Cereplast Inc (OTCMKTS:CERP) Taking A Plunge
Cereplast Inc (OTCMKTS:CERP) displayed some pretty horrific performance yesterday. The ticker opened at $0.027, made a brief run to $0.0284 after which it crashed hard down. When the closing bell rang, the value was standing at $0.0211 which is around 25% below Tuesday’s value.
Apart from last week’s pump, there really is no other reasonable explanation for the drop. If you take a look at our database, you’ll see that more than 10 emails worth $27,500 were received between August 6 and August 9. We’ve seen promotional campaigns much bigger than this one, but for CERP, who have only been sporadically mentioned by the pumpers, this was their first appearance under the intense spotlight of the newsletters. How did it go?
Well, apart from yesterday’s disaster, it actually went rather well. There was some initial hesitation on August 6, August 7, and August 8 when the awareness campaign was still in its infancy, but then it really took off last Friday when around 40 million shares changed hands and the price moved up by about 22%. This week was also going quite well with a couple of more sessions ending in the green, but we must say at this point that the rise was not fueled solely by the promotional campaign.
Everyone was expecting the results for the second quarter of 2013 and CERP themselves were doing their best to keep the excitement going. They issued what they call “an outlook” on the first half of the year and in it they said that the revenues for the period between January and June amounts to no less than $1.7 million which is an increase of about 800% year-over-year.
The 10-Q itself came out about an hour after yesterday’s devastating session and if you check it out, you’ll see that the revenues for the first six months of 2013 do indeed amount to around $1.7 million. You’ll also see that, as we predicted, the sales have decreased when compared to the first quarter which is something of a bad sign considering the rather dreadful situation that CERP are in right now. Here are the rest of the figures:
- cash: $223 thousand
- current assets: $7 million
- current liabilities: $26 million
- net loss: $8.7 million
- accumulated deficit: $113.9 million
We’re really struggling to see why CERP seemed so excited about the new report. Yes, they have managed to increase the amount of cash on hand and when it comes to sales, they are better off compared to last year, but every other aspect shows us that the period between March and June was not successful at all.
The current portion of the liabilities has increased by a whopping $6 million and while the management team said in the earnings call that they have done everything they can to cut down on expenses, the net loss is still huge.
The thing that will probably scare most investors away, however, is the colossal dilution. Between May 17 and August 13, more than 270 million brand new CERP shares saw the light of day. The management team are simply unable to cut down on the stock issuance and at that rate, the authorized shares number (which was increased to 2 billion back in April) will be reached in no time. With that in mind, we’re starting to feel that speaking about $300 million to $500 million in revenues (as the company CEO did during the earnings call) is a bit pointless at the moment. Right now, just an hour and a half into the session, CERP is down another 10% which would suggest that some investors tend to agree with us.
Unlike other penny stocks under the pressure of promotion like Amanasu Techno Holdings Corp (OTCMKTS:ANSU) and BluForest Inc (OTCMKTS:BLUF), CERP have a serious business and they have shown us long ago that they’re capable of generating revenues. The problem lies in the fact that profitability is still a distant dream. That’s precisely why a potential investment has its risks and considering them carefully before making your next move is absolutely essential.
