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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-QSB
  x
    
    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 
  o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
  Commission file number 333-131853
 CEREPLAST, INC.
  Nevada
(State or other Jurisdiction of Incorporation or Organization)
    
    91-2154289
(IRS Employer Identification No.)
 
 
 x o
 o x
  o x




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TABLE OF CONTENTS
 PART I  FINANCIAL INFORMATION
    
    
    0ITEM 1. FINANCIAL STATEMENTSBALANCE SHEETSTATEMENTS OF OPERATIONSTATEMENTS OF CASH FLOWSNOTES TO THE FINANCIAL STATEMENTSITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONITEM 3. CONTROLS AND PROCEDURESPART 2  OTHER INFORMATIONITEM 1. LEGAL PROCEEDINGSITEM 2. ISSUANCE OF UNREGISTERED SECURITIES AND USE OF PROCEEDSITEM 3. DEFAULTS UPON SENIOR SECURITIES:ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERSITEM 5. OTHER INFORMATIONITEM 6. EXHIBITSSIGNATURESEXHIBIT 31.1EXHIBIT 32.1




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PART I  FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 
 
 ASSETSCurrent AssetsCash
    
    $
    154,738Accounts Receivable, Net
    
    
    124,217Inventory
    
    
    936,804Employee Advances
    
    
    5,796Prepaid Expenses
    
    
    Total Current Assets
    
    
    1,221,555Property and EquipmentProperty and Equipment
    
    
    996,372Accumulated Depreciation and Amortization
    
    
    (181,632
    )Net Property and Equipment
    
    
    814,740Other AssetsIntangibles, Net
    
    
    25,122Deposits
    
    
    26,344Total Other Assets
    
    
    51,466Total Assets
    
    $
    2,087,761LIABILITIES AND SHAREHOLDERS EQUITYCurrent LiabilitiesAccounts Payable
    
    $
    224,551Other Payable
    
    
    2,121Accrued Expenses
    
    
    35,088Credit Lines
    
    
    47,468Note Payable
    
    
    251,250Shareholders Loan
    
    
    157,908Capital Leases, Current Portion
    
    
    11,023Loan Payable, Current Portion
    
    
    2,495Total Current Liabilities
    
    
    731,904Long-Term LiabilitiesCapital Leases
    
    
    125,283Loan Payable
    
    
    25,429Total Long-Term Liabilities
    
    
    150,712Total Liabilities
    
    
    882,616Shareholders EquityPreferred Stock, $0.001 par value;
5,000,0000 authorized preferred shares
    
    
    Common Stock, $0.001 par value;
495,000,000 authorized shares;
201,131,189 shares issued and outstanding
    
    
    201,132Additional Paid in Capital
    
    
    7,763,023Deferred Equity Offering Cost
    
    
    (3,071,180
    )Retained Earnings/(Deficit)
    
    
    (3,687,830
    )Total Shareholders Equity
    
    
    1,205,145Total Liabilities and Shareholders Equity
    
    $
    2,087,761




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Three Months Ended
    
    
    Nine Months Ended9/30/2006
    
    
    9/30/2005
    
    
    9/30/2006
    
    
    9/30/2005REVENUES
    
    $
    169,061
    
    
    $
    172,935
    
    
    $
    448,910
    
    
    $
    464,052COST OF SALES
    
    
    93,474
    
    
    
    179,229
    
    
    
    276,830
    
    
    
    418,970GROSS PROFIT
    
    
    75,587
    
    
    
    (6,294
    )
    
    
    172,080
    
    
    
    45,082OPERATING EXPENSESDepreciation and Amortization
    
    
    36,334
    
    
    
    6,130
    
    
    
    100,877
    
    
    
    6,130Marketing Expense
    
    
    75,521
    
    
    
    
    
    
    
    202,997
    
    
    
    Professional Fees
    
    
    125,913
    
    
    
    15,135
    
    
    
    344,898
    
    
    
    15,135Rent Expense
    
    
    40,266
    
    
    
    5,216
    
    
    
    129,926
    
    
    
    5,216Salaries & Wages
    
    
    403,752
    
    
    
    3,918
    
    
    
    630,200
    
    
    
    3,918Other Operating Expenses
    
    
    516,646
    
    
    
    194,125
    
    
    
    856,295
    
    
    
