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Cereplast Announces 2012 Second Quarter Financial Results

Cost of sales for the three months ended June 30, 2012 were approximately $545,000, compared to $6.7 million for the same period in 2011. Cost of sales for the first six months of 2012 totaled $1.2 million as compared to $13.2 million for the first six months of 2011. The decline in cost of sales is due to our lower variable manufacturing costs from the Company's reduced sales volumes and reduction in manufacturing overhead through lower supplies utilization and headcount attrition.

Research and development expenses for the three months ended June 30, 2012 were approximately $126,000, compared to approximately $259,000 for the same period of 2011, or a decline of over 51%. Research and development expenses for the first six months of 2012 were approximately $255,000, compared to approximately $509,000 for the first six months of 2011, or a decline of nearly 50%. The decrease was primarily due to a reduction in legal expenses and outside services used in our current product development projects.

Selling, general and administrative expenses for the three months ended June 30, 2012 were approximately $1.7 million as compared to $2.7 million for the same period in 2011. Selling, general and administrative expenses for the first six months of 2012 totaled approximately $2.9 million as compared to $4.8 million for the first six months of 2011, for a decline in both periods of over 39%. The decrease was primarily due to reduced headcount and variable sales and marketing expenses due to lower sales volume in the current year, offset by an increase in our allowance for doubtful accounts of $0.5 million in the second quarter of 2012.

Net loss for the three months ended June 30, 2012 was approximately $3.9 million as compared to $2.4 million for the same period in 2011. Net loss for the first six months of 2012 was approximately $6.7 million as compared to approximately $4.1 million for the first six months of 2011. The increase in our net loss for 2012 was primarily due to a full period of interest expense related to the coupon of our Convertible Debentures issued in May 2011, non-cash interest expense of $734,000 recognized from our Forbearance Agreement with the holders of our Convertible Debentures which reduced the conversion price in the Indenture from $5.80 to $1.00 per share, debt extinguishment costs of $427,000 related to exchange and retirement of $1 million of our Convertible Debentures and a loss of $99,000 on the change of an embedded derivative within our Warrants.

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