CHESTER, Va.--(BUSINESS WIRE)--Nov. 10, 2004--Star Scientific, Inc. (NASDAQ:STSI - News) yesterday filed results for the company's third fiscal quarter on Form 10-Q with the Securities and Exchange Commission. The company had a $4.96 million net loss for the third quarter, compared with a $7.16 million loss for third quarter 2003. Star had announced on September 30 that it raised $25.0 million during August and September through the sales of 5,150,000 shares of the company's common stock. The company also announced on September 2 that a firm trial date had been set for its patent infringement lawsuit against RJ Reynolds Tobacco Company, Inc., which is to commence on January 24, 2005.
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Net sales for the third quarter totaled $16.7 million, an 8.4% increase over second quarter sales of $15.4 million, and an increase of $5.7 million from third quarter 2003, when net sales totaled $10.9 million. Shipments of cigarettes by the company's subsidiary, Star Tobacco, Inc., totaled 63.9 truckloads for the third quarter compared with 66.5 truckloads for the previous quarter. Higher per-carton pricing resulted in a $4.5 million increase in gross margin compared to third quarter 2003, although the company continued to operate at a loss for the third quarter.
Star noted that the improvement in gross margin and sales during third quarter 2004 reflected in part the fact that sales in third quarter 2003 were disrupted, during that quarter, by the termination of the proposed sale of the company's cigarette business. Further, Star noted that competition among discount cigarette manufacturers continues to be a significant factor, particularly in the non-MSA states that do not require escrow payments for sales of cigarettes.
The company also announced that in order to comply with recent changes in NASDAQ rules, which require a majority of the Board of Directors to be independent, Christopher Miller resigned from the Board on October 28, 2004. Mr. Miller will continue to serve as Star's Chief Financial Officer.
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 the capital 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 any subsequent modification of the MSA, and the Company's dependence on key employees and on its strategic relationships with Brown & Williamson Tobacco Corporation in light of its merger 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 "Factors That May Affect Future Results" in the Company's Registration Statement on Form S-3, as amended by Amendment No. 1 to Form S-3 filed with the Securities and Exchange Commission on August 20, 2004, and other factors detailed from time to time in the Company's other filings with the Securities and Exchange Commission, 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 tobacco products that deliver fewer carcinogenic toxins (principally tobacco specific nitrosamines, or TSNAs), through the utilization of the innovative StarCured® tobacco curing technology, and in sublicensing that technology to others. Star Scientific has a Corporate and Sales Office in Chester, VA, an Executive, Scientific & Regulatory Affairs office in Bethesda, MD, and manufacturing and tobacco processing facilities in Chase City and in Petersburg, VA.