Cereplast, Inc. (OTC:CERP) Surprisingly Roars Upward

Cereplast, Inc. (OTC:CERP) offers an intriguing graph today, spiking out of nowhere more than 115% after losing 90% of its value over the course of several months. The company produces novel bio plastics using easily sourced vegetable starches to replace more toxic varieties of plastics and resins.

The most recent spike in the stock price and volumes comes after a press release from Tuesday, an 8-K stating that Cereplast would not be held in default for failing to pay interest on an issued note. The payment of interest is deferred until June 1, as the company skipped two interest payment periods. While Cereplast has marketing success with the more widespread use of bioplastics, the company seems burdened by debt and other financial weaknesses:

• $237,000 cash

• $8.9 million total liabilities

• $9.9 million net loss

The company was only mentioned as a sub-choice in free mailings, probably to help investors improve their portfolio. While CERP has had some good days, the general trend is for falling, given that the company is piling on losses and debt which it seems unable to repay. The fortunate rescheduling and the avoidance of default may have helped significantly for the doubling of the price.

At $0.025 per share, the CERP stock may generate several good days of fast upward movement, but losses follow soon after. Although the company does not list itself as a development-stage group, its first foray on the bioplastics market came at the end of last year, with one product made from algae, Biopropylene. But the plastic is far from entirely green- only 20% renewable biomatter is used in this composite.

While not being pumped, Cereplast is doing a self-promotion through press releases, promising healthy revenues in 2013. In just six weeks, the company states it achieved $500,000 in revenues, but it is still uncertain if the year will be good enough to stave off the threat of debt default. But this is not enough, as Cereplast incurred a million dollars in short-term debt to continue its operations and considers cost-cutting measures among its 147 workers in several different countries. Also, Cereplast saw a problem with the non-payment of accounts receivable and devised a system to return orders from defaulting customers.

While the group has room for development, it will hardly register immediately in the stock price and we may expect to see significant corrections.

While not currently promoted, the CERP ticker benefited from a mention in a Wise Alerts free newsletter. The pumper, with a small average budget of $4,000, has a small range of previous mentions and alerts, and helped with the dramatic rise in Superior Ventures, Inc. (OTC:SVEN). Since the pumpers went silent, SVEN dropped more than 95% of its value. It is best to research the potential of each company for yourself before committing yourself to the picks in paid emails.