776008--3/16/2009--STAR_SCIENTIFIC

related topics

{product, liability, claim}

{product, market, service}

{acquisition, growth, future}

{condition, economic, financial}

{regulation, change, law}

{stock, price, operating}

{customer, product, revenue}

{stock, price, share}

{product, candidate, development}

{personnel, key, retain}

{property, intellectual, protect}

{control, financial, internal}

{financial, litigation, operation}

We have incurred losses for the past six years and we expect operating expenses to continue to be greater than operating revenues in the foreseeable future. In the future, we may not be able to secure financing necessary to operate and grow our business as planned. Current levels of market volatility are unprecedented. If we are unable to protect our intellectual property rights, our competitive position could be harmed and we could be required to incur significant expenses to enforce our rights. Our growth strategy anticipates that we will create new products and distribution channels and expand existing distribution channels for our low-TSNA smokeless tobacco products. Our future growth is also heavily dependent upon increased consumer acceptance of our low-TSNA smokeless tobacco products, as well as on increased demand to license the related technology. If we are unable to effectively manage these initiatives, our business, financial condition, results of operations and cash flows would be adversely affected. The tobacco industry is highly competitive, and our competitors may develop technology for the production of low-TSNA tobacco that does not infringe on the technology to which we are the exclusive licensee, or they may develop technology for low-TSNA tobacco or other cigarette alternative products that could make our technology obsolete. Sales of tobacco products have been declining, which could have a material adverse effect on our revenues and cash flows. We may face delays in obtaining very low-TSNA tobacco or other raw materials to adequately manufacture our products. We do not have long-term contracts with any of our retail customers or independent distributors, and a loss or material reduction in their business with us could result in reduced sales of our products. We have many potentially dilutive derivative securities outstanding and the issuance of these securities as well as the future sales of our common stock would have a dilutive effect on current stockholders. The combination transaction between RJR and B W may impact negatively upon us. We are dependent on the domestic tobacco business. The tobacco industry is subject to substantial and increasing regulation with respect to the sale and marketing of its products. The tobacco industry is subject to substantial and increasing federal, state and local excise taxes. We have had substantial obligations under state laws adopted under the Master Settlement Agreement. We may be assessed additional sales and use taxes by the Commonwealth of Virginia. Lawsuits may affect our profitability and we have limited insurance coverage for any damages for which we may become liable. If we do not effectively manage our growth, we may be unable to successfully develop, market and sell our products. We may lose our key personnel or fail to attract and retain additional personnel. Our directors and executive officers own a large percentage of our voting stock, which allows them to exercise significant control over us, and they may make decisions with which you disagree. Our stock price has been and may continue to be volatile and an investment in our common stock could suffer a decline in value. Our research development efforts may not result in commercially viable products and may continue to be curtailed by our lack of available research funds. We are subject to risks inherent in new product development initiatives, particularly with respect to our goal of developing pharmaceutical products to treat tobacco-related dependence and other neurological conditions, which are subject to FDA regulation and approvals, and for potentially related products such as neutraceuticals.

Full 10-K form ▸

776008--3/16/2009--STAR_SCIENTIFIC_INC