Dragonite International Limited
(incorporated in the Cayman Islands with limited liability)
(Stock Code: 329)
VOLUNTARY ANNOUNCEMENT

This is a voluntary announcement made by Dragonite International Limited (the “Company, together with its subsidiaries referred to as the “Group”). The purpose of this announcement is to keep the Shareholders and potential investors of the Company informed of the latest developments of the Company. Unless the context requires otherwise, capitalised terms used herein shall have the same meanings as those defined in the announcement of the Company dated 1 August 2011. GRANT OF NEW US PATENT — US PATENT NO. 8156944 The board of directors of the Company (the “Board”) is pleased to announce that on 17 April 2012, the Group’s patent for the “Aerosol Electronic Cigarette” has been successfully issued in the United States by the United States Patent and Trademark Office as United States Patent No. 8156944, (the “944 Patent”) to Mr. Hon Lik, inventor of the electronic cigarette, executive director of the Company, and has been assigned in favour of Ruyan Investment (Holdings) Limited, a wholly owned subsidiary of the Company. The 944 Patent embodies novel technologies of the electronic cigarette and is an important addition to the Group’s intellectual property portfolio. The 994 Patent is expected to facilitate new supply agreements with distributors in the near future.

COMPLAINT FOR PATENT INFRINGEMENT — US PATENT NO. 7832410 Reference is made to the Company’s voluntary announcements dated 13 January 2011, 28 January 2011 and 1 August 2011. The 2nd Complaint (Case No. 11-6268), filed on 29 July 2011, has been consolidated with the Amended Complaint (Case No. 11-367) for discovery and claim construction purposes. Of the total 11 defendants, three have defaulted, namely, Smoking Everywhere Inc, Instead LLC and Load and Fold dba Magic Puffer, and two (Jeffrey Orth dba Janty USA and Janty USA, LLC) have consented to judgment in favour of Ruyan Investment (Holdings) Limited, the Plaintiff. The Board is also pleased to announce that the Plaintiff has executed a settlement agreement with defendant BLEC, LLC which provides for the payment of monetary compensation to the Plaintiff. A request for dismissal without prejudice of defendant BLEC, LLC from the case will be filed in due course. The Company will keep the Shareholders and potential investors of the Company informed of any material development in connection with the complaint herein mentioned by way of further announcement(s) as and when appropriate.

By order of the Board Dragonite International Limited Gary Drew Douglas Managing Director Hong Kong, 18 April 2012

This week, the federal Government Accounting Office (GAO) issued a report titled “Large Disparities in Rates for Smoking Products Trigger Significant Market Shifts to Avoid Higher Taxes.”

The document shows the impact of the different federal tax rates on various tobacco products as a result of the federal cigarette and tobacco tax increases which went into effect on April 1, 2009, the National Association of Tobacco Outlets (NATO) reported.

The report further found that market shifts are causing revenue losses for the federal government and recommended that Congress should consider equalizing tax rates on roll-your-own and pipe tobacco.

Market Shifts
Below is a chart that shows the federal excise tax rates on tobacco products before and after the April 1, 2009 tax increase:

The GAO noted monthly sales of pipe tobacco increased from about 240,000 pounds in January 2009 to more than three million pounds in September 2011. Monthly sales of roll-your-own tobacco, meanwhile, decreased from approximately two million pounds to 315,000 pounds in the same time frame.

Similarly, large cigar sales rose from 411 million cigars to more than one billion cigars, while small cigar sales declined from about 430 million cigars to 60 million cigars.

The report showed that given these market shifts in pipe versus roll-your-own tobacco and large cigars versus small cigars, the federal government experienced revenue losses of between $615 million and $1.1 billion in tobacco taxes.

The GAO report recommended that Congress “should consider equalizing tax rates on roll-your-own and pipe tobacco and, in consultation with Treasury [the U.S. Treasury Department], consider options for reducing tax avoidance due to tax differentials between small and large cigars.”

http://www.csdecisions.com/2012/04/20/gao-suggests-equalizing-tobacco-tax-rates/

What are your thoughts?

