Cereplast Reports First Quarter 2008 Financial Results, Provides Business Update

HAWTHORNE, Calif.--(BUSINESS WIRE)--Cereplast, Inc. (OTCBB: CERP), manufacturer of proprietary bio-based sustainable plastics, today reported financial results for the three months ended March 31, 2008.

For the first three months of 2008, Cereplast reported gross sales of $913,152, a 134% increase over the comparable 2007 period. The increase in sales is a result of volume growth in the Company’s bioplastic resins from an expanding customer base. Operating expenses increased by $2.2 million, or 122%, to $4.0 million for the three months ended March 31, 2008, compared to the quarter ended March 31, 2007. The increase is attributable to increased spending, both cash and non-cash related, to support the commercial introduction of the Company’s two resin families and business growth. Non-cash compensation to employees and directors included the issuance of restricted stock and expensing of stock options as part of long-term compensation.

The Company reported a net loss of $3.8 million, or $0.01 per share, for the first quarter of 2008 as compared with a net loss of $1.8 million, or $0.01 per share, for the comparable period in 2007. This increase in net loss was a result of higher operating expenses associated with the growth of the Company’s resin operations. The weighted average number of shares used in the calculation of earnings per share was 259.6 million for first quarter of 2008, compared to 206.5 million for the first quarter of 2007. The increase in the weighted average number of shares primarily reflects the shares issued in the Company’s July 2007 offering.

During the three months ended March 31, 2008, the Company used $3.2 million of cash for operating activities, compared to net cash used in operating activities of $1.8 million for the first three months of 2007. The increase in the use of cash for operating activities was a result of increased manufacturing and operating expenses, significant acquisition of raw material inventory and prepayments required for the construction of new equipment for the Company’s Indiana manufacturing facility. Cash and short-term investments at March 31, 2008 totaled $5.2 million.

“The demand for our bioplastics continues to grow rapidly as demonstrated by our triple-digit revenue growth in the first quarter of this year,” said Frederic Scheer, Cereplast’s Chairman and CEO. “Our Compostables Resins™ and Hybrid Resins™ continue to generate a tremendous amount of interest in the marketplace, fueled by both continually mounting environmental awareness and rising fossil fuel prices, and we are starting to see customers that had longer development cycles bringing their very first products to market.”

“We continue to put the necessary pieces in place to rapidly develop our business,” said Randy Woelfel, President and Chief Operating Officer. “Cereplast is expanding production capacity, growing its management and sales teams, developing new products to meet market demand and expand its customer base, and doing so with quality standards unsurpassed in our industry.”

Operating Highlights

Product Development and Intellectual Property – Cereplast has developed and is commercializing proprietary bio-based resins through two complementary product families: Cereplast Compostables Resins™, a renewable, ecologically sound substitute for single-use petroleum-based plastics, and Cereplast Hybrid Resins™, which replace 50 percent or more of the petroleum-based content of durable traditional plastics with materials from renewable resources. Cereplast resins are competitively-priced compared to petroleum-based plastic resins and can be converted into finished products on conventional manufacturing equipment without additional capital investment by downstream converters. During the first quarter 2008 Cereplast received a “notice of allowance” from the European patent office for a new patent formulation already granted by the U.S. Patent and Trademark Office under patent (# 7,138,439) dated November 21, 2006.

Customer Development – As of March 31, 2008, more than 100 companies have requested and been provided with samples of Cereplast bioplastic resin and 70 customers have purchased resin for trials and testing. Of these, 46 customers have advanced to prototype testing and qualification of more than 100 different product applications. In addition, over ten customers have commercialized and introduced more than 65 different bioplastic products using Cereplast resin. The Company announced during the first quarter that Pace Technologies, a maker of high quality printable plastic sheets and rolls for the graphic arts industry, launched a new line of products, BIOGRAPH.ics™, using Cereplast Compostables Resins™. The Company also announced the launch of a new line of cosmetics jars made with Biopropylene® by CSI/Cosmolab, a California company specialized in serving the cosmetics industry. The company also announced that its Compostables Resins™ were selected by two additional converters; Quickpoint, a manufacturer of promotional items, and Harco Enterprises, a Canadian company that launched the NaturesPlast© product line, which includes a variety of products such as sandwich picks, cookie cutters, drink stirrers, kids’ giveaways, spoons and flying discs.

International Expansion – Cereplast recently opened its European headquarters in France to capitalize on the growing demand for sustainable plastics throughout Europe. The European marketplace historically has been highly receptive to products that help increase sustainability. The office will serve as headquarters for sales representatives and support staff to assist existing customers in developing bioplastic applications and cultivate new market opportunities in industries such as packaging, automotive and consumer electronics. To further support sales, Cereplast Europe also opened a distribution center located outside of Amsterdam, The Netherlands, where the first containers of resins manufactured in Hawthorne arrived in early March.

Production – The Company continues to focus on improving its production process and expanding capacity. Cereplast’s Hawthorne, California facility currently has about 50 million pounds of production capacity, with a proprietary state-of-the-art process designed by the Company specifically for processing bioplastics at commercial scale. The Company’s new bioplastic production facility in Seymour, Indiana will add 50 million pounds of additional production capacity in Phase I and is on schedule to become operational at the end of the third quarter 2008. Manufacturing equipment for the plant is currently being manufactured and installation will commence in June. The company obtained financial incentives from the State of Indiana under the form of tax abatement that were confirmed by the City of Seymour and the Governor of the State of Indiana, who welcomed the decision of Cereplast to settle in the state.

Quality Management and Assurance – In March 2008, Cereplast achieved ISO9001:2000 certification from the International Standardization Organization (ISO) for its world-class Management System. ISO 9001:2000 gives requirements for an organization’s Quality Management System covering a wide range of topics that include management commitment to quality, customer focus, adequacy of its resources, employee competence and process management. Cereplast is one of the first in the industry to commit to and achieve this significant level of certification.

Corporate Management and Infrastructure – Cereplast now has 63 full time employees and continues to attract and retain the necessary talent to manage its growth. In the first quarter of 2008, the Company strengthened its management team by naming 30-year industry veteran Randy G. Woelfel as President and Chief Operating Officer. Woelfel oversees all day-to-day operations, reporting directly to Frederic Scheer who remains chairman and chief executive officer. Cereplast also strengthened its Board at the end of the first quarter by appointing Woelfel and Stephan Garden, the Company’s Senior Vice President Finance and Business Development, as directors. They join Petros Kitsos, Jacques Vincent (Vice Chairman of Group Danone, who joined the Board in January) and Frederic Scheer to comprise the Company’s five-member Board of Directors. Cereplast also has retained Latham & Watkins LLP to advise Cereplast as it transitions from smaller reporting company to non-accelerated filer status.

About Cereplast

Cereplast, Inc. (OTCBB: CERP) designs and manufactures proprietary bio-based, sustainable plastics which are used as substitutes for petroleum-based plastics in all major converting processes – such as injection molding, thermoforming, blow molding and extrusions – at a pricing structure that is competitive with petroleum-based plastics. On the cutting-edge of bio-based plastic material development, Cereplast now offers resins to meet a variety of customer demands. Cereplast Compostables™ Resins are ideally suited for single use applications where high bio-based content and compostability are advantageous, especially in the food service industry. Cereplast Hybrid Resins™ combine high bio-based content with the durability and endurance of traditional plastic, making them ideal for applications in industries such as automotive, consumer electronics and packaging. Learn more at www.cereplast.com.

Safe Harbor Statement

Matters discussed in this press release contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. When used in this press release, the words "anticipate," "believe," "estimate," "may," "intend," "expect" and similar expressions identify such forward-looking statements. Actual results, performance or achievements could differ materially from those contemplated, expressed or implied by the forward-looking statements contained herein. These forward-looking statements are based largely on the expectations of the Company and are subject to a number of risks and uncertainties. These include, but are not limited to, risks and uncertainties associated with: the impact of economic, competitive and other factors affecting the Company and its operations, markets, product, and distributor performance, the impact on the national and local economies resulting from terrorist actions, and U.S. actions subsequently; and other factors detailed in reports filed by the Company.