This Day On The Street
Continue to site
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

Star Scientific Admits Legal Defeat, Warns Short on Cash

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 - Get Report), 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.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

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
Stocks Under $10

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

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
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
STSI $0.21 3.14%
RAI $47.80 0.00%
AAPL $93.99 0.00%
FB $102.01 0.00%
GOOG $682.40 0.00%


Chart of I:DJI
DOW 15,973.84 +313.66 2.00%
S&P 500 1,864.78 +35.70 1.95%
NASDAQ 4,337.5120 +70.6750 1.66%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs