News
Star Scientific Files Third Quarter Financial Report
PETERSBURG, Va.-(Business Wire)-November 8, 2007 - Star Scientific, Inc. (NASDAQ:STSI) filed its financial report on third quarter 2007 today with the Securities and Exchange Commission. The company reported a consolidated after-tax net loss for the third quarter of approximately $5.0 million, compared with a net loss of $3.6 million for the same prior-year period. The company ceased manufacturing and distributing discount cigarettes in June 2007, which drove the third-quarter loss from discontinued operations of approximately $0.5 million, compared to net income of $0.6 million for third quarter 2006. The net loss for the period from continuing operations was approximately $4.5 million compared with a net loss of $4.2 million for third quarter 2006.
The company had gross sales from continuing operations of $140,800 for the quarter, a 7% increase over sales for the prior-year period, primarily as a result of increased sales volume. Net sales for the quarter totaled $51,600, a decrease of $64,800, or 55.6% from third quarter 2006. The net sales total for the quarter reflects sales incentives and related discounts.
Star pursued a variety of initiatives during the third quarter aimed at continued expansion of the distribution of Ariva(R) and Stonewall dissolvable smokeless tobacco products. Those efforts included a test market in the Kroger grocery store chain and expansion of Ariva(R) distribution through the Walgreen's chain. The company also expects to begin distribution of an Ariva(R) Java blend during the fourth quarter. The results of third-quarter marketing efforts appear to confirm the company's view that Ariva(R) is the first smokeless tobacco product that is an acceptable alternative to cigarettes for female smokers, who make up approximately 50% of the U.S. smoking population. Stonewall dissolvable smokeless tobacco, which was developed for adults who use traditional moist snuff, is now available in three blends: Wintergreen, Natural and Java.
The company had gross sales from continuing operations of $529,800 for the nine months ended September 30, 2007, a 63.1% increase compared to the prior year period, due largely to increased sales volumes. Net sales for the nine months ended September 30, 2007 totaled $398,900, an increase of $124,500, or 45.4%, compared with the same period in 2006. For the nine months ended September 2007 the company reported an after-tax net loss from continuing operations of $34.0 million compared to an after-tax net loss for the same period a year ago of $10.7 million. The current year continuing operations after-tax net loss includes two one-time transactions, the loss on the sale of the MSA funds of approximately $27.0 and the gain on the sale of tobacco curing barns of approximately $5.3 million. When discontinued operations are included, the net loss for the first nine months of 2007 was approximately $34.4 million, compared with a $9.1 million loss for the prior year period.
The company noted in an earlier release that, as part of the patent infringement lawsuit, Star filed its opening brief with the US Court of Appeals for the Federal Circuit on September 10. RJR's opposition brief is due by November 20, and Star's reply to that brief is due on or before December 21. When briefing has been completed the Federal Circuit will assign a date for oral argument on Star's appeal.
This press release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The Company has tried, whenever possible, to identify these forward-looking statements using words such as "anticipates", "believes", "estimates", "expects", "plans", "intends" and similar expressions. These statements reflect the Company's current beliefs and are based upon information currently available to it. Accordingly, such forward-looking statements involve known and unknown risks, uncertainties and other factors which could cause the Company's actual results, performance or achievements to differ materially from those expressed in, or implied by, such statements. These risks, uncertainties and contingencies include, without limitation, the challenges inherent in new product development initiatives, particularly in the smokeless tobacco area, the uncertainties inherent in the progress of scientific research, the Company's ability to raise additional capital in the future necessary to maintain its business, potential disputes concerning the Company's intellectual property, risks associated with litigation regarding such intellectual property, potential delays in obtaining any necessary government approvals of the Company's low-TSNA tobacco products, market acceptance of the Company's new smokeless tobacco products, competition from companies with greater resources than the Company, the Company's decision not to join the Master Settlement Agreement ("MSA"), the effect of state statutes adopted under the MSA, and the Company's dependence on key employees and on its strategic relationships with Brown & Williamson Tobacco Corporation in light of its combination with RJ Reynolds Tobacco Company, Inc. The impact of potential litigation, if initiated against or by individual states that have adopted the MSA, could be materially adverse to the Company.
See additional discussion under "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2006, as filed with the SEC on March 16, 2007, and as amended on Form 10-K/A on April 30, 2007, and other factors detailed from time to time in the Company's other filings with the SEC, available at www.sec.gov. The Company undertakes no obligation to update or advise upon any such forward-looking statements to reflect events or circumstances after the date of this press release or to reflect the occurrence of unanticipated events.
About Star Scientific
Star Scientific is a technology-oriented tobacco company with a toxin reduction mission. It is engaged in the development of dissolvable smokeless tobacco products that deliver fewer carcinogenic toxins (principally tobacco specific nitrosamines, or TSNAs), through the utilization of the innovative StarCured(R) tobacco curing technology, and in sublicensing that technology to others. Star Scientific has a Corporate and Sales Office in Petersburg, VA, an Executive, Scientific & Regulatory Affairs office in Bethesda, MD, and manufacturing and tobacco processing facilities in Chase City, VA and in Petersburg, VA.
See Star's website at: http://www.starscientific.com.
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