Petey Schmidt's Instablog Sell-side analyst Petey Schmidt http://seekingalpha.com Star Scientific (CIGX) - Poor operating margins, on-going litigation, and potential shareholder dilution http://seekingalpha.com/instablog/939403-petey-schmidt/180907-star-scientific-cigx-poor-operating-margins-on-going-litigation-and-potential-shareholder-dilution?source=feed 180907 Management believes the company will continue to incur losses into the foreseeable future.  Furthermore, in their SEC filings, they state that smokeless tobacco sales have been stable, but remain at low levels.  Substantial sales are still required to reach a break even level.  A widening operating loss for the past decade also do not provide a positive outlook for CIGX.

 

CIGX also continues to incur legal fees in connection with an infringement patent trial.  It is unlikely that legal proceedings will sway in their favor anytime soon.  RJR Tobacco, the defendant in this case, claims that the probability of loss is not probable.  CIGX continues to incur debt and interest expenses associated with litigation fees.

 

The company also states that it received proceeds of $11 million through the sale of 4,856,730 shares in the first quarter of 2011 ending in March.  The majority of these shares are associated with insider transactions.  According to Yahoo! Finance, purchases in the last 6 months amount to 4,041,750 shares.  A material number amount of shares relate to shares that have been purchased upon options exercise.  Of the $11 million, $2.1 million is from the exercise of warrants and stock options.  The company's filings say nothing on a company repurchase plan to prevent shareholder dilution.  There are also a number of unexercised shares set to expire at various dates.  The following table below shows options awarded to executives and their associated expiry date. 

 
]]> Tue, 24 May 2011 09:24:09 -0400 Management believes the company will continue to incur losses into the foreseeable future.  Furthermore, in their SEC filings, they state that smokeless tobacco sales have been stable, but remain at low levels.  Substantial sales are still required to reach a break even level.  A widening operating loss for the past decade also do not provide a positive outlook for CIGX.

 

CIGX also continues to incur legal fees in connection with an infringement patent trial.  It is unlikely that legal proceedings will sway in their favor anytime soon.  RJR Tobacco, the defendant in this case, claims that the probability of loss is not probable.  CIGX continues to incur debt and interest expenses associated with litigation fees.

 

The company also states that it received proceeds of $11 million through the sale of 4,856,730 shares in the first quarter of 2011 ending in March.  The majority of these shares are associated with insider transactions.  According to Yahoo! Finance, purchases in the last 6 months amount to 4,041,750 shares.  A material number amount of shares relate to shares that have been purchased upon options exercise.  Of the $11 million, $2.1 million is from the exercise of warrants and stock options.  The company's filings say nothing on a company repurchase plan to prevent shareholder dilution.  There are also a number of unexercised shares set to expire at various dates.  The following table below shows options awarded to executives and their associated expiry date. 

 
]]> stsi