This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Star Scientific Admits Legal Defeat, Warns Short on Cash

Stocks in this article: STSIRAI

GLEN ALLEN, Va. ( TheStreet) -- Star Scientific (STSI) finally admitted Friday that only $5 million in cash was received from the settlement of a long-running legal tussle with R.J. Reynolds Tobacco. Star also warned that current cash on hand would run out before the end of the first quarter 2013.

All in, Star Scientific's third-quarter financial results were both humiliating and humbling. The company's stock price has been cut in half since July and Friday's close of $2.56 (before third-quarter results) was the lowest in 10 months.

Star Scientific sued R.J. Reynolds, a division of Reynolds American (RAI), for violating patents covering a tobacco curing technology. The legal battle wound through multiple courts, decisions and appeals by both sides, but throughout, Star Scientific promised its shareholders victory that would force R.J. Reynolds to pay hundreds of millions of dollars in penalties plus ongoing royalties on future tobacco sales.

The case was settled on Sept. 21 with R.J. Reynolds paying just $5 million, although Star Scientific executives refused to acknowledge the disappointing result until Friday's 10-Q was filed.

Under terms of the settlement now disclosed, Star Scientific received a "one-time" payment of $5 million from R.J. Reynolds and will receive no other financial payment or royalties in the future.

The cash helped Star Scientific post a small profit for the third quarter despite sales of its nutritional supplements Anatabloc and Cig-Rx totaling just $1.6 million, flat sequentially. Excluding the R.J. Reynolds money, Star Scientific's operating loss was $6.7 million in the quarter.

Star Scientific had "working capital" of $10.2 million, including $9.5 million in cash at the end of the September quarter, which the company says is sufficient to "sustain operations into the first quarter 2013."

The company has still not explained the embarrassing retraction and correction of results from an inflammation study of Anatabloc.

-- Reported by Adam Feuerstein in Boston.

Adam Feuerstein writes regularly for TheStreet. In keeping with company editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,461.32 -153.49 -0.92%
S&P 500 1,927.11 -14.17 -0.73%
NASDAQ 4,382.8470 -36.6310 -0.83%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs