Star Scientific Files Annual Report

Star Scientific, Inc. (Nasdaq:STSI) filed its annual report on Form 10-K today with the Securities and Exchange Commission. The company reported a net loss from continuing operations of approximately $17.1 million compared with a $13.8 million operating loss in 2006. In addition to the loss from continuing operations, the company incurred a loss on the sale of the interest stream and reversionary interest in the Master Settlement Agreement (MSA) escrow accounts of $27.0 million, and a gain of $3.6 million from the sale of approximately 990 of the company’s tobacco curing barns. There was, in addition, a loss of $4.1 from discontinued operations and $0.6 million from other one-time transactions that resulted in a net loss of $41.5 million, as compared to a $12.3 million net loss for 2006. Gross sales of the company’s dissolvable smokeless tobacco products, Ariva® and Stonewall® increased to $0.7 million during 2007, a 41.9% increase from gross sales of $0.5 million in 2006. Net sales also increased by 23.2%, from $0.4 million in 2006 to $0.5 million in 2007. Total operating expenses increased $3.1 million, due primarily to $2.7 million in marketing and distribution costs for Ariva® and Stonewall®. At year end the company had $8.8 million in cash and cash equivalents compared with $4.3 million at year-end 2006. Earlier today the company announced that it had completed private placements of shares of its common stock with existing shareholders and new institutional investors that yielded gross proceeds of $12.5 million. Star also reported that oral arguments on its appeal of rulings in its patent infringement lawsuit against RJ Reynolds (RJR) had been held on Friday, March 7 at the US Court of Appeals for the Federal Circuit in Washington, DC. The company appealed two summary judgment rulings issued by the US District Court in January, 2007 and a June, 2007 granting RJR’s defense claim of inequitable conduct. Star anticipates that the Federal Circuit Court of Appeals will issue decisions on the appeal during the second quarter or shortly thereafter. The company was pleased with the oral argument on its behalf, and continues to believe that it ultimately will be successful in the judicial process. 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 additional capital in the future 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 the Company's dependence on key employees and on its strategic relationships with Brown & Williamson Tobacco Corporation in light of its combination 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 "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2007, as filed with the SEC on March 17, 2008, and other factors detailed from time to time in the Company's other filings with the SEC, 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 dissolvable smokeless 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 Petersburg, VA, an Executive, Scientific & Regulatory Affairs office in Bethesda, MD, and manufacturing and tobacco processing facilities in Chase City, VA and in Petersburg, VA. See Star’s website at: http://www.starscientific.com