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Company licenses Star products, leases Chase City plant

SoVaNow.com / October 09, 2013
Star Scientific, which until 2012 was in the business of producing and marketing alternative tobacco products, has entered into its first licensing agreement – this one with Starion, LLC, a Virginia company formed by, among others, Sheldon Bogaz, the former Vice President of Star Scientific.

On October 2, 2013, Star Scientific, Inc. sold to Starion, for nearly $600,000, equipment and inventory previously used by the company to manufacture its low-TSNA dissolvable smokeless tobacco lozenges. The purchase price was secured by two promissory notes – one for $375,000 covering equipment, and the other for $214,500, covering inventory.

Included in the deal was a license agreement granting Starion the right to use trademarks once used in Star’s now discontinued tobacco related business, and a non-exclusive sublicense covering patents for producing low-TSNA tobacco, and for low-TSNA dissolvable smokeless tobacco products.

Under the agreements, Star receives royalty payments for the sale and manufacture of the dissolvable smokeless tobacco products for a minimum of ten years. And, for the first two years, Star agrees to not compete with Starion in the sale of dissolvable smokeless tobacco products.

Lastly, Star will sublease to Starion a portion of its plant in Chase City. The building and sublease are the subject of an upcoming Mecklenburg County IDA meeting, which owns the building.

Starion LLC, was formed October 18, 2012, before Star Scientific announced it was moving into the dietary supplement market. Since then, Starion has registered to do business in a number of States, including, California, Georgia, Oklahoma, Louisiana, and Mississippi, and it has registered a federal trademark, with the US Patent and Trademark Office, for the name and logo of Cruise electronic cigarettes.

At the end of 2012, Star Scientific announced it was getting out of the tobacco business, but would continue to look for “licensing opportunities related to our dissolvable tobacco products and technology, including that relating to our Ariva BDL™ and Stonewall BDL™ modified risk tobacco products and the patented StarCured® tobacco curing process used in connection with the manufacturing of our low TSNA dissolvable tobacco products.”

More recently, Star Scientific, and its founder Johnnie Williams have been in the forefront of an ongoing ethical investigation into Williams’ ties to Governor Bob McDonnell, his wife and daughter, and Attorney General and Gubernatorial Candidate Ken Cuccinelli – all of whom have received gifts and donations from Williams, and who owned stock in Star Scientific.

Star Scientific is also embroiled in a dispute over $700,000 in unpaid taxes, plus interest arising from levies on its tobacco barns in Mecklenburg County. If the company loses the case, currently languishing in the Circuit Court in Boydton, it could face tax liabilities of up to $1.7 million, it has told investors.

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