NJOY, an early pioneer in the e-cigarette industry specializing in disposable product lines, has filed a voluntary petition for relief under Chapter 11 bankruptcy. The company is also well-known for its participation in the historic 2010 lawsuit Sottera Inc. v. U.S. Food and Drug Administration which forced the FDA to regulate e-cigarettes as tobacco products rather than medical devices. Sottera Inc. became NJOY in 2012.
Citing poor sales and the high compliance costs associated with the new FDA deeming regulations, the final nail in the NJOY coffin seems to come from the failure of the Kings 2.0 device. NJOY President Jeffrey Weiss claims that the Scottsdale, Arizona-based firm sustained significant losses after launching the new product line, an updated version of the previously successful Kings disposable e-cig. Gross sales of King line declined $7.4 million from the $93 million reported revenues of 2013.
The case was filed on September 16, 2016 in the U.S. Bankruptcy Court for the District of Delaware. The hearing is set for Sept. 20 at 9:30 a.m. EST. with the Honorable Christopher Sontchi presiding.
NJOY bankruptcy burns celebrity investors
Some rather high-profile investors were caught off-guard by the recent news, including Singer Bruno Mars, a long-time NJOY user and vaping enthusiast. Others include PayPal founder Peter Thiel and the controversial Sean Parker, famous for the now-defunct Napster music sharing platform. Parker provided NJOY with an initial $10 million investment, saying at the time that e-cigs had the potential to make convention tobacco cigarettes “obsolete.”
News of the NJOY bankruptcy comes just five months after the announcement of the new FDA deeming regulations and just six weeks after they officially went into effect. It is the first major manufacturer of electronic cigarettes to file for bankruptcy in the United States, according to general counsel at Reorg Research, Jude Gorman. It is estimated that NJOY had an accumulated deficit of over $234.4 million at the time of the filing. According to Gorman, “All of the e-cigarette companies are affected by the regulations, but NJOY has a lot of debt it can’t pay.”
A spokesperson for NJOY claims that their products can still be located in 21,249 stores, including 23 of the top 25 convenience store chains. The company also boasts a nearly 4.5% of the U.S. e-cig market. While the FDA deeming regulations and their associated costs of compliance are a contributing factor to the NJOY bankruptcy filing, the declining popularity of disposable e-cigarettes as compared to more high-tech, open systems may be a more significant factor.
(Related Article: FDA RESPONDS TO NICOPURE LABS AND R2B SMOKE-FREE LAWSUITS)
Share this post