Norway has been documented recently as the second European country to embrace the substitution of snus for cigarettes, confirming the “Swedish experience” of tobacco harm reduction. Karl Erik Lund, a researcher at the Norwegian Institute for Alcohol and Drug Research, has published a series of studies illustrating the “Norwegian experience” (here and here). His newest study shows that a smoker’s willingness to try snus is closely correlated with one’s perception of the product’s health risks relative to cigarettes. The study appears in Nicotine & Tobacco Research (abstracthere).

The full article can be found at http://rodutobaccotruth.blogspot.com/

By Lou Maiellano.

Imagine a natural ingredient so promising and intriguing that it is being clinically evaluated to address a variety of illnesses and conditions, including depression, schizophrenia, Alzheimer’s, Tourette syndrome, ADHD, anger management and anxiety. Think about it, an ingredient that would address conditions that are expected to be the scourge of the 21st century.

According to the Alzheimer’s Association, in 2010 the cost of direct and indirect medical and caretaker resources for those afflicted with Alzheimer’s and age-related dementia approached $210 billion. The association estimates that Alzheimer’s will cost the U.S. $20 trillion over the next 40 years.

Now, think about a treatment regimen that would include an ingredient that has shown significant promise in delaying the onset of Alzheimer’s, suppressing its symptoms and managing its debilitating effects.

Think about similar treatment regimens for clinical depression, anxiety and for chronic pain. This sounds incredible doesn’t it?  Yes, it is incredible. But, it’s also ironic, because the ingredient is nicotine and the source of the ingredient is tobacco, often referred to as the public health scourge of the 20th century.

Healthy Benefits
In 2000, research scientists at Stanford University set out to prove that nicotine damages blood vessels. Much to their surprise they found just the opposite. Nicotine prompted the growth of new blood vessels. This finding has led to studies suggesting that nicotine could be instrumental in assisting diabetes patients, who all too often lose lower extremities to amputation—a result of poor blood circulation.

Today, however, the downside of this promising wonder ingredient is that the most efficient way to ingest nicotine is by inhaling the smoke of its burning source—tobacco. In other words, the dangers of the delivery system may very well outweigh the benefits of the ingredient that is being delivered. So, if we could separate the ingredient from the way it is most commonly delivered, we might be able to have a calm, rational discussion about why people consume tobacco and use nicotine. We are a long way from clinical results that demonstrate the positive attributes of tobacco and the nicotine it contains, but we can begin to have a more beneficial discussion about tobacco and nicotine in their many forms and formulations.

According to many well-meaning, and some not-so-well-meaning, groups all tobacco and nicotine use leads to cigarette smoking and inevitable illness and premature death. But, just as much, if not more, research suggests that alternative forms of tobacco—snus, dissolvables and alternative nicotine delivery systems, such as e-cigarettes, lozenges and gums, are helping millions of users quit or significantly reduce cigarette consumption. Rather than leading to smoking, these alternatives are leading to declines in U.S. smoking rates as measured recently by manufacturers like Altria and Reynolds.

In time I expect that real, scientific evidence will begin to sway the argument and the vast benefits of nicotine will become apparent and accepted. But, in the meantime it’s essential to separate the tobacco/nicotine reality from the smoking issue. One of the ways we do this is by alerting the general public to the ongoing clinical studies and the potential for good that nicotine appears to have. It’s critical that we not allow the anti-smoking radicals to stain new forms of nicotine delivery with the same brush that they have painted smoking.

It’s clear that new battle lines are being drawn and the industry cannot afford to lose this battle. The industry needs to fight hard to separate tobacco and nicotine from smoking and push hard for an individual’s right to purchase and use nicotine-containing alternatives. It’s essential that this fight not be fought exclusively by large tobacco companies. Retailers and distributors need to join the fray and find a win. The stakes are too high to sit idly by.

http://www.csdecisions.com/2012/04/16/redrawing-the-battle-lines/

Please get the message out! Enjoy the insight! Comments are welcome.

The investment, which is being made by Catterton Growth Partners L.P., will be used to accelerate NJOY’s brand awareness, growth and other business development opportunities, according to the company’s announcement.

“NJOY and Catterton are a terrific fit, as both companies are the ‘Gold Standard’ in their respective businesses,” said Craig Weiss, president and CEO of NJOY. “We welcome Catterton not just as an investor, but as a strategic partner that can help take NJOY to the next level.”

Catterton Partners is banking on its investment to continue the momentum of NJOY’s market leadership in the category.

“NJOY is a market leader with outstanding products that have significant consumer appeal and are poised for broader acceptance in the marketplace,” said Michael Farello, a partner with Catterton Partners. “With its wide network of distribution partners, deep new product pipeline and a strong executive team, NJOY is positioned for significant growth. We look forward to working with NJOY and utilizing our financial and operational resources, as well as our expertise in consumer products, to support the company’s long-term business plans and success.”

Roy Anise, executive vice president of NJOY, said Catterton chooses only the best companies in which to invest, as evidenced by the firm’s outstanding track record. “With Catterton’s help, their portfolio companies have significantly increased their brand strength, distribution and market share, and these are the same goals that we have for NJOY,” he said.

Scottsdale, Ariz.-based NJOY is available in more than 20,000 retail locations nationwide, including more than half of the nation’s top 20 convenience store chains. The brand offers a variety of rechargeable and non-rechargeable electronic cigarette products made for adult smokers. According to NJOY, these products provide nicotine and rich tobacco and menthol flavor without smoke or odor, and cost less than traditional cigarettes.

http://www.csnews.com/top-story-njoy_electronic_cigarettes_receives_$20m_investment-60838.html?utm_source=CSNDaily&utm_medium=newsletter&utm_campaign=1884

BERLIN, MD – Maryland officials say cigarette smuggling is on the rise, and it’s costing the state hundreds of thousands of dollars in lost tax revenue, the Delmarva Daily Times reports.

Maryland assesses a $2-per-pack excise tax, and the state is focused on trying to keep those tax dollars within the state.

Comptroller Peter Franchot “has always been a strong proponent for aggressive enforcement of Maryland’s tax laws,” said his spokesperson, Christine Feldmann. “It’s a matter of fairness. Criminals who knowingly violate Maryland’s tax laws hurt small businesses that follow the rules. It’s about leveling the playing field.”

Feldmann said the practice continues because the penalties for violators are “not very bad,” creating an environment that breeds “multiple repeat offenders.”

Currently, smugglers face criminal charges of transporting and possession of untaxed cigarettes. The former carries a fine of $50 per carton and a threat of up to two years in prison, while the latter is a misdemeanor punishable by up to a $1,000 fine and one year in prison.

This year, state police at the Berlin Barrack are on pace to seize roughly four times more cigarettes than last year. They made four arrests last year, uncovering 1,737 cartons, while this year, they have already made five arrests and seized about 1,600 cartons.

It is a violation of Maryland law to enter the state with more than two packs of cigarettes purchased out-of-state.

Franchot is sponsoring legislation to stiffen the smuggling penalties: one would increase the per-carton penalty to a $150 fine and imprisonment for up to two years — and that’s for first-time offenders. Repeat offenders would face a fine of $300 per carton and up to five years in jail. Feldmann said any county that borders a low-tax state is a target, including Cecil and Prince George’s counties.

Police said smugglers have been taking north-south routes to unload cargo in New York City, where the combined city and state taxes total $6.46 a pack.

Lt. Krah Plunkert in Princess Anne, Maryland, said his troopers have seen a significant increase in cigarette smuggling, and they have already made eight arrests this year. By comparison, they made just two arrests last year. He said he believes cigarette smuggling is funding organized crime, much like alcohol and bootlegging nearly a century ago.

