Cereplast Inc. (OTCMKTS:CERP) Starts the Year With a Surge

2013 was not a good year for the shareholders of Cereplast Inc. (OTCMKTS:CERP). Throughout the year the stock of the company was on a noticeable slide towards the bottom that only intensified in the last two months culminating in a new 52-week low of $0.004 posted on December 19. What the new year will bring remains to be seen but at least for now CERP is finally moving in the right direction.

On Friday the company surged upwards by more than 30% and managed to close the day at $0.007 per share. Interest in the stock exploded with even greater force resulting in around 43 million shares changing their owners, more than 6 times the amount from the previous session and 3 times the average for the company. Still they will have to do much better if they want to return to the February highs of 6 cents per share.

CERP operates in the field of biobased plastic material development. The company offers two families of resins – Compostables targeted at single-use applications like plastic bags and Sustainables which combine high biobased content with the characteristics of traditional plastics. With more and more countries looking for ways to limit pollution and reduce the use of traditional plastics CERP certainly have potential to grow.

The problem is that despite starting commercialization of some of their products in 2006 and 2007 for now CERP have nothing to show except immense net loss and dilution of their common stock. The last financial report covering the quarter ending September 30 revealed some rather discouraging numbers:

• $233 thousand cash
• $7.1 million current assets
• $29 million current liabilities
• $438 thousand revenues
• $7.2 million net loss

Net loss for the first nine months of 2013 has reached $34 million while the accumulated deficit has passed through $121 million. Even a bigger cause for concern is the amount of dilution that has taken place. At the end of 2012 CERP had 63 million outstanding shares, which turned into 810 million at the end of September 2013 and 994 million as of November 14. In less than a year CERP managed to burn through half of its 2 billion authorized shares.

Maybe that is why on May 8 CERP filed a lawsuit against Magna Group LLC and Hanover Holdings LLC, two of the most notorious toxic funders in the pennystock world. A possible positive outcome will undeniably boost the share price of the company but that is a rather risky bet. On December 11 the court dismissed a request for relief and preliminary injunction filed by Hanover and Magna.

On Friday the hype-wave that lifted the price of every company having something to do with marijuana and cannabis started to fade away and severe corrections ensued. The former leader of the sector – Medical Marijuana, Inc. (OTCMKTS:MJNA) tumbled by 20% to end the session at $0.152 per share. The only company that managed to keep its ground was Growlife Inc (OTCBB:PHOT) who climbed by the modest 2.7% to a close of $0.20.