE OF FINANCIAL The Company's financial instruments consist
INSTRUMENTS principally of cash and cash equivalents,
other receivables, and current payables. The
carrying amount of such financial instruments
approximates their estimated fair value as of
September 30, 1998. The estimated fair value
is not necessarily indicative of the amounts
the Company could realize in a current market
exchange or of future earnings or cash flows.
34
<PAGE> 35
EXHIBIT INDEX
TO
FORM 10-KSB
OF
WEST INDIES SUGAR CORPORATION
NUMBER TITLE
3.1 Registrant's Certificate of Incorporation,
including all Amendments (to be filed by amendment)
3.2 Registrant's By-laws (to be filed by amendment)
27.1 Financial Data Schedule
35
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> SEP-30-1998
<CASH> 196,932
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 198,304
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 198,304
<CURRENT-LIABILITIES> 3,570
<BONDS> 0
0
0
<COMMON> 550,014
<OTHER-SE> (355,280)
<TOTAL-LIABILITY-AND-EQUITY> 198,304
<SALES> 0
<TOTAL-REVENUES> 10,774
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 161,154
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (150,380)
<INCOME-TAX> 0
<INCOME-CONTINUING> (150,380)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (150,380)
<EPS-PRIMARY> (.27)
<EPS-DILUTED> (.27)
</TABLE>
