##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2011
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934
 Commission File Number 001-34689
 CEREPLAST, INC.
 (Exact name of registrant as specified in its charter)
 Nevada
(State or Other Jurisdiction of Incorporation or Organization)
    
    91-2154289
(I.R.S. Employer Identification No.)300 N. Continental Boulevard, Suite 100El Segundo, California
    
    90245(Address of Principal Executive Office)
    
    (Zip Code)
 (310) 615-1900
(Registrants Telephone Number, Including Area Code)
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
 o þ




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##### 



CEREPLAST, INC.
FORM 10-Q
TABLE OF CONTENTS
 PagePART IFINANCIAL INFORMATIONItem 1. FINANCIAL STATEMENTS
    
    
    3Consolidated Balance Sheets at March 31, 2011 and December 31, 2010
    
    
    3Consolidated Statements of Operations and Other
Comprehensive Income for the Three months ended March 31, 2011 and 2010
    
    
    4Consolidated Statements of Cash Flows for the Three months ended March 31, 2011 and 2010
    
    
    5Notes to the Consolidated Financial Statements
    
    
    6Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    
    
    15Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    21Item 4T CONTROLS AND PROCEDURES
    
    
    21PART IIOTHER INFORMATIONItem 1. LEGAL PROCEEDINGS
    
    
    22Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
    
    
    22Item 3. DEFAULTS UPON SENIOR SECURITIES
    
    
    22Item 4. RESERVED
    
    
    22Item 5. OTHER INFORMATION
    
    
    23Item 6. EXHIBITS
    
    
    23SIGNATURES
    
    
    24Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
  Unless otherwise indicated or unless the context requires otherwise, all references in this
report to we, us, our, Cereplast or the Company shall refer to Cereplast, Inc.
  2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 ITEM 1.
    
    CONSOLIDATED FINANCIAL STATEMENTS
 CEREPLAST, INC.
 
 CONSOLIDATED BALANCE SHEETS
 (in thousands, except shares data)
 March 31, 2011
    
    
    December 31, 2010(Unaudited)ASSETSCurrent AssetsCash
    
    $
    7,185
    
    
    $
    2,391Accounts Receivable, Net
    
    
    11,665
    
    
    
    5,289Inventory, Net
    
    
    1,794
    
    
    
    1,392Prepaid Expenses and Other Current Assets
    
    
    142
    
    
    
    65Total Current Assets
    
    
    20,786
    
    
    
    9,137Property and EquipmentProperty and Equipment
    
    
    5,647
    
    
    
    5,564Accumulated Depreciation and Amortization
    
    
    (2,423
    )
    
    
    (2,213
    )Property and Equipment, Net
    
    
    3,224
    
    
    
    3,351Other AssetsRestricted Cash
    
    
    43
    
    
    
    43Deferred Loan Costs
    
    
    387
    
    
    
    266Intangible Assets, Net
    
    
    109
    
    
    
    173Deposits
    
    
    24
    
    
    
    14Total Other Assets
    
    
    563
    
    
    
    496Total Assets
    
    $
    24,573
    
    
    $
    12,984LIABILITIES AND SHAREHOLDERS EQUITYCurrent LiabilitiesAccounts Payable
    
    $
    1,380
    
    
    $
    2,567Accrued Expenses
    
    
    1,327
    
    
    
    1,251Capital Leases, Current Portion
    
    
    11
    
    
    
    9Loan Payable, Current Portion
    
    
    584
    
    
    
    149Total Current Liabilities
    
    
    3,302
    
    
    
    3,976Long-Term LiabilitiesLoan Payable
    
    
    4,202
    
    
    
    2,119Total Long-Term Liabilities
    
    
    4,202
    
    
    
    2,119Total Liabilities
    
    
    7,504
    
    
    
    6,095Shareholders EquityPreferred Stock, $0.001 par value; 

5,000,0000 shares authorized and none outstanding
    
    
    
    
    
    
    Common Stock, $0.001 par value; 

495,000,000 shares authorized; 15,688,634 and 12,992,195
shares issued and outstanding at March 31, 2011 and
December 31, 2010, respectively
    
    
    16
    
    
    
    13Common Stock Subscribed, not issued
    
    
    154
    
    
    
    Additional Paid in Capital
    
    
    61,557
    
    
    
    49,737Accumulated Deficit
    
    
    (44,683
    )
    
    
    (42,933
    )Accumulated Other Comprehensive Income
    
    
    25
    
    
    
    72Total Shareholders Equity
    
    
    17,069
    
    
    
    6,889Total Liabilities and Shareholders Equity
    
    $
    24,573
    
    
    $
    12,984
   3




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##### Table of Contents



CEREPLAST, INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME
 (unaudited, in thousands, except per share data)
 Three months endedMarch 31, 2011
    
    
    March 31, 2010GROSS SALES
    
    $
    7,285
    
    
    $
    319Sales Discounts, Returns and Allowances
    
    
    (45
    )
    
    
    (29
    )NET SALES
    
    
    7,240
    
    
    
    290COST OF SALES
    
    
    6,538
    
    
    
    198GROSS PROFIT
    
    
    702
    
    
    
    92Research and Development
    
    
    250
    
    
    
    77Selling, General and Administrative
    
    
    2,043
    
    
    
    1,480LOSS FROM OPERATIONS BEFORE OTHER EXPENSES
    
    
    (1,591
    )
    
    
    (1,465
    )OTHER EXPENSESRestructuring Costs
    
    
    
    
    
    
    219Interest Expense, Net
    
    
    159
    
    
    
    1TOTAL OTHER EXPENSE, NET
    
    
    159
    
    
    
    220NET LOSS
    
    $
    (1,750
    )
    
    $
    (1,685
    )OTHER COMPREHENSIVE INCOME(Loss) Gain on Foreign Currency Translation
    
    
    (47
    )
    
    
    18TOTAL COMPREHENSIVE LOSS
    
    $
    (1,797
    )
    
    $
    (1,667
    )BASIC AND DILUTED LOSS PER SHARE
    
    $
    (0.12
    )
    
    $
    (0.17
    )WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING, BASIC AND DILUTED
    
    
    14,873
    
    
    
    9,868
   4




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##### Table of Contents



CEREPLAST, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands, except shares data)
 Three Months EndedMarch 31, 2011
    
    
    March 31, 2010CASH FLOWS FROM OPERATING ACTIVITIES:Net Loss
    
    $
    (1,750
    )
    
    $
    (1,685
    )Adjustment to Reconcile Net Loss to Net Cash Used in Operating ActivitesDepreciation and Amortization
    
    
    216
    
    
    
    155Allowance for Doubtful Accounts
    
    
    42
    
    
    
    (1
    )Common Stock Issued for Services, Salaries and Wages
    
    
    584
    
    
    
    175Amortization of Loan Discount
    
    
    19
    
    
    
    Loss on Disposal of Leasehold Improvements
    
    
    
    
    
    
    12Impairment of Intangible Assets
    
    
    64
    
    
    
    Changes in Operating Assets and LiabilitiesAccounts Receivable
    
    
    (6,417
    )
    
    
    64Deferred Loan Costs
    
    
    28
    
    
    
    Inventory
    
    
    (403
    )
    
    
    (110
    )Deposits
    
    
    (10
    )
    
    
    42Prepaid Expenses
    
    
    (76
    )
    
    
    181Restricted Cash
    
    
    
    
    
    
    (43
    )Intangibles
    
    
    
    
    
    
    (1
    )Accounts Payable
    
    
    (1,337
    )
    
    
    (223
    )Accrued Expenses
    
    
    97
    
    
    
    81NET CASH USED IN OPERATING ACTIVITIES
    
    
    (8,943
    )
    
    
    (1,353
    )CASH FLOWS FROM INVESTING ACTIVITIES:Purchase of Property and Equipment, and Intangibles
    
    
    (89
    )
    
    
    (53
    )NET CASH USED IN INVESTING ACTIVITIES
    
    
    (89
    )
    
    
    (53
    )CASH FLOWS FROM FINANCING ACTIVITIES:Payments on Capital Leases
    
    
    (1
    )
    
    
    (9
    )Payments made on Notes Payable
    
    
    
    
    
    
    (54
    )Proceeds from Loan Payable, Net of Loan Costs
    
    
    2,502
    
    
    
    21Proceeds from Issuance of Common Stock and Subscriptions, Net of Issuance Costs
    
    
    11,372
    
    
    
    1,289NET CASH PROVIDED BY FINANCING ACTIVITIES
    
    
    13,873
    
    
    
    1,247FOREIGN CURRENCY TRANSLATION
    
    
    (47
    )
    
    
    18NET INCREASE (DECREASE) IN CASH
    
    
    4,794
    
    
    
    (141
    )CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
    
    
    2,391
    
    
    
    1,306CASH AND CASH EQUIVALENTS, END OF PERIOD
    
    $
    7,185
    
    
    $
    1,165SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATIONCash Paid During the Year For:Interest
    
    $
    119
    
    
    $
    1Income Taxes
    
    $
    
    
    
    $
    During the three months ended March 31, 2011, the Company issued 2,596,500
shares in exchange for net proceeds
of $11,218 under a private placement. During the three months ended March 31,
2010, the Company issued 705,000
shares in exchange for net proceeds of $1,289 under a private placement.SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONSDuring the three months ended March 31, 2011, the Company issued 83,877
shares valued at $414 for services to
directors and employees, 12,000 shares valued at $59 for prepaid services
and 4,062 shares valued at $20 for a settelment
agreement. The Company also recognized $112 of expense related to vesting
of employee stock options for the same
period. During the three months ended March 31, 2010, the Company
issued 31,250 shares valued at $125 for fees
associated with an early lease termination and 12,500 shares valued
at $50 for board member services.
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##### Table of Contents



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2010
(Unaudited)
  Organization
  Line of Business
 ®
    
    
    Cereplast Compostables® resinsare renewable, ecologically-sound
substitutes for petroleum-based plastics targeting primarily single-use disposables and
packaging applications. We offer 12 commercial grades of Compostables resins in this
product line. These resins are compatible with existing manufacturing processes and
equipment making them a ready substitute for traditional petroleum-based resins. We
commercially introduced our Compostables line in November 2006.
 
    
    Cereplast Sustainables resinsare renewable, ecologically-sound substitutes
for petroleum-based plastics targeting primarily single-use disposables and packaging
applications. We offer eight commercial grades of Sustainables resins in this product line.
These resins are compatible with existing manufacturing processes and equipment, making
them a ready substitute for traditional petroleum-based resins. We commercially introduced
our Sustainables line in late 2007 under the name Cereplast Hybrid Resins®.
 
    
    Cereplast Hybrid Resins® replace up to 50% of the petroleum content
in conventional plastics with bio-based materials such as industrial starches
sourced from plants. The Hybrid resins line is designed to offer similar
properties to traditional polyolefins such as impact strength and heat deflection
temperature, and is compatible with existing converter processes and equipment.
Cereplast Hybrid Resins® provide a viable alternative for brand owners
and converters looking to partially replace petroleum-based resins in durable goods
applications. Hybrid resins address this need in a wide range of markets,
including automotive, consumer goods, consumer electronics, medical, packaging, and
construction. We commercially introduced our first grade of Hybrid resin, Hybrid
150, at the end of 2007. We currently offer three commercial grades in this
product line.
  6




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##### Table of Contents




    
    Cereplast Algae Plastics. In October 2009 we announced that we have been
developing a new technology to transform algae into bioplastics and intend to
launch a new family of algae-based resins that will complement the companys
existing line of Compostables and Sustainable resins. Although we do not expect
this new technology to become commercial before mid 2011, it remains an important
development as we believe that the potential for algae-based resins is quite
substantial. Cereplast algae-based resins could replace, in a first step, 50% or
more of the petroleum content used in traditional plastic resins. Currently, we are
using renewable material such as starches from corn, tapioca, wheat, potatoes and
Ingeo® PLA, which are considered food related crops. We believe that it
is important to enhance research on non-food crops as we expect a surge in demand
in bioplastics in future years thus potentially creating pressure on food crops.
Algae is the first non-food crop project the company will introduce and our R&D
department is contemplating the development of additional non-food crop polymers in
future years. Recently the algae production business has attracted considerable
attention when Exxon announced a $600 million investment in Synthetic Genomics and
BP invested $10 million in Martek Biosciences. We maintain that algae is a very
attractive feedstock as it offers a low carbon footprint alternative and at the
same time could be accessible in very large quantities. We also have a long-term
future plan to create algae plastic made of 100% algae component, abandoning any
reliance on fossil fuels. However, the availability of algae production in large
quantities is several years away.
  Basis of Presentation and Consolidation
  Use of Estimates
  Cash and Cash Equivalents
   7




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Concentration of Credit Risk
  Other Concentration
  Restricted Cash
  Fair Value of Financial Instruments
  Accounts Receivable
  Inventories
 in thousands
 March 31, 2011
    
    
    December 31, 2010(Unaudited)Raw Materials
    
    $
    1,290
    
    
    $
    936Bioplastic Resins
    
    
    400
    
    
    
    318Finished Goods
    
    
    43
    
    
    
    44Packaging Materials
    
    
    61
    
    
    
    53WIP
    
    
    
    
    
    
    41Obsolescence Reserve
    
    
    
    
    
    
    Inventories, net
    
    $
    1,794
    
    
    $
    1,392
  8




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##### Table of Contents



Property and Equipment
 in thousands
 March 31, 2011
    
    
    December 31, 2010(Unaudited)Equipment
    
    $
    5,079
    
    
    $
    5,074Construction in Progress
    
    
    212
    
    
    
    135Furniture & Fixtures
    
    
    279
    
    
    
    279Automobile
    
    
    25
    
    
    
    25Leasehold Improvements
    
    
    52
    
    
    
    515,647
    
    
    
    5,564Less Accumulated Depreciation
    
    
    (2,423
    )
    
    
    (2,213
    )Net Property and Equipment
    
    $
    3,224
    
    
    $
    3,351
 Intangible Assets
 in thousands
 March 31, 2011
    
    
    December 31, 2010(Unaudited)Intangible Assets
    
    $
    142
    
    
    $
    206Less Accumulated Amortization
    
    
    (33
    )
    
    
    (33
    )Net Intangibles
    
    $
    109
    
    
    $
    173
 Deferred Income Taxes
     9




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##### Table of Contents



Revenue Recognition
  Marketing and Advertising
  Stock-Based Compensation
 
 Loss per Share Calculations
  Legal Proceedings
  Comparative Figures
   10




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##### Table of Contents



Reverse Stock Split
  Capital Stock Issued
  
    
    We issued 2,596,500 shares of common stock and 649,128 warrants with an exercise price of
$6.35 for gross proceeds of $12.3 million pursuant to a Securities Purchase Agreement dated
January 26, 2011 between the Company and each of the signatories thereto. The Company
incurred stock issuance costs of approximately $1.1 million.
 
    
    We issued 95,877 shares of common stock valued at $0.5 million to various employees,
directors, and third parties for services rendered during the period.
 
    
    We issued 4,062 shares of common stock valued at $20,000 pursuant to a settlement
agreement.
 Valuation Assumptions for Stock Options
  March 31,2011Average risk-free interest rate
    
    
    2.29
    %Average expected life (in years)
    
    
    6.0Volatility
    
    
    41.9
    %
 
    
    Expected Volatility:The fair values of stock based payments were valued using a
volatility factor based on our historical stock prices.
 
    
    Expected Term:We elected to use the simplified method as discussed in SAB No. 107 to
develop the estimate of the expected term.
 
    
    Expected Dividend:We have not paid any dividends and do not anticipate paying dividends
in the foreseeable future.
 
    
    Risk-Free Interest Rate:We base the risk-free interest rate used on the implied yield
currently available on U.S. Treasury zero-coupon issues with remaining term equivalent to
the expected term of the options.
  11




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##### Table of Contents



Stock Option Activity
 in thousands except per share data
 2011
    
    
    2010Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    AverageShares
    
    
    Exercise Price
    
    
    Shares
    
    
    Exercise PriceOutstandingJanuary 1
    
    
    73
    
    
    $
    22.40
    
    
    
    73
    
    
    $
    22.40Granted at fair value
    
    
    300
    
    
    
    5.31
    
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Canceled/forfeited
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    OutstandingMarch 31
    
    
    373
    
    
    
    8.65
    
    
    
    73
    
    
    
    22.40Options exercisable at March 31
    
    
    133
    
    
    $
    14.69
    
    
    
    73
    
    
    $
    22.40
 in thousands,
except per share data):
 Options Outstanding
    
    
    Options ExercisableWeighted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    WeightedWeighted
    
    
    Average
    
    
    
    
    
    
    
    
    
    
    Weighted
    
    
    AverageAverage
    
    
    Remaining
    
    
    Aggregate
    
    
    
    
    
    
    Average
    
    
    Remaining
    
    
    AggregateExercise
    
    
    Contract
    
    
    Intrinsic
    
    
    
    
    
    
    Exercise
    
    
    Contract
    
    
    IntrinsicRange of Exercise Prices
    
    Shares
    
    
    Price
    
    
    Life
    
    
    Value
    
    
    Shares
    
    
    Price
    
    
    Life
    
    
    Value$0.0  $5.31
    
    
    300
    
    
    $
    5.31
    
    
    
    9.93
    
    
    $
    12
    
    
    
    60
    
    
    $
    5.31
    
    
    
    9.93
    
    
    $
    2$5.32  $22.40
    
    
    73
    
    
    $
    22.40
    
    
    
    3.67
    
    
    $
    
    
    
    
    73
    
    
    $
    22.40
    
    
    
    3.67
    
    
    $
    
   Venture Loan Payable
   December 22,Assumptions:
    
    2010Expected Life
    
    7 yearsExpected volatility
    
    
    39.9
    %Dividends
    
    NoneRisk-free interest rate
    
    
    2.74
    %
  12




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Promissory Note
    California
Facilities
 Indiana Facility 
 Bönen
Facility
   in
thousands
 Three Months Ended March 31,2011
    
    
    2010North America
    
    $
    238
    
    
    
    3.3
    %
    
    $
    281
    
    
    
    88.1
    %InternationalGermany
    
    
    4,687
    
    
    
    64.3
    %
    
    
    31
    
    
    
    9.7
    %Italy
    
    
    1,578
    
    
    
    21.7
    %
    
    
    
    
    
    
    
    %Other
    
    
    782
    
    
    
    10.7
    %
    
    
    7
    
    
    
    2.2
    %Gross sales
    
    $
    7,285
    
    
    
    100.0
    %
    
    $
    319
    
    
    
    100.0
    %
     13




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##### Table of Contents



in thousands except per share data
 2011
    
    
    2010Weighted
    
    
    
    
    
    
    WeightedNumber of
    
    
    Average
    
    
    Number of
    
    
    AverageWarrants
    
    
    Exercise Price
    
    
    Warrants
    
    
    Exercise PriceOutstanding January 1,
    
    
    1,273
    
    
    $
    4.44
    
    
    
    
    
    
    $
    Issued
    
    
    649
    
    
    
    6.35
    
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    OutstandingMarch 31
    
    
    1,922
    
    
    
    5.08
    
    
    
    
    
    
    
    Warrants exercisable at end of period
    
    
    1,922
    
    
    $
    5.08
    
    
    
    
    
    
    $
    
   Issuance of Capital Stock
 
    
    Subsequent to March 31, 2011 we issued 35,000 shares upon the exercise of warrants for
proceeds of $155,000.
 
    
    Subsequent to March 31, 2011 we issued 33,671 shares of restricted common stock valued
at $140,000 to employees and third parties for services rendered
 Italian Expansion
   14




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##### Table of Contents



ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
   
    
    inability to raise sufficient additional capital to finance operations;
 
    
    potential fluctuation in quarterly results;
 
    
    failure to earn profits;
 
    
    inadequate capital to expand our business, inability to raise additional capital or
financing to implement our business plans;
 
    
    decline in demand for our products and services;
 
    
    inability to source raw materials in sufficient quantities to support growth in customer
demand;
 
    
    rapid and significant changes in markets and other factors, including national, state
and local legislation, that encourage use of bioplastics;
 
    
    failure to commercialize new grades of resin being pursued in our technical / market
development pipeline;
 
    
    competitor actions that curtail our market share, negatively affect pricing or limit
sales growth;
 
    
    litigation with or legal claims and allegations by outside parties;
 
    
    insufficient revenues to cover operating costs;
    General
 ®
  15




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##### Table of Contents




    
    Cereplast Compostables® resins are renewable, ecologically-sound substitutes
for petroleum-based plastics targeting primarily single-use disposables and packaging
applications. We offer 12 commercial grades of Compostables resins in this product line.
These resins are compatible with existing manufacturing processes and equipment making them
a ready substitute for traditional petroleum-based resins. We commercially introduced our
Compostables line in November 2006.
 
    
    Cereplast Sustainables resins are renewable, ecologically-sound substitutes
for petroleum-based plastics targeting primarily single-use disposables and packaging
applications. We offer eight commercial grades of Sustainables resins in this product
line. These resins are compatible with existing manufacturing processes and equipment,
making them a ready substitute for traditional petroleum-based resins. We commercially
introduced our Sustainables line in late 2007 under the name Cereplast Hybrid
Resins®.
 