“There has to be some type of group that puts it together,” he said. “I don’t think they’re just putting the money back in their pocket and purchasing houses and nice vehicles.”

http://www.nacsonline.com/NACS/News/Daily/Pages/ND0404122.aspx?src=newsarticle

Up to now, Camel Snus Mint has been available only in the Minneapolis-St. Paul area since the first quarter of 2011. Starting April 2, the smokeless tobacco product is available in select retail outlets across 27 states, according to Richard J. Smith, spokesperson for Reynolds American Inc., parent company of RJRT.

Those states are Washington, Oregon, California, Nevada, Utah, Arizona, Colorado, New Mexico, Kansas, Oklahoma, Texas, Minnesota, Iowa, Missouri, Wisconsin, Illinois, Mississippi, Indiana, Ohio, Kentucky, Tennessee, North and South Carolina, Georgia, Alabama, Florida and New York.

Camel Snus Mint offers adult tobacco consumers a traditional mint style through a proprietary blend of various mint flavors. The addition of this style further broadens Camel Snus’ portfolio, with mint being a long-established category in smokeless tobacco, Smith said.

“As trends in tobacco use change, Camel is transforming by offering adult smokers options, like Camel Snus Mint, to consider switching to,” he added.

As CSNews Online previously reported, RJRT began its first trial of Camel SNUS in April 2006, with national distribution beginning in January 2009. Currently, six styles are offered: Winterchill, Robust, Mellow, Frost, Frost Large (in select markets) and now Mint.

http://www.csnews.com/top-story-r.j._reynolds_expands_camel_snus_line-60809.html?utm_source=CSNDaily&utm_medium=newsletter&utm_campaign=1875

General, Swedish Match’s flagship product, will be available in convenience stores and tobacco outlets in the metropolitan areas of New York, Los Angeles, Minneapolis, Phoenix, Denver, Nashville and throughout the state of Ohio with the two newest flavors in its product assortment, Nordic Mint and Classic Blend. Those flavors were launched in Chicago, Dallas and Philadelphia in mid-2011.

“These particular markets were chosen because they meet a number of important criteria to maximize the success of the General brand — from local smoking restrictions to the number of adult tobacco consumers and the potential opportunity for the snus category as a whole,” said Clark Darrah, vice president, Next Generation Products, for Swedish Match.

“Adult tobacco consumers are increasingly looking for discrete, satisfying alternatives to traditional smokeless tobacco and cigarettes,” Darrah continued. “Swedish snus and the General brand, in particular, has been the No. 1 choice for discrete tobacco satisfaction among millions of Swedes for decades and now American consumers are finding it to be a superior choice to traditional American smokeless products.”

Promotional support for the market expansion will include print and online advertisements, as well as direct mail, sampling events and a word-of-mouth program called The General’s Club. More details on The General’s Club will be announced at a later date.

http://www.csnews.com/top-story-swedish_match_enters_seven_new_u.s._markets-60828.html?utm_source=CSNDaily&utm_medium=newsletter&utm_campaign=1882

WASHINGTON – NACS urging its members to call on Congress for support of legislation that would close a tax loophole that is allowing customers to mass-produce their own cartons of cigarettes with lower-taxed pipe tobacco.

In recent years, roll-your-own (RYO) tobacco machines have surfaced at various traditional and non-traditional retail locations, which put convenience stores at a competitive disadvantage.

Legislation supported by NACS seeks to provide regulatory certainty that is compromised by the use of lower-taxed pipe tobacco in RYO machines. NACS is urging members of Congress to support H.R. 4134, a bill introduced by Rep. Diane Black (R-TN) that would level the playing field for all retailers selling tobacco products and provide long-term regulatory and tax certainty. Similar legislation has passed in the Senate as part of the Highway bill.

The legislation does not call for a new tax on RYO cigarettes made with a commercial RYO machine — it simply ensures that all state and federal tobacco taxes are legally collected.

Last week attendees of NACS Day on Capitol Hill brought this issue to the attention of members of Congress — but more action is needed — ask your legislator to support H.R. 4134.

Read more about RYO in NACS Magazine and in the Government Relations section.

http://www.nacsonline.com/NACS/News/Daily/Pages/ND0329121.aspx

What are your thoughts?