    632,756TOTAL OPERATING EXPENSES
    
    
    1,198,432
    
    
    
    224,524
    
    
    
    2,265,193
    
    
    
    663,155LOSS FROM OPERATIONS BEFORE OTHER INCOME(EXPENSES)
    
    
    (1,122,845
    )
    
    
    (230,818
    )
    
    
    (2,093,113
    )
    
    
    (618,073
    )OTHER INCOME (EXPENSES)Interest Income
    
    
    222
    
    
    
    
    
    
    
    6,125
    
    
    
    Interest Expense
    
    
    (13,364
    )
    
    
    (14,988
    )
    
    
    (39,511
    )
    
    
    (33,386
    )(13,142
    )
    
    
    (14,988
    )
    
    
    (33,386
    )
    
    
    (33,386
    )LOSS BEFORE PROVISIONS FOR TAXES
    
    
    (1,135,987
    )
    
    
    (245,806
    )
    
    
    (2,126,499
    )
    
    
    (651,459
    )Provision for Taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    NET LOSS
    
    $
    (1,135,987
    )
    
    $
    (245,806
    )
    
    $
    (2,126,499
    )
    
    $
    (651,459
    )BASIC AND DILUTED LOSS PER SHARE
    
    $
    (0.01
    )
    
    $
    (0.00
    )
    
    $
    (0.01
    )
    
    $
    (0.00
    )WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING
BASIC AND DILUTED
    
    
    200,400,921
    
    
    
    151,590,529
    
    
    
    198,037,524
    
    
    
    146,140,443




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9 Months Ended9/30/2006
    
    
    9/30/2005CASH FLOWS FROM OPERATING ACTIVITIES:Net loss
    
    $
    (2,126,499
    )
    
    $
    (651,459
    )Adjustment to reconcile net loss to net cash
used in operating activitiesDepreciation and amortization
    
    
    100,877
    
    
    
    31,550Financing Discount Costs
    
    
    69,445Common stock issued for services
    
    
    294,630
    
    
    
    28,200(Increase) Decrease in:Accounts Receivable
    
    
    (77,254
    )
    
    
    (68,767
    )Inventory
    
    
    (646,699
    )
    
    
    46,000Employee advances
    
    
    (4,496
    )
    
    
    Deposits
    
    
    (3,907
    )
    
    
    (32,033
    )Prepaid Expenses
    
    
    172,686
    
    
    
    (1,753
    )Increase (Decrease) in:Accounts Payable
    
    
    (4,851
    )
    
    
    (73,877
    )Other Payables
    
    
    (4,698
    )
    
    
    2,920Accrued Expenses
    
    
    (72,552
    )
    
    
    (19,009
    )NET CASH USED IN OPERATING ACTIVITIES
    
    
    (2,303,318
    )
    
    
    (738,228
    )NET CASH USED IN INVESTING ACTIVITIES:Purchase of property and equipment, and intangibles
    
    
    (565,335
    )
    
    
    (17,700
    )NET CASH USED IN INVESTING ACTIVITIES
    
    
    (565,335
    )
    
    
    (17,700
    )CASH FLOWS FROM FINANCING ACTIVITIES:Bank Overdraft
    
    
    
    
    
    
    Advances from shareholders
    
    
    38,579
    
    
    
    36,838Payments on advances from shareholders
    
    
    (6,797
    )
    
    
    (45,634
    )Advances on Credit Lines
    
    
    251,250
    
    
    
    13,077Payments on Credit Line
    
    
    (20,160
    )
    
    
    Payments on Capital Leases
    
    
    (30,106
    )
    
    
    (31,638
    )Proceeds from Notes Payable
    
    
    
    
    
    
    150,000Payments on Term Loan Payable
    
    
    (57,237
    )
    
    
    (6,769
    )Proceeds from issuance of common stock and subscription receivable
    
    
    2,341,375
    
    
    
    648,423NET CASH PROVIDED BY FINANCING ACTIVITIES
    
    
    2,516,904
    
    
    
    764,297NET INCREASE (DECREASE) IN CASH
    
    
    (351,749
    )
    
    
    8,369CASH, BEGINNING OF PERIOD
    
    
    506,487
    
    
    
    4,705CASH, END OF PERIOD
    
    $
    154,738
    
    
    $
    13,074




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1.
    