    
    Cereplast Hybrid Resins® replace up to 50% of the petroleum content
in conventional plastics with bio-based materials such as industrial starches
sourced from plants. The Hybrid resins line is designed to offer similar
properties to traditional polyolefins such as impact strength and heat deflection
temperature, and is compatible with existing converter processes and equipment.
Cereplast Hybrid Resins® provide a viable alternative for brand owners
and converters looking to partially replace petroleum-based resins in durable goods
applications. Hybrid resins address this need in a wide range of markets,
including automotive, consumer goods, consumer electronics, medical, packaging and
construction. We commercially introduced our first grade of Hybrid resin, Hybrid
150, at the end of 2007. We currently offer three commercial grades in this
product line.
 
    
    Cereplast Algae Plastics. In October 2009 we announced that we have
been developing a new technology to transform algae into bioplastics and intend to
launch a new family of algae-based resins that will complement the Companys
existing line of Compostables and Sustainable resins. Although we do not expect
this new technology to become commercial before mid-2011, it remains an important
development as we believe that the potential for algae-based resins is quite
substantial. Cereplast algae-based resins could replace, in a first step, 50% or
more of the petroleum content used in traditional plastic resins. Currently, we are
using renewable material, such as starches from corn, tapioca, wheat, potatoes and
Ingeo® PLA, which are considered food-related crops. We believe that it
is important to enhance research on non-food crops as we are expecting a surge in
demand in bioplastics in future years, thus potentially creating pressure on food
crops. Algae is the first non-food crop project the Company will introduce and our
R&D department is contemplating the development of additional non-food crop
polymers in future years. Recently, the algae production business has attracted
considerable attention when Exxon announced a $600 million investment in Synthetic
Genomics and BP invested $10 million in Martek Biosciences. We believe that algae
is a very attractive feedstock as it offers a low carbon footprint alternative and,
at the same time, could be accessible in very large quantities. We also have a
long-term future plan to create algae plastic made of 100% algae component,
abandoning any reliance on fossils fuels. However, the availability of Algae
production in large quantities is several years away.
  16




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Recent Strategic Events
 Italian Expansion.
  New Distribution Agreements.
 European Office.
 Private Placement.
 Venture Loan.
 Trends and Uncertainties that May Impact Future Results of Operations
 Global Market and Economic Conditions.
  Sales
  17




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Operating Expenses.
   Revenue Recognition
  Research and Development Costs
  Stock-Based Compensation
  Accounts Receivable
   18




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Inventories
  Intangibles
  Property and Equipment
  Deferred Income Taxes
    Sales
 st
 Cost of Sales
   19




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Gross Profit
  Research and Development Expenses
  Selling, General and Administrative Expenses
  Other Expense, Net
  Net Loss
      20




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ITEM 3.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
   
 ITEM 4.
    
    CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
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Changes in Internal Control Over Financial Reporting
  
 PART II  OTHER INFORMATION
 
 ITEM 1.
    
    LEGAL PROCEEDINGS
  ITEM 1A.
    
    RISK FACTORS
  
 ITEM 2.
    
    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  
    
    On January 26, 2011 we issued 2,596,500 shares of common stock and 649,128 warrants with an
exercise price of $6.35 for gross proceeds of $12.3 million in a private placement.
 
    
    On February 28, 2011, we issued 95,877 shares of common stock valued at $0.5 million to
various employees, directors and third parties for services rendered for prepaid rent.
 
    
    On February 28, 2011, we issued 4,062 shares of common stock valued at $20,00 pursuant to a
settlement agreement
  
 ITEM 3.
    
    DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4.
    
    RESERVED
  22




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ITEM 5.
    
    OTHER INFORMATION
  
 ITEM 6.
    
    EXHIBITS
 ExhibitNumber
    
    Description31.1
    
    
    Certification of the Chief Executive Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.31.2
    
    
    Certification of the Principal Financial Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 200232.1
    
    
    Certification of the Chief Executive Officer pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002. ***32.2
    
    
    Certification of the Principal Financial Officer pursuant to Section 906
of the Sarbanes-Oxley Act of 2002***
 
 ***
    
    In accordance with Item 601(b)(32)(ii) of Regulation S-K, this exhibit shall not be deemed
filed for the purposes of Section 18 of the Exchange Act or otherwise subject to the
liability of that section, nor shall it be deemed incorporated by reference in any filing
under the Securities Act of 1933, as amended, or the Exchange Act.  23




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SIGNATURES
  Date: May 16, 2011
    CEREPLAST, INC.By:
    /s/ Frederic ScheerFrederic ScheerChairman, Chief Executive Officer and Director
(Principal Executive Officer)  24