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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-QSB
 (Mark One)
 þ
    
    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended
September 30, 2007
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from ____ to ____
 Commission file number 333-_________
 CEREPLAST, INC.
  Nevada
(State or other Jurisdiction of Incorporation or Organization)
    
    91-2154289
(IRS Employer Identification No.)
 
 
 þ o
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TABLE OF CONTENTS
 PagePART I  FINANCIAL INFORMATIONITEM 1. FINANCIAL STATEMENTSBALANCE SHEET
    
    
    3STATEMENTS OF OPERATION
    
    
    4STATEMENTS OF CASH FLOWS
    
    
    5NOTES TO THE FINANCIAL STATEMENTS
    
    
    6ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
    
    
    8ITEM 3. CONTROLS AND PROCEDURES
    
    
    10PART 2  OTHER INFORMATIONITEM 1. LEGAL PROCEEDINGS
    
    
    11ITEM 2. ISSUANCE OF UNREGISTERED SECURITIES AND USE OF PROCEEDS
    
    
    11ITEM 3. DEFAULTS UPON SENIOR SECURITIES:
    
    
    11ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    11ITEM 5. OTHER INFORMATION
    
    
    11ITEM 6. EXHIBITS
    
    
    11SIGNATURES
    
    
    12Exhibit 31.1Exhibit 32.1
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PART I  FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 
 
 ASSETSCurrent AssetsCash
    
    $
    10,972,838Accounts Receivable, Net
    
    
    294,789Inventory
    
    
    1,912,775Prepaid Expenses and Other Current Assets
    
    
    54,011Total Current Assets
    
    
    13,234,413Property and EquipmentProperty and Equipment
    
    
    2,716,105Accumulated Depreciation and Amortization
    
    
    (480,328
    )Net Property and Equipment
    
    
    2,235,777Other AssetsInvestments
    
    
    500Intangibles, Net
    
    
    20,001Deposits
    
    
    39,375Total Other Assets
    
    
    59,876Total Assets
    
    $
    15,530,066LIABILITIES AND SHAREHOLDERS EQUITYCurrent LiabilitiesAccounts Payable
    
    $
    681,865Other Payable
    
    
    715Accrued Expenses
    
    
    199,241Capital Leases, Current Portion
    
    
    74,387Loan Payable, Current Portion
    
    
    10,951Total Current Liabilities
    
    
    967,159Long-Term LiabilitiesCaptial Leases
    
    
    106,847Loan Payable
    
    
    6,732Total Long-Term Liabilities
    
    
    113,579Total Liabilities
    
    
    1,080,738Shareholders EquityPreferred Stock, $0.001 par value 5,000,000 authorized preferred shares, none issued and outstanding
    
    
    Common Stock, $0.001 par value; 495,000,000 authorized shares; 258,542,852 shares issued and
outstanding
    
    
    258,543Additional Paid in Capital
    
    
    26,467,562Deferred Equity Offering Cost
    
    
    (2,427,075
    )Retained Earnings/(Deficit)
    
    
    (9,849,702
    )Total Shareholders Equity
    
    
    14,449,328Total Liabilities and Shareholders Equity
    
    $
    15,530,066
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Three Months Ended
    
    
    Nine Months Ended9/30/2007
    
    
    9/30/2006
    
    
    9/30/2007
    
    
    9/30/2006GROSS SALES
    
    $
    661,742
    
    
    $
    169,061
    
    
    $
    1,609,020
    
    
    $
    448,910Sales Discounts, Returns & Allowances
    
    
    (29,499
    )
    
    
    
    
    
    
    (165,852
    )
    
    
    NET SALES
    
    
    632,243
    
    
    
    169,061
    
    
    
    1,443,168
    
    
    
    448,910COST OF SALES
    
    
    514,697
    
    
    
    93,474
    
    
    
    1,329,176
    
    
    
    276,830GROSS PROFIT
    
    
    117,546
    
    
    
    75,587
    
    
    
    113,992
    
    
    
    172,080OPERATING EXPENSESDepreciation and Amortization
    
    
    108,162
    
    
    
    36,334
    
    
    
    256,374
    
    
    
    100,877Financing Discount Costs
    
    
    
    
    
    
    
    
    
    
    816,385
    
    
    
    Marketing Expense
    
    
    47,699
    
    
    
    75,521
    
    
    
    88,529
    
    
    
    202,997Professional Fees
    
    
    310,466
    
    
    
    125,913
    
    
    
    541,544
    
    
    
    344,898Rent Expense
    
    
    111,392
    
    
    
    40,266
    
    
    
    215,550
    
    
    
    129,926Salaries & Wages and Stock Based Compensation
    
    
    837,320
    
    
    
    403,752
    
    
    
    1,948,766
    
    
    
    630,200Other Operating Expenses
    
    
    430,223
    
    
    
    516,646
    
    
    
    1,272,302
    
    
    
    856,295TOTAL OPERATING EXPENSES
    
    
    1,845,262
    
    
    
    1,198,432
    
    
    
    5,139,450
    
    
    
    2,265,193LOSS FROM OPERATIONS BEFORE OTHER
INCOME(EXPENSES)
    
    
    (1,727,716
    )
    
    
    (1,122,845
    )
    
    
    (5,025,458
    )
    
    
    (2,093,113
    )OTHER INCOME (EXPENSES)Interest Income
    
    
    133,624
    
    
    
    222
    
    
    
    153,439
    
    
    
    6,125Interest Expense
    
    
    (7,963
    )
    
    
    (13,364
    )
    
    
    (32,598
    )
    
    
    (39,511
    )125,661
    
    
    
    (13,142
    )
    
    
    120,841
    
    
    
    (33,386
    )LOSS BEFORE PROVISIONS FOR TAXES
    
    
    (1,602,055
    )
    
    
    (1,135,987
    )
    
    
    (4,904,617
    )
    
    
    (2,126,499
    )Provision for Taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    NET LOSS
    
    $
    (1,602,055
    )
    
    $
    (1,135,987
    )
    
    $
    (4,904,617
    )
    
    $
    (2,126,499
    )BASIC AND DILUTED LOSS PER SHARE
    
    $
    (0.01
    )
    
    $
    (0.01
    )
    
    $
    (0.02
    )
    
    $
    (0.01
    )WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING
BASIC AND DILUTED
    
    
    258,179,019
    
    
    
    200,400,921
    
    
    
    231,570,067
    
    
    
    198,037,524
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Nine Months Ended9/30/2007
    
    
    9/30/2006CASH FLOWS FROM OPERATING ACTIVITIES:Net loss
    
    $
    (4,904,617
    )
    
    $
    (2,126,499
    )Adjustment to reconcile net loss to net cash
used in operating activitiesDepreciation and Amortization
    
    
    256,374
    
    
    
    100,877Financing Discount Costs
    
    
    816,384
    
    
    
    69,445Common Stock Issued for Services
    
    
    863,232
    
    
    
    294,630(Increase) Decrease in:Accounts Receivable
    
    
    (162,318
    )
    
    
    (77,254
    )Inventory
    
    
    (936,695
    )
    
    
    (646,699
    )Employee Advances
    
    
    
    
    
    
    (4,496
    )Deposits
    
    
    (13,031
    )
    
    
    (3,907
    )Prepaid Expenses
    
    
    (5,952
    )
    
    
    172,686Increase (Decrease) in:Accounts Payable
    
    
    (85,085
    )
    
    
    (4,851
    )Other Payables
    
    
    (186
    )
    
    
    (4,698
    )Accrued Expenses
    
    
    151,331
    
    
    
    (72,552
    )NET CASH USED IN OPERATING ACTIVITIES
    
    
    (4,020,563
    )
    
    
    (2,303,318
    )NET CASH USED IN INVESTING ACTIVITIES:Purchase of Property and Equipment, and Intangibles
    
    
    (1,286,827
    )
    
    
    (565,335
    )NET CASH USED IN INVESTING ACTIVITIES
    
    
    (1,286,827
    )
    
    
    (565,335
    )CASH FLOWS FROM FINANCING ACTIVITIES:Advances/(Payments) on Shareholder Loans
    
    
    (372,074
    )
    
    
    31,782Advances/(Payments) on Credit Lines
    
    
    (47,468
    )
    
    
    231,090Advances/(Payments) on Capital Leases
    
    
    14,381
    
    
    
    (30,106
    )Advances/(Payments) on Notes Payable
    
    
    (250,000
    )
    
    
    Advances/(Payments) on Term Loan Payable
    
    
    (7,748
    )
    
    
    (57,237
    )Proceeds from Issuance of Common Stock
    
    
    16,738,115
    
    
    
    2,341,375NET CASH PROVIDED BY FINANCING ACTIVITIES
    
    
    16,075,206
    
    
    
    2,516,904NET INCREASE IN CASH
    
    
    10,767,816
    
    
    
    (351,749
    )CASH, BEGINNING OF PERIOD
    
    
    205,022
    
    
    
    506,487CASH, END OF PERIOD
    
    $
    10,972,838
    
    
    $
    154,738
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Organization
 th
  Line of Business
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
    
    Through an initial private placement completed on March 10, 2007, which was made in
reliance upon an exemption from registration under rule 506 of Regulation D promulgated
under Section 4(2) of the Securities Act of 1933, the Company issued 7,484,999 restricted
 shares of common stock for gross cash proceeds of $2,245,500.
    
    Through an initial private placement completed on July 2, 2007, which was made in
reliance upon an exemption from registration under rule 506 of Regulation D promulgated
under Section 4(2) of the Securities Act of 1933, the Company issued 38,341,053 restricted
 shares of common stock for gross cash proceeds of $14,569,600. The subscribers to the
private placement were primarily
comprised of institutions focused on the renewable and clean technology sectors, including
UBS, Fortis Investments, Clariden Leu, Credit Suisse and Swisscanto. The shares acquired
through this private placement were subsequently registered with the SEC through an SB-2
filing, which was declared effective on July 11, 2007.
    
    The Company received funds of $1,830,000 under its Equity Line of Financing for
5,168,645 common stock shares issued.
    
    The Company issued 4,282,054 shares of common stock valued at $2,321,599 to various
employees and consultants for services rendered.
     
    
    A loan from a shareholder in the amount of $162,705, which bore PIK interest at the
rate of 6% per year. The principal was due in June 2007. On April 4, 2007 the Company
repaid all fully outstanding principal and interest under this loan.
    
    A loan from an affiliate in the amount of $200,000, which bore PIK interest at the rate
of 7.00% per annum, and matures in October 2008. On June 27, 2007 the Company repaid all
fully outstanding principal and interest under this loan.
    
    A loan from an affiliate in the amount of $250,000, which bore PIK interest at the rate
of 6.00% per annum, and matures in 2007. As of March 31, 2007 the Company had repaid all
fully outstanding principal and interest under this loan.
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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
 Cautionary Statements
  
    
    statements concerning the potential benefits that Cereplast, Inc. (the Company, we,
or Cereplast) may experience from its business activities and certain transactions it
contemplates or has completed; and
    
    statements of Cereplasts expectations, beliefs, future plans and strategies,
anticipated developments and other matters that are not historical facts. These statements
may be made expressly in this Form 10-QSB. You can find many of these statements by
looking for words such as believes, expects, anticipates, estimates, opines, or
similar expressions used in this Form 10-QSB. These forward-looking statements are subject
to numerous assumptions, risks and uncertainties that may cause Cereplasts actual results
to be materially different from any future results expressed or implied by Cereplast in
those statements. The most important facts that could prevent Cereplast from achieving its
stated goals include, but are not limited to, the following:
 (a)
    
    volatility or decline of Cereplasts stock price;(b)
    
    potential fluctuation in quarterly results;(c)
    
    failure of Cereplast to earn revenues or profits;(d)
    
    inadequate capital to continue or expand its business, inability to
raise additional capital or financing to implement its business plans;(e)
    
    changes in demand for Cereplasts products and services;(f)
    
    rapid and significant changes in markets;(g)
    
    litigation with or legal claims and allegations by outside parties;(h)
    
    insufficient revenues to cover operating costs.
   Current Overview
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Critical Accounting Policies
   Revenue Recognition
 Results of Operations for the Three Months and Nine Months Ended September 30, 2007 compared to the
Three Months and Nine Months Ended September 30, 2006.
 Sales
 Cost of Sales
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Gross Profit
 Operating Expenses
 Net Loss
 Liquidity and Capital Resources
      
 Item 3. Controls and Procedures
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PART 2  OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 2. ISSUANCE OF UNREGISTERED SECURITIES AND USE OF PROCEEDS
  
    
    The Company sold 7,484,990 restricted shares of common stock to accredited investors for
aggregate consideration of $2,245,500 during the first quarter.
    
    On June 21, 2007, accredited investors purchased an aggregate of 38,341,053 shares of
common stock at $0.38 per share for an aggregate purchase price of $14,569,600. The common
stock was offered and sold to the Investors in a private placement transaction made in
reliance upon exemptions from registration pursuant to Section 4(2) under the Securities
Act of 1933 and Rule 506 promulgated thereunder. Each of the Investors are accredited
investors as defined in Rule 501 of Regulation D promulgated under the Securities Act of
1933.
  
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES:
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 ITEM 5. OTHER INFORMATION
  
 ITEM 6. EXHIBITS
 31.1
    
    Certification by the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification by the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
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SIGNATURES
  CEREPLAST, INC.By:
    
    /s/ Frederic ScheerFrederic Scheer
President, Chief Executive Officer, and ChairmanDated: November 5, 2007By:
    
    /s/Stephan GardenStephan Garden
Senior Vice President Finance and Business DevelopmentDated: November 5, 2007
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EXHIBIT INDEX
 ExhibitNo.
    
    Description31.1
    
    Certification by the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification by the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
  13