    ORGANIZATION AND LINE OF BUSINESSOrganizationCereplast, Inc. (the Company) was incorporated in the state of Nevada on September 29, 2001.
The Company, based in Hawthorne, California, began commercial operations January 1, 2002 to
provide products and services for biodegradable packaging and organic waste systems in the food
service and beverage industries. In 2005, the Company started to redirect its operations toward
resin manufacturing and expanded its operations in renting industrial facility with additional
warehouse space.The accompanying interim unaudited condensed financial statements have been prepared in
accordance with accounting principles generally accepted in the United States for interim
financial information and pursuant to the rules and regulations of the Securities and Exchange
Commission. Accordingly, they do not include all of the information and footnotes required by
accounting principles generally accepted in the United States for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating results for the nine
month period ended September 30, 2006 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2006. For further information, refer to the financial
statements for the year ended December 31, 2005 and the notes thereto included in the Companys
Annual Report.Line of BusinessThe Company had developed a breakthrough technology to produce proprietary bio-based resins,
which are used as substitutes for conventional petroleum-based plastics in a variety of
applications, including the manufacture of food service items such as utensils, plates, cups,
and straws. The Company was validating its technology in selling finished products, but since
mid-2005, the Company started its transition to become only a resin manufacturer.2.
    
    CAPITAL STOCKDuring the nine months ended September 30, 2006 the Company received funds of $105,000 for
restricted common stock subscribed.Through a private placement, 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,
10,710,000 restricted shares of common stock were issued for cash of $1,326,250.In April 2006, the Company cancelled 678,106 shares relating to services rendered.On April 2, 2006, Yanosan Group exercised the option to convert the $50,000 outstanding
principal balance and accrued interest on its Customer Loan into 1,045,000 restricted shares of
common stock.On April 20, 2006, the Company issued 20,000 shares valued at $16,000 for services.On September 30, 2006 the Company issued 392,840 shares valued at $294,630 to various employees
and consultants for services rendered.As of September 30, 2006 the Company received funds of $625,000 under its Equity Line of Credit
Financing.3.
    
    EQUITY LINE OF FINANCINGOn February 13, 2006, the Company entered into a $10,000,000 private equity line of financing
agreement with Cumorah Capital, Inc. (the investor), with a commitment period of twenty-four
months. Based on the amount of the advance, the Investor can purchase shares of common stock at
an exchange rate equal to 90% of the market price during the pricing period. A 5,000,000 shares
commitment fee was paid by the Company at time of closing. As of the nine months ended September
30, 2006, the Company received $625,000 in exchange for 720,698 shares on the equity line and
has $9,375,000 in availability.4.
    
    RELATED PARTYAt September 30, 2006, the shareholders loan in the amount of $157,908, is from the
shareholders, and bear interest payable at the rate of 6% per annum.




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At September 30, 2006, the Note Payable in the amount of $251,250, is from Cumorah Capital,
Inc., and bears interest payable at the rate of 6% per annum.
On or about January 4, 2006, the majority shareholder transferred 2,130,000 shares of common
stock to various Transferees and reissued certificates with restrictive transfer legend to the
Transferees pursuant to Section 4(1) of the Act.5.
    
    SUBSEQUENT EVENTSOn October 4, 2006, the Company received funds of $200,000 in exchange for 500,000 restricted
shares.




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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)
    
    failure to commercialize Cereplasts technology or to make sales;(f)
    
    changes in demand for Cereplasts products and services;(g)
    
    rapid and significant changes in markets;(h)
    
    litigation with or legal claims and allegations by outside parties;(i)
    
    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, 2006 compared to the
Three and Nine months Ended September 30, 2005.
 Revenues
  Cost of Sales
  Gross Profit
  Operation Expenses
  Research and Development




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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 1,050,000 restricted shares of common stock at $0.10 per share to
accredited investors for aggregate consideration of $105,000 during the first quarter.
    
    The Company sold 10,710,000 restricted shares of common stock at $0.1238 per share to
accredited investors for aggregate consideration of $1,326,250 during the first quarter.
    
    On October 4, 2006, the Company received funds of $200,000 in exchange for
500,000 restricted shares.
  
 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 and Principal
Accounting/Financing Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.32.1
    
    Certification by the Chief Executive Officer and Principal
Accounting/Financing 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 ScheerPresident, Chief Executive Officer, Principal Financial/Accounting
Officer and Chairman Dated: November 14, 2006