April 12, 2006
By facsimile to (212) 930-9725 and U.S. Mail
Mr. Frederic Scheer
President and Chief Executive Officer
Cereplast, Inc.
3421-3433 West El Segundo Boulevard
Hawthorne, CA 90250
Re: Cereplast, Inc.
Pre-effective Amendment 1 to Registration Statement on Form
SB-2
Filed April 3, 2006
File No. 333-131853
Dear Mr. Scheer:
We reviewed the filing and have the comments below.
General
1. Include in the prospectus the information that you gave us in
response to prior comment 2:
* The $10 million amount of the periodic equity investment
agreement
or PEIA was negotiated between Cereplast, Inc. or Cereplast and
Cumorah Capital, Inc. or CCI.
* Cereplast sought this amount because it believes that $10
million
will satisfy its capital needs for approximately two years.
2. Your statement that "the Company does not believe it is
appropriate to state whether it expects to utilize the entire $10
million" does not address the second sentence of prior comment 2.
Based on disclosure in the eighteenth risk factor and the
information
that you gave us in response to prior comment 13, it appears
unlikely
that CCI will provide Cereplast the total dollar amount available
under the PEIA. Thus, as requested previously, state in the
prospectus whether you believe that CCI will provide Cereplast the
total dollar amount available under the PEIA. Further, provide
support for your belief.
3. Refer to prior comment 3. Please confirm that you did not use
a
placement agent.
4. We considered your response to prior comment 4 and are unable
to
concur that the items referenced in section 7.2(d) of the PEIA
"are
quantifiable and are not subject to discretion." Thus, we reissue
the comment to tell us who determines whether Cereplast has
complied
with "all covenants, agreements and conditions" required by the
PEIA
and the registration rights agreement and what standard will be
used.
Periodic Equity Investment Agreement, page 3
5. Refer to prior comment 10. As requested previously, explain
here
why Cereplast issued five million shares to CCI upon the PEIA`s
execution. We note the disclosure on the prospectus` outside
front
cover page that the issuance represents a commitment fee.
6. Please disclose the information that you gave us in response to
prior comment 11.
Use of Proceeds, page 11
7. Include in the prospectus the information that you gave us in
response to prior comment 13:
* Cereplast has approximately 199,483,262 shares of common stock
outstanding.
* At current market prices, Cereplast may request a maximum
advance
of $250,000 which would require the issuance of 360,750 shares of
common stock.
* CCI`s 4.9% ownership limitation would restrict Cereplast from
issuing in excess of 10,500,000 shares. Further, clarify whether
the
10,500,000 share amount includes or excludes the five million
shares
issued to CCI upon the PEIA`s execution.
8. Please disclose the total amount of proceeds that Cereplast can
receive under the PEIA.
9. Please separate this paragraph into two paragraphs so that
investors may readily ascertain that the use of proceeds will be
for
general corporate purposes.
Selling Stockholders, page 32
10. Include in the prospectus the information that you gave us in
response to prior comment 18: The Madison Trust and Mr.
Christopher
Stappas purchased in a private transaction with a third party
shareholder the securities being offered for resale.
11. Refer to prior comment 21. Clarify that the term selling
stockholders does not include CCI`s transferees, pledgees, donees,
or
successors.
Periodic Equity Investment Agreement, page 34
12. Include in the prospectus the information that you gave us in
response to prior comment 23:
Cereplast considered alternative financing methods,
including a private placement of shares to accredited
investors and a private placement of convertible debentures
to private funds. Cereplast elected to proceed with the
equity
line credit facility because the terms offered by
CCI,
including the extent of the discount at which it would
purchase its shares and, in turn, the dilution to Cereplast`s
shareholders, were more favorable for Cereplast as
compared to the other financings.
Exhibit 5.1
13. Refer to prior comment 28. The opinion`s revised third
paragraph
that 28 million shares are to be issued to the selling stockholder
is
inconsistent with disclosures in the prospectus. Disclosures in
the
prospectus state that:
* The three million shares being offered for resale by The Madison
Trust and Mr. Christopher Stappas are outstanding.
* Cereplast issued five million shares to CCI as a commitment fee
upon the PEIA`s execution.
* The remaining 20 million shares being registered for resale are
issuable under the PEIA.
Revise the opinion`s third paragraph so that it is consistent
with disclosures in the prospectus.
Closing
File an amendment to the SB-2 in response to the comment. To
expedite our review, Cereplast may wish to provide us three marked
courtesy copies of the amendment. Include with the filing any
supplemental information requested and a cover letter tagged as
correspondence that keys the responses to the comments. If
Cereplast
thinks that compliance with the comments is inappropriate, provide
the basis in the letter. We may have additional comments after
review of the amendment, the responses to the comments, and any
supplemental information.
We urge all persons responsible for the accuracy and adequacy
of
the disclosure in the registration statement reviewed by us to
ensure
that they have provided all information investors require for an
informed decision. Since Cereplast and its management are in
possession of all facts relating to the disclosure in the
registration statement, they are responsible for the adequacy and
accuracy of the disclosures that they have made.
If Cereplast requests acceleration of the registration
statement`s effectiveness, Cereplast should furnish a letter at
the
time of the request, acknowledging that:
* Should the Commission or the staff acting by delegated authority
declare the registration statement effective, it does not
foreclose
the Commission from taking any action on the filing.
* The action of the Commission or the staff acting by delegated
authority in declaring the registration statement effective does
not
relieve Cereplast from its full responsibility for the adequacy
and
accuracy of the registration statement`s disclosures.
* Cereplast may not assert our comments or the declaration of the
registration statement`s effectiveness as a defense in any
proceedings initiated by the Commission or any person under the
United States` federal securities laws.
The Commission`s Division of Enforcement has access to all
information that Cereplast provides us in our review of the
registration statement or in response to our comments on the
registration statement.
We will consider a written request for acceleration of the
registration statement`s effectiveness under Rule 461 of
Regulation C
under the Securities Act as confirmation that those requesting
acceleration are aware of their responsibilities under the
Securities
Act and the Exchange Act as they relate to the proposed public
offering of the securities specified in the
registration statement. We will act on the request and by
delegated
authority grant acceleration of the registration statement`s
effectiveness.
You may direct questions on comments and disclosure issues to
Edward M. Kelly, Senior Counsel, at (202) 551-3728 or me at (202)
551-3767.
Very truly yours,
Jennifer R. Hardy
Legal Branch Chief
cc: Gregory Sichenzia, Esq.
Stephen M. Fleming, Esq.
Sichenzia Ross Friedman Ference LLP
1065 Avenue of the Americas
New York, NY 10018
Mr. Frederic Scheer
April 12, 2006
Page 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
DIVISION OF
CORPORATION FINANCE