--------------------------------------------------------------------------------
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                            -------------------------

                                   FORM 10-Q/A
                                (Amendment No. 1)
                            ------------------------



                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                 FOR THE FISCAL QUARTER ENDED SEPTEMBER 30, 2009

                          COMMISSION FILE NO.: 0-28887


                          CARBONICS CAPITAL CORPORATION
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)


Delaware                                                           22-3328734
--------------------------------------------------------------------------------
(State of other jurisdiction of                                   (IRS Employer
incorporation or organization)                               Identification No.)


One Penn Plaza, Suite 1612, New York, New York                        10119
--------------------------------------------------------------------------------
(Address of principal executive offices)                             (Zip Code)

                                 (212) 994-5374
--------------------------------------------------------------------------------
               (Registrant's telephone number including area code)



Check mark  whether  the issuer (1) filed all  reports  required  to be filed by
Section 13 or 15(d) of the  Securities  Exchange  Act of 1934 during the past 12
months (or for such shorter  period that the registrant as required to file such
reports),  and (2) has been subject to such filing  requirements for the past 90
days. Yes X No __

Indicate by check mark whether the registrant has submitted  electronically  and
posted on its corporate Web site, if any, every  Interactive  Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss.232.405 of
this chapter)  during the  preceding 12 months (or for such shorter  period that
the registrant was required to submit and post such files.) Yes __ No__

Indicate by check mark whether the registrant is a large  accelerated  filer, an
accelerated filer, a non-accelerated  filer, or a smaller reporting company. See
the definitions of "large accelerated  filer,"  "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act. (Check One)

Large accelerated filer             Accelerated filer
                         ---                                ---
Non-accelerated filer               Small reporting company  X
                         ---                                ---


Indicate by check mark whether the  registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act) Yes No X

The number of  outstanding  shares of common  stock as of November  23, 2009 was
312,942,178.

<PAGE>

   Amendment No. 1


This  Amendment No.1 on Form 10Q/A,  which amends and restates items  identified
below with respect to the Form 10Q, filed by Carbonics Capital Corporation ("we"
or "the Company") with the  Securities  and Exchange  Commission  (the "SEC") on
November 23, 2009 (the "Original Filing"), is being filed in order to :

o    Include  restated  financial  statements  as  described  in  Note 10 to the
     financial statements;

o    Amend Item 2, Management's  Discussion and Analysis, to reflect the amended
     financial statements;

o    Amend Item 4,  Controls  and  Procedures,  to reflect the  modification  to
     management's assessment of its disclosure controls and procedures caused by
     the restatement and to provide further disclosures;

o    Amend  the  following   notes  under  Item  1,  Financial   Statements  and
     Supplementary Schedules, to reflect the amended financial statements:

     o    Note 1,  Acquisition,  was  updated  with  respect to the terms of the
          Stock Purchase Agreement between the Company and GS AgriFuels

     o    Note 3, Going  Concern,  was updated to restate the Company's  working
          capital deficit;

     o    Note 5,  Shareholders'  Equity,  was updated to remove the designation
          and issuance of the Series D Preferred shares from the Company;

     o    Note 6, Financing Arrangements, was updated to restate the schedule of
          financial  obligations  and  the  description  of  amounts  previously
          recorded  due were  deleted  in the  paragraph  describing  the  Stock
          Purchase  Agreement  between the Company and GS AgriFuels  Corporation
          ("GS AgriFuels");

     o    Note 7, Related  Party  Transactions,  was updated with respect to the
          description of the Stock Purchase Agreement between the Company and GS
          AgriFuels;

     o    Note 9,  Acquisitions,  was updated  with  respect to the terns of the
          Stock Purchase Agreement between the Company and GS AgriFuels;

     o    Note 10,  Restatements,  was updated to outline the changes  that were
          made to the financial statements.

None of the other  disclosures in this Report have been amended or updated.  For
updated  information about the Company,  please refer to the more recent filings
made with the SEC.








                                       2



<PAGE>


                          CARBONICS CAPITAL CORPORATION
                          QUARTERLY REPORT ON FORM 10Q
                 FOR THE FISCAL QUARTER ENDED SEPTEMBER 30, 2009
<TABLE>
                                TABLE OF CONTENTS



                                                                                                           Page No
Part I            Financial Information

<S>               <C>                                                                                           <C>
Item 1.           Financial Statements ..........................................................................3
                  Condensed Consolidated Balance Sheet - September 30, 2009 (unaudited)
                    and December 31, 2008........................................................................4
                  Condensed Consolidated Statements of Operations - for the Three and Nine Months
                    Ended September 30, 2009 (unaudited) and 2008 (unaudited)....................................5
                  Statement of Stockholders' Equity - December 31, 2008 and Nine Months
                    Ended September 30, 2009.....................................................................6
                  Condensed Consolidated Statements of Cash Flows - for the Nine Months
                    Ended September 30, 2009 (unaudited) and 2008 (unaudited)....................................7
                  Notes to Condensed Consolidated Financial Statements...........................................8
Item 2.           Management's Discussion and Analysis .........................................................16
Item 3            Quantitative and Qualitative Disclosures about Market Risk....................................19
Item 4.           Controls and Procedures.......................................................................19

Part II           Other Information

Item 1.           Legal Proceedings.............................................................................20
Items 1A.         Risk Factors..................................................................................20
Item 2.           Unregistered Sales of Equity Securities and Use of Proceeds...................................20
Item 3.           Defaults upon Senior Securities...............................................................20
Item 4.           Submission of Matters to a Vote of Security Holders...........................................20
Item 5.           Other Information ............................................................................20
Item 6.           Exhibits .....................................................................................21

Signatures                                                                                                      22










                                       3
<PAGE>


</TABLE>



                                     PART I


ITEM 1            FINANCIAL STATEMENTS























                                       4

<PAGE>

<TABLE>



                         CARBONICS CAPITAL CORPORATION
                      CONDENSED CONSOLIDATED BALANCE SHEETS
           AS OF SEPTEMBER 30, 2009 (UNAUDITED) AND DECEMBER 31, 2008
<CAPTION>
                                                                                       RESTATED
                                                                                      9/30/2009       12/31/2008
                                                                                  -------------    -------------
ASSETS
Current Assets:
<S>                                                                               <C>              <C>
   Cash .......................................................................   $       7,262    $        --
   Accounts receivable, net of allowance for doubtful accounts of $3,094 and $0          87,614             --
   Inventory ..................................................................          28,198             --
   Note receivable - related party ............................................         320,398          386,132
   Prepaid expenses ...........................................................          83,991             --
                                                                                  -------------    -------------
      Total current assets ....................................................         527,463          386,132

   Equipment, net of accumulated depreciation of $9,313 .......................          19,966             --
   Property, plant and equipment held for use .................................       1,299,365             --

Other Assets:

   Construction in progress ...................................................         554,720             --
   Restricted cash ............................................................         241,980             --
                                                                                  -------------    -------------
      Total other assets ......................................................         796,700             --
                                                                                  -------------    -------------

TOTAL ASSETS ..................................................................   $   2,643,493    $     386,132
                                                                                  =============    =============
LIABILITIES AND STOCKHOLDERS' DEFICIT

Current Liabilities:

   Accounts payable and accrued expenses ......................................   $   2,046,733    $     591,511
   Accrued interest ...........................................................         840,316          439,870
   Accrued interest - related party ...........................................             373             --
   Note payable ...............................................................       1,404,600             --
   Note payable - related party ...............................................         105,669             --
   Convertible debentures - related party .....................................         415,293             --
   Convertible debentures .....................................................       7,948,120        9,178,820
   Current maturities of long term debt .......................................         218,686             --
                                                                                  -------------    -------------
      Total current liabilities ...............................................      12,979,790       10,210,201
   Long term debt net of current maturities ...................................         914,927             --
                                                                                  -------------    -------------
      TOTAL LIABILITIES .......................................................      13,894,717       10,210,201
                                                                                  -------------    -------------

Preferred stock
Series C, par $0.001, 1,000,000 shares authorized, 805,767 and 805,767 issued
   and outstanding, respectively ..............................................             806              806
Series D, par $1,000, 1,000,000 shares authorized, 0 and 0 issued
   and outstanding, respectively ..............................................            --               --
Common stock, par $0.001, 500,000,000 authorized
   250,964,080 and 127,279,405 issued and outstanding, respectively ...........         250,964          127,279
Additional paid-in capital ....................................................     123,849,832      128,559,537
Accumulated deficit ...........................................................    (135,352,826)    (138,511,691)
                                                                                  -------------    -------------
   Total stockholders' deficiency .............................................     (11,251,224)      (9,824,069)
                                                                                  -------------    -------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY ................................   $   2,643,493    $     386,132
                                                                                  =============    =============


              The notes to the financial statement are an integral
                           part of these statements.
</TABLE>
                                       5
<PAGE>


<TABLE>

                          CARBONICS CAPITAL CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
     FOR THE THREE AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 2009 AND 2008
                                   (UNAUDITED)

<CAPTION>

                                                                      Three Months Ended                  Nine months Ended
                                                             (Restated)       (Restated)       (Restated)        (Restated)
                                                                9/30/09          9/30/08          9/30/09          9/30/08
                                                          -------------     -------------    -------------     ------------
<S>                                                       <C>              <C>              <C>              <C>
Revenue ...............................................   $     149,153    $   1,559,187    $   1,786,983    $   7,742,630
Cost of revenues ......................................         121,815        1,348,654        2,098,827        6,950,383
                                                          -------------    -------------    -------------    -------------
                                                                 27,338          210,533         (311,844)         792,248

Operating expenses:
   General and administrative expenses ................         199,994          363,329          780,506        1,082,688
   Selling expenses ...................................            --              8,909           16,191           27,774
   Stock based compensation ...........................            --               --               --            250,000
                                                          -------------    -------------    -------------    -------------
     Total operating expenses .........................         199,994          372,238          796,697        1,360,462
                                                          -------------    -------------    -------------    -------------

Operating loss ........................................        (172,656)        (161,705)      (1,108,542)        (568,214)
                                                          -------------    -------------    -------------    -------------

Other income (expense):
   Interest income ....................................         (23,425)            --              4,709             --
   Interest income - related party ....................          50,586             --             99,901             --
   Other income/expense ...............................            --             16,754            1,707           26,310
   Loss on sale of equipment ..........................               2             --            (14,005)            --
   Grant income .......................................            --             99,658           59,563           99,658
   Gain on extinguishment of debt .....................          48,186             --             48,186             --
   Amortization of deferred financing costs and
     debt discount ....................................            --               (250)         (46,712)            (750)
   Settlement expense .................................            --               --            (62,500)            --
Costs related to conversion features ..................         259,431             --            (82,601)            --
   Costs related to conversion features - related party          (9,406)            --           (381,543)            --
   Change in fair value of conversion features ........            --           (291,375)      5, 183,296       (2,819,738)
   Interest expense - related party ...................         (40,016)            --           (101,091)            --
   Interest expense ...................................        (203,386)         (91,255)        (441,505)        (378,579)
                                                          -------------    -------------    -------------    -------------
     Total other income (expense) .....................          81,973)        (266,468)       4,267,407       (3,073,099)

Income (loss) before provision for income taxes .......         (90,683)        (428,172)       3,158,866       (3,641,314)

Provision/benefit for income taxes ....................            --               --               --               --
                                                          -------------    -------------    -------------    -------------

Net Income (Loss) .....................................   $     (90,683)   $    (428,172)   $   3,158,866    $  (3,641,314)
                                                          =============    =============    =============    =============

Earnings (loss) per share, basic ......................   $        --      $        --      $        0.02    $       (0.04)
                                                          =============    =============    =============    =============

Earnings (loss) per share, dilutive ...................   $        --      $        --      $        0.02    $       (0.04)
                                                          =============    =============    =============    =============
Weighted average share of common stock
   outstanding, basic .................................     313,287,800       95,802,303      198,826,036       95,802,303
                                                          =============    =============    =============    =============

Weighted average shares of common stock
     outstanding, dilutive ............................     500,000,000       95,802,303      500,000,000       95,802,303
                                                          =============    =============    =============    =============

             The notes to the condensed financial statements are an
                       integral part of these statements.
</TABLE>
                                       6

<PAGE>

                          CARBONICS CAPITAL CORPORATION
                       STATEMENTS OF STOCKHOLDERS' EQUITY
  FOR THE YEAR ENDED DECEMBER 31, 2008 AND NINE MONTHS ENDED SEPTEMBER 30, 2009
<TABLE>
<CAPTION>
                                                           Series C Preferred Stock Series D Preferred Stock       Common Stock
                                                               Shares         Amount  Shares         Amount    Shares        Amount
                                                          --------------------------------------------------------------------------

<S>                                                       <C>        <C>                 <C>            <C>         <C>
Balance, December 31, 2007 ............................       974,140    $       974    --   $     --       9,549,266   $     9,549
                                                          ===========    ===========    ==   ==========   ===========   ===========
Issuance of common stock upon conversion of debt ......          --             --                 --            --       9,730,140
                                                                                                                               9730
Stock issued for services .............................          --             --      --         --       3,000,000         3,000
Stock issued for compensation .........................          --             --      --         --      10,000,000        10,000
Conversion of Series C Preferred into common stock ....      (168,373)          (168)              --            --      95,000,000
                                                                                                                             95,000
Forgiveness of affiliate debt .........................          --             --      --         --            --            --
Restatement-recapitalization from acquisition of entity
under common control ..................................          --             --      --         --            --            --
Net loss ..............................................          --             --      --         --            --            --
                                                                         -----------    --   ----------   -----------   -----------

Balance, December 31, 2008 ............................       805,767    $       806    --   $     --     127,279,406   $   127,279
                                                          ===========    ===========    ==   ==========   ===========   ===========

Issuance of common stock upon conversion of debt ......          --             --      --         --     123,684,674       123,685
Acquisition of entity under common control ............          --             --      --         --            --            --
Beneficial conversion feature .........................          --             --      --         --            --            --
Forgiveness of debt ...................................          --             --      --         --            --            --
Net income ............................................          --             --      --         --            --            --
                                                          -----------    -----------    --   ----------   -----------   -----------
Balance, September 30, 2009, (restated) ...............       805,767    $       806    --   $     --     250,964,080   $   250,964
                                                          ===========    ===========    ==   ==========   ===========   ===========
</TABLE>

<TABLE>
                                                                                                       Total
                                                              Additional        Accumulated    Stockholders'
                                                         Paid-In-Capital            Deficit           Equity
                                                          --------------    --------------    ---------------
<S>                                                       <C>               <C>               <C>
Balance, December 31, 2007 ............................   $  126,524,280    $ (128,319,926)   $   (1,785,123)
                                                          ==============    ==============    ==============

Issuance of common stock upon conversion of debt ......          109,770              --             119,500
Stock issued for services .............................           87,000              --              90,000
Stock issued for compensation .........................          190,000              --             200,000
Conversion of Series B Preferred into common stock ....          (94,832)             --                --
Forgiveness of affiliate debt .........................       (1,796,320)             --          (1,796,320)
Restatement-recapitalization from acquisition of entity
under common control ..................................        3,539,639        (3,539,639)             --
Net (loss) ............................................             --          (6,652,126)       (6,652,126)
                                                          --------------    --------------    --------------
Balance, December 31, 2008 ............................   $  128,559,537    $ (138,511,691)   $   (9,824,069)
                                                          ==============    ==============    ==============

Issuance of common stock upon conversion of debt ......          (12,383)             --             111,302
Acquisition of entity under common control ............       (4,837,868)             --          (4,837,868)
Beneficial conversion feature .........................          109,164              --             109,164
Forgiveness of debt ...................................           31,382              --              31,382
Net income ............................................             --           3,158,866         3,158,866
                                                          --------------    --------------    --------------

Balance, September 30, 2009, (restated) ...............   $  123,849,826    $ (135,352,825)   $  (11,251,224)
                                                          ==============    ==============    ==============


             The notes to the condensed financial statements are an
                       integral part of these statements.
</TABLE>

                                       7
<PAGE>

<TABLE>
                          CARBONICS CAPITAL CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
              FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008
                                   (UNAUDITED)
<CAPTION>
                                                                                 (RESTATED)
                                                                                Nine Months    Nine Months
                                                                              Ended 9/30/09  Ended 9/30/08
                                                                              -------------  --------------
CASH FLOW FROM OPERATING ACTIVITIES
<S>                                                                             <C>            <C>
Net income from continuing operations ........................................   $ 3,158,866    $(3,641,314)

Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization ................................................        89,395           --
Inventory reserve ............................................................        72,027           --
Bad debt expense .............................................................         1,489           --
Change in fair value of conversion liabilities ...............................    (5,183,296)     2,819,738
Recognition and accretion of conversion liabilities ..........................       464,144           --
Loss on sale of equipment ....................................................        14,003           --
Changes in Assets and Liabilities
   Accounts receivable .......................................................        61,083           --
   Inventory .................................................................     1,457,793           --
   Prepaid expenses ..........................................................       (14,483)          --
   Accounts payable and accrued expenses .....................................      (719,503)       201,385
   Accrued interest ..........................................................       289,561           --
   Deferred revenue ..........................................................      (107,325)          --
                                                                                 -----------    -----------
      Net cash provided by (used in) operating activities ....................      (416,246)      (620,191)
                                                                                 -----------    -----------

CASH FLOW FROM INVESTING ACTIVITIES

   Cash placed under restrictions ............................................       (34,796)          --
   Cash acquired from acquisition ............................................       266,605           --
      Proceeds from sale of equipment ........................................        50,125           --
      Proceeds from related party receivables ................................        99,484           --
   Project development costs .................................................          --             --
   Additions to and acquisition of property, plant and equipment .............          (860)          --
                                                                                 -----------    -----------
      Net cash provided by investing activities ..............................       380,557           --
                                                                                 -----------    -----------
CASH FLOWS FROM FINANCING ACTIVITIES

   Issuances (Repayments) of long-term debt ..................................        (8,006)       (66,314)
   Advances from related party ...............................................        50,956        879,750
   Proceeds from convertible debenture .......................................          --           10,548
   Repayment of note receivable - related party ..............................          --         (200,000)
                                                                                 -----------    -----------
      Net cash provided by financing activities ..............................        42,950        623,984
                                                                                 -----------    -----------
   Net (decrease) increase in cash ...........................................         7,262          3,793

   Cash at beginning of period ...............................................          --           (3,793)
                                                                                 -----------    -----------
   Cash at end of period .....................................................   $     7,262    $      --
                                                                                 ===========    ===========

Supplemental statement of non-cash investing and financing activities:

Transfer of net assets to related party ......................................   $      --        2,203,653
Stock based compensation .....................................................   $      --          250,000
Increase in related party note due to expenses paid on behalf of related party   $      --          717,680
Decrease in related party note due to expenses paid on behalf of related party   $      --        1,275,388
Forgiveness of amount owed to related party ..................................   $      --        2,000,000
Debt conversions into common stock ...........................................   $   111,302           --
Cancellation of accounts payable .............................................   $   926,739           --

             The notes to the condensed financial statements are an
                       integral part of these statements.

</TABLE>
                                       8
<PAGE>

1        CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance  with  accounting  principles  generally  accepted in the
United States for interim  financial  information  and with the  instructions to
Form  10Q  of  Regulation  S-X.  Accordingly,  they  do not  include  all of the
information and footnotes required by accounting  principles  generally accepted
in the United  States  for  complete  financial  statements.  In the  opinion of
management,  all normal recurring  adjustments  considered  necessary for a fair
statement  of the  results of  operations  have been  included.  The  results of
operations  for the nine months  ended  September  30, 2009 are not  necessarily
indicative  of the results of  operations  for the full year.  When  reading the
financial  information  contained in this Quarterly Report,  reference should be
made to the financial  statements  and notes  contained in the Company's  Annual
Report on Form 10-K for the year ended December 31, 2008.

ACQUISITION

Sustainable Systems, Inc.

Effective  June  30,  2009,  GS  AgriFuels  Corporation  and  Carbonics  Capital
Corporation  entered into a Stock Purchase Agreement pursuant to which Carbonics
acquired 100% of the stock of Sustainable Systems,  Inc.  ("Culbertson") from GS
AgriFuels in return for  assumption of $4,000,000 of GS AgriFuels'  indebtedness
to YAGI Investments, L.P. ("YAGI"). In connection with this Agreement, Carbonics
issued an amended and restated convertible  debenture to YAGI for $4,000,000 due
on December 31, 2011.  GS AgriFuels is a  wholly-owned  subsidiary of GreenShift
Corporation,  a  company  that  is  majority  owned  by the  Company's  majority
shareholder,  Viridis  Capital,  LLC. The financial  results of  Culbertson  are
included in the  combined  results of  operations  for the three and nine months
ended  September  30,  2009  in  accordance   with  FASB  Accounting   Standards
Codification 805, Appendix D, for acquisitions of entities under common control.

2        NATURE OF OPERATIONS

Carbonics Capital Corporation ("we," "our," "us," "Carbonics," or the "Company")
was founded to recycle carbon dioxide into value-added products.

Our development  activities during 2009 have primarily involved  evaluation of a
number of  different  biological,  chemical and other  technologies  designed to
recycle  carbon  dioxide into  value-added  products.  Our  strategic  plan also
involves the  acquisition of accretive  assets and cash flows that are strategic
to our technology  development  efforts. We are currently evaluating a number of
qualified   opportunities   that  produce  the  raw  materials  needed  for  our
technologies, or that have the infrastructure we need to scale our technologies,
or that have the ability to refine the products we produce with our technologies
into finished goods. Our plan in this respect is to leverage the targeted assets
and cash flows to defray our technology  and financing risk as we  commercialize
our technologies.

Our operations  during the nine months ended September 30, 2009, mostly involved
the maintenance of our idled oilseed crush facility in Culbertson,  Montana.  We
are currently seeking  investment for the  revitalization of this facility based
on its potential value in the biofuel and culinary markets

3        GOING CONCERN

The  accompanying  financial  statements  have been  prepared  assuming that the
Company will continue as a going concern. The Company had an accumulated deficit
of  $(135,352,826) at September 30, 2009. As of September 30, 2009 the Company's
current  liabilities  exceeded  current  assets by  $12,452,327,  which includes
convertible debentures of $7,948,120,  accrued interest payable of $840,689, and
related party convertible  debentures of $415,293. The Company's working capital
deficit net of these amounts is  $3,248,225.  These  matters  raise  substantial
doubt about the Company's  ability to continue as a going concern.  Management's
plans include raising additional  proceeds from debt and equity transactions and
completing strategic acquisitions.

4        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The financial  statements for the periods ended September 30, 2009 and 2008 have
been consolidated to include the accounts of the Company and its subsidiaries.

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles
generally  accepted in the United States of America requires  management to make

                                       9
<PAGE>

estimates  and  assumptions   that  affect  the  reported   amounts  of  assets,
liabilities,  revenues,  expenses,  and disclosures of contingencies  during the
reporting period. Actual results could differ from management's estimates.

STOCK BASED COMPENSATION

The  Company  accounts  for stock and stock  options  issued  for  services  and
compensation to employees under FASB Accounting Standards  Codification 718. For
non-employees, the fair market value of the Company's stock on the date of stock
issuance or option/grant  is used. The Company  determines the fair market value
of options issued under the Black-Scholes Pricing Model. Under the provisions of
FASB Accounting  Standards  Codification 718,  share-based  compensation cost is
measured  at the  grant  date,  based on the fair  value  of the  award,  and is
recognized as an expense over the employee's requisite service period (generally
the vesting period of the equity grant).

FINANCIAL INSTRUMENTS

The Company  accounted for the  convertible  debentures in accordance  with FASB
Accounting Standards Codification 480, as the conversion feature embedded in the
convertible  debentures  could result in the note principal and related  accrued
interest being converted to a variable number of the Company's common shares.

The Company  accounted for the price  protection  features  associated  with the
Series D Shares in accordance with FASB Accounting  Standards  Codification 480,
as the conversion  feature  embedded in the price protection could result in the
Company being required to issue  additional  common shares up to the full amount
of the deficiency until such time as the former shareholders  realize sufficient
cash sales proceeds to increase the deficiency to zero.

NOTE 5     STOCKHOLDERS' EQUITY

SERIES C PREFERRED STOCK

Shares of the Company's  Series C Preferred Stock (the "Series C Shares") may be
converted by the holder into Company common stock.  The conversion ratio is such
that the full 1,000,000 Series C Shares  originally  issued convert into Company
common shares  representing 80% of the fully diluted  outstanding  common shares
outstanding after the conversion  (which includes all common shares  outstanding
plus  all  common  shares  potentially  issuable  upon  the  conversion  of  all
derivative securities not held by the holder). The holder of Series C Shares may
cast the number of votes at a  shareholders  meeting or by written  consent that
equals  the  number  of  common  shares  into  which  the  Series C  Shares  are
convertible  on the record  date for the  shareholder  action.  In the event the
Board of Directors  declares a dividend payable to Company common  shareholders,
the holders of Series C Shares will receive the  dividend  that would be payable
if the Series C Shares were  converted  into Company  common shares prior to the
dividend.  In the event of a liquidation of the Company, the holders of Series C
Shares will receive a preferential  distribution  of $0.001 per share,  and will
share in the  distribution  as if the  Series C Shares had been  converted  into
common  shares.  At  September  30,  2009,  there were  805,767  Series C Shares
outstanding,  691,624 of which were held by the Company's majority  shareholder,
Viridis  Capital,  LLC. At November 23, 2009, there were 974,140 Series C Shares
outstanding,  921,890 of which were held by the Company's majority  shareholder,
Viridis Capital, LLC.

COMMON STOCK

The Company issued  123,684,674 shares of common stock upon the conversion of an
aggregate  of $111,302 in debt during the nine months ended  September  30, 2009
consisting  of:  66,415,378  common shares issued to YA Global  Investments,  LP
("YAGI"),  upon the  conversion  of $55,789 in debt;  37,269,296  common  shares
issued to RAKJ Holdings,  Inc. ("RAKJ"), upon the conversion of $35,370 in debt;
and,  20,000,000  common shares were issued to Mammoth  Corporation  ("Mammoth")
upon the conversion of $20,142 in debt.

6        FINANCING ARRANGEMENTS

The  following  is a  summary  of the  Company's  financing  arrangements  as of
September 30, 2009:

Current portion of notes payable and long term debt:
<TABLE>
<CAPTION>

<S>                                                                                  <C>
Current portion of installment debt payable from Culbertson to Anchor Light, L.P.    $     1,400,000
Mortgages and other term notes                                                               223,286
                                                                                     ---------------
     Total current portion of notes payable and long term debt                       $     1,623,286
                                                                                     ===============

Long-term debt, net of current maturities:
Notes payable to Montana Dept of Agriculture from Culbertson                         $       124,052
Notes payable to Great Northern Development from Culbertson                                  790,875
                                                                                     ---------------
     Total long term debt                                                            $       914,927
                                                                                     ===============
</TABLE>

                                       10

<PAGE>
<TABLE>
<CAPTION>
Current portion of convertible debentures:
<S>                                                                                  <C>
Convertible debenture payable to YA Global Investments issued October 2005           $    1,205,814
Convertible debenture payable to YA Global Investments issued June 2007                     633,333
Convertible debenture payable to YA Global Investments issued February 2006               2,040,401
Convertible debenture payable to YA Global Investments issued June 2009                   4,000,000
Convertible debenture payable to Minority Interest Fund (II)                                415,293
Convertible debenture payable to RAKJ Holdings issued April 2009                             68,572
                                                                                    ===============
     Total current convertible debentures                                           $     8,363,413
                                                                                    ===============
</TABLE>
CONVERTIBLE DEBENTURES

As of September  30, 2009,  the Company had  convertible  debentures  payable to
Minority Interest Fund (II), LLC ("MIF") in an aggregate amount of $415,293 (the
"MIF Debentures").  The MIF Debentures include an additional debenture issued on
April 1, 2009 in the amount of $1,000,000 (the "MIF  Debenture") in return for a
promissory  note issued by MIF to the Company in the amount of  $1,000,000  (the
"MIF Note"). The MIF Note bears interest at the rate of 20% per year and matures
on December 31, 2010. The MIF Debentures bear interest at a rate of 20% per year
and mature on December 31, 2010.  MIF is entitled to convert the  $1,000,000  of
the MIF Debentures at a rate equal to 60% of the lowest closing market price for
the Company's common stock for the twenty trading days preceding conversion. The
MIF Note has been  recorded net of the MIF  Debenture  as of September  30, 2009
given the presumed  right of offset  accorded to related  parties.  The interest
receivable  due under the MIF Note has also been  presented  net of the interest
payable due under the MIF Debenture.  During the nine months ended September 30,
2009,  MIF  purchased  additional  debentures  from the Company in the amount of
$89,500,  assigned  $87,817 of the principal amount due to MIF to RAKJ Holdings,
Inc.  ("RAKJ")  ($67,817) and Mammoth  Corporation  ("Mammoth")  ($20,000).  The
Company  determined  the  value of the MIF  Debenture  at  April  1,  2009 to be
$1,362,732,  which  represented the face value of the debenture plus the present
value of the conversion feature.  The liability for the conversion feature shall
be  increased  from its  present  value  of  $362,732  at  April 1,  2009 to its
estimated  settlement  amount of $428,571 at December 31, 2010.  As of September
30, 2009,  an expense of $18,812 has been  recorded as interest  expense for the
accretion of the discount on the convertible  note payable,  thereby  increasing
the carrying  value of the MIF Debenture to $415,293 at September 30, 2009.  For
the nine  months  ended  September  30,  2009,  interest  income of $99,901  and
interest expense of $101,091 for the MIF Debentures were incurred.  The managing
member of MIF is a relative of the Company's chairman.

On  April  1,  2009,  the  Company  issued  Blackfield,   LLC  ("Blackfield")  a
convertible debenture in the amount of $500,000 (the "Blackfield  Debenture") in
return for a promissory  note issued by  Blackfield to the Company in the amount
of $500,000 (the  "Blackfield  Note").  During the quarter  ended  September 30,
2009,  the  Blackfield  Debenture  and  promissory  note were  cancelled and all
related entries were reversed effective July 1, 2009.

The balance of convertible debt due to RAKJ as of September 30, 2009 was $68,572
(the "RAKJ Debenture").  The Company issued 37,269,296 shares of common stock to
RAKJ,  upon the  conversion  of $35,370 in debt  during  the nine  months  ended
September 30, 2009. The RAKJ Debenture is convertible  into Company common stock
at a rate  equal to 50% of the lowest  closing  market  price for the  Company's
common  stock for the twenty  trading  days  preceding  conversion.  The Company
determined the value of the RAKJ Debenture at April 1, 2009 to be $110,782 which
represented  the face  value of the  debenture  plus  the  present  value of the
conversion feature.  The liability for the conversion feature shall be increased
from its present value of $50,782 at April 1, 2009 to its  estimated  settlement
amount of $120,000 at December 31, 2010. During the three months ended September
30, 2009,  MIF assigned  $10,317 to the RAKJ debenture As of September 30, 2009,
an expense of $4,180 has been recorded as interest  expense for the accretion of
the discount on the convertible note payable,  thereby,  increasing the carrying
value of the RAKJ Debenture. Conversely, the carrying value was decreased during
the period for the  conversions  into common  stock.  For the nine months  ended
September  30,  2009  interest  expenses of $3,363 for the RAKJ  Debenture  were
incurred.

The  Company  issued  20,000,000  shares of common  stock to  Mammoth,  upon the
conversion  of $20,000 in debt plus accrued  interest of $142 during the quarter
ended  September 30, 2009,  which  amounts paid off the  debenture in full.  The
Mammoth  Debenture was convertible  into Company common stock at a rate equal to
50% of the lowest  closing  market price for the Company's  common stock for the
twenty trading days preceding  conversion.  For the nine months ended  September
30, 2009,  interest expenses of $142 was paid. The balance due under the Mammoth
Debenture at September 30, 2009 was $0.

                                       11
<PAGE>

The Company  accounted for each of the MIF Debenture,  the Mammoth Debenture and
the RAKJ Debenture in accordance  with FASB  Accounting  Standards  Codification
480, as the conversion  feature  embedded in each debenture  could result in the
note  principal  being  converted to a variable  number of the Company's  common
shares.

On August 14, 2008, the Company and YA Global Investments,  L.P. ("YAGI") agreed
to extend the maturity  date of the  following  secured  convertible  debentures
previously  issued  to YAGI to  December  31,  2011:  that  certain  convertible
debenture dated October 12, 2005 in the original principal amount of $1,475,000;
that  certain  convertible  debenture  dated  February  8, 2006 in the  original
principal amount of $3,050,369;  and, that certain  convertible  debenture dated
June 26, 2007 in the original principal amount of $570,000.  The current balance
due against these  debentures  was  $2,234,687  as of September  30, 2009.  Each
debenture  provides  for  interest  in the  amount  of 12%  per  annum  and  are
convertible  at the  lesser of $0.60 or 90% of the lowest  closing  bid price of
Carbonics'  common stock during the 30 trading days  immediately  preceding  the
conversion date.

Effective June 30, 2009, the Company and GS AgriFuels Corporation entered into a
Stock  Purchase  Agreement  pursuant to which the Company  acquired  100% of the
stock of Sustainable  Systems,  Inc.  ("Culbertson") from GS AgriFuels in return
for  assumption  of  $4,000,000  of GS  AgriFuels'  indebtedness  to  YA  Global
Investments,  L.P.  ("YAGI").  In connection  with this  Agreement,  the Company
issued an amended and restated convertible  debenture to YAGI for $4,000,000 due
on December 31, 2011. This debenture  provides for interest in the amount of 12%
per annum and is  convertible  at the  lesser of the fixed  conversion  price of
$0.01 or 90% of the lowest daily volume  weighted  average  price of  Carbonics'
common stock during the 20 trading days  immediately  preceding  the  conversion
date.

The  Company  accounted  for  the  YAGI  Debenture  dated  October  12,  2005 in
accordance with FASB Accounting  Standards  Codification  480, as the conversion
feature  embedded in the YAGI Debenture could result in the note principal being
converted to a variable  number of the  Company's  common  shares.  The carrying
amount of the  debenture  has been  restated for the prior year (please see Note
10,  Restatement of Prior Years Financials,  below).  The Company determined the
value  of the  YAGI  Debenture  at  December  31,  2008 to be  $3,014,535  which
represented  the face  value of the  debenture  plus  the  present  value of the
$2,411,628  conversion  feature.  As of September 30, 2009, income of $1,808,721
has been recorded from a reduction in the fair value of the  conversion  feature
on the convertible note payable,  thereby,  decreasing the carrying value of the
YAGI Debenture to $1,205,814 at September 30, 2009.

The  Company  accounted  for  the  YAGI  Debenture  dated  February  8,  2006 in
accordance with FASB Accounting  Standards  Codification  480, as the conversion
feature  embedded in the YAGI Debenture could result in the note principal being
converted to a variable  number of the  Company's  common  shares.  The carrying
amount of the debenture has been restated for the prior year (please see Note 10
Restatement of Prior Years Financials,  below). The Company determined the value
of the YAGI  Debenture at December 31, 2008 to be $5,587,845  which  represented
the  face  value  of the  debenture  plus the  present  value of the  $4,470,276
conversion  feature.  As of September 30, 2009,  income of  $3,374,575  has been
recorded  from a reduction  in the fair value of the  conversion  feature on the
convertible  note payable,  thereby,  decreasing  the carrying value of the YAGI
Debenture to $2,040,401 at September 30, 2009.

The  Company  accounted  for  the  YAGI  Debenture  dated  October  12,  2005 in
accordance with FASB Accounting  Standards  Codification  480, as the conversion
feature  embedded in the YAGI Debenture could result in the note principal being
converted to a variable  number of the  Company's  common  shares.  The carrying
amount of the debenture has been restated for the prior year (please see Note 10
Restatement of Prior Years Financials,  below). The Company determined the value
of the YAGI Debenture at December 31, 2008 to be $632,840 which  represented the
face value of the  debenture  plus the present  value of the $62,840  conversion
feature.  As of  September  30,  2009,  an expense of $493 has been  recorded as
interest  expense for the  accretion  of the  discount on the  convertible  note
payable,  thereby,  increasing  the  carrying  value  of the YAGI  Debenture  to
$633,333 at September 30, 2009.

NOTES PAYABLE

Secured Promissory Note

In December  2008,  Sustainable  Systems  ("Culbertson")  and Anchor  Light,  LP
entered into a Secured  Promissory  Note in the amount of $1,400,000.  Under the
agreement,  the Anchor Light note accrues interest at a rate of 13.5% per annum.
Monthly  payments  consist of all accrued  interest on the unpaid balance with a
final balloon payment plus any accrued unpaid interest due when the note matures
on  December  4, 2009.  This note is secured by an interest in all the assets of
Culbertson  including  the  accounts  receivable.  For  the  nine  months  ended
September 30, 2009, interest expense of $48,300 was accrued. As of September 30,

                                       12
<PAGE>

2009, the total  principal  balance on this note was  $1,400,000.  On August 18,
2009,  the Company  signed a  Forbearance  Agreement  with Anchor  Light.  As of
September 30, 2009,  the Anchor Light note was in default as of that date due to
the inventory liquidation (see Note 8, Commitment and Contingencies, below).

Term Notes

Culbertson  has various notes  payable with two other  lenders.  Culbertson  has
signed three notes payable with the Montana  Department of Agriculture  totaling
$124,052. These notes were issued by the Montana Agriculture Development Council
under Return On Investment Agreements,  numbers 0250714, 0350764, and 0450785. A
return on  investment  (ROI)  pursuant to these  agreements is an award of money
with the  expectation  that all or a part of the money  will be  repaid  after a
deferral period. No payments are required, and no interest is accrued during the
initial time period.  After the deferral period,  the award recipient repays the
investment  plus  interest over a remaining  period (up to seven  years).  As of
December 31, 2005,  all three notes were in the  deferral  period with  expected
deferral of interest and payments until February 2006. The deferral periods were
subsequently  extended  and the  notes  were  further  modified  with  regard to
interest  and  subordination.  ROI note  number  0450785 is secured by a lien on
specific equipment including pumps, blending vessels, storage bins and a solvent
recovery  system.  All notes accrue  interest at the rate of 3.2% per annum with
payments  of  principal  and  interest  beginning  March 6, 2011.  The notes are
secured by an interest in various equipment including eleven pumps and a solvent
recovery system. For the nine months ended September 30, 2009,  interest expense
of $1055 for these obligations was incurred and accrued.

Culbertson has signed four notes with Great Northern  Development.  Three of the
notes totaling  $393,780 at September 30, 2009 accrue interest at the rate of 6%
per annum.  The  payment  terms for the notes are as  follows:  the  $10,206 and
$116,599 notes are to be paid off with 180 monthly payments  beginning  December
15, 2005 with a maturity  date of November 15, 2020 and the $266,975  note is to
be paid off with 120 monthly  payments  beginning March 15, 2006 with a maturity
date of January 15, 2016; the monthly payments on this note are $1,800 per month
from April 2007 to March 2008 and then  $3,300  thereafter.  The fourth note for
$615,781 (as of September 30, 2009) accrues interest at the rate of 5% per annum
with payments of principal only through November 2007 and principal and interest
payments until the maturity date of November 15, 2010;  the monthly  payments on
this note are $7,500 during 2007,  $10,000  during 2008;  $5,000 during 2009 and
$17,302  thereafter.  For the nine months ended  September  30,  2009,  interest
expense of $13,716 for these obligations was incurred.  The principal balance of
these notes at September 30, 2009 was $1,009,561.

7        RELATED PARTY TRANSACTIONS

Effective June 30, 2009, the Company and GS AgriFuels Corporation entered into a
Stock  Purchase  Agreement  pursuant to which the Company  acquired  100% of the
stock of Sustainable  Systems,  Inc.  ("Culbertson") from GS AgriFuels in return
for  assumption  of  $4,000,000  of GS  AgriFuels'  indebtedness  to  YA  Global
Investments,   L.P.  ("YAGI").  GS  AgriFuels  is  a  subsidiary  of  GreenShift
Corporation,   which  company  is  majority  owned  by  the  Company's  majority
shareholder, Viridis Capital, LLC.

Minority  Interest  Fund  (II),  LLC  ("MIF")  is party to  certain  convertible
debentures  issued by the Company (see Note 6, Convertible  Debentures,  above).
The managing member of MIF is a relative of the Company's chairman.

8        COMMITMENTS AND CONTINGENCIES

On May 4, 2009, the Superior Court of the State of California  entered a default
against the Company in the amount of $62,500.  Golden  State  Equity  Investors,
Inc. alleged claims against the Company in which they asserted a cause of action
for breach of contract regarding a Settlement  Agreement dated July 9, 2008. The
Company has recorded this default amount effective January 1, 2009.

The Company's  Culbertson oilseed processing  facility did not receive a line of
credit for 2008 crop purchases,  voluntarily  surrendered its commodity  dealers
license and, on April 27, 2009,  entered  into a settlement  agreement  with the
states of Montana and North Dakota  pertaining to  outstanding  payments due for
purchase of oilseeds  during 2008 that were contracted at rates far greater than
current oilseed values.  Culbertson had previously  negotiated with two separate
banks  to  receive  working  capital  financing   sufficient  to  service  these
obligations.  Neither  bank was able to close due to  strain  in the  prevailing
commodity and financial markets. Culbertson has accordingly idled its operations
pending  liquidation by the Montana  Department of  Agriculture of  Culbertson's
inventories  to  satisfy  the  oilseed  payables.  Culbertson  is  permitted  to
reacquire  its  commodity  license upon the  completion  of  sufficient  working
capital  and equity  financing  to  operate.  The  liquidation  of  Culbertson's
inventory  is ongoing and is expected  to be complete  during the third  quarter
2009.  Approximately  $1,216,136  was due to growers who had delivered  seed, of
which amount  $950,723 had been paid as of July 17, 2009.  The remaining  amount
due and owing to the growers of $265,413 was paid in September of 2009.

                                       13
<PAGE>

On July 24, 2009, the Company and GS CleanTech Corporation entered into an Early
Adopter  License   Agreement  (the  "EALA")  involving  use  of  GS  CleanTech's
bioreactor and related technologies. The EALA calls for the payment of royalties
to GS CleanTech  equal to 10% of the Company's  pre-tax net income deriving from
the use of GS CleanTech's feedstock conditioning technologies, lipid production,
extraction and refining technologies, and carbon dioxide mitigation technologies
in  select  municipal  and  industrial   applications,   not  including  ethanol
production.  The EALA additionally  provides for reciprocal license rights to GS
CleanTech  such that GS  CleanTech  shall  have the  exclusive  right to use any
technology  acquired by Carbonics  (not including the licensed  technologies  or
technologies  developed from the licensed technologies under the EALA). The EALA
is  non-exclusive  but the Company has been granted most favored licensee status
in the EALA.  This status shall be subject to cancellation in the event that the
Company  fails to  commercialize  the  licensed  technologies  on the  following
schedule:  bench testing shall be completed on or before the second  anniversary
of the EALA; pilot testing shall be completed on or before the third anniversary
of the EALA; a  commercial-scale  pilot facility shall be built on or before the
fourth anniversary of the EALA; and,  commercial sales shall have been initiated
on or before the fifth anniversary of the EALA. The Company shall provide all of
the  capital  resources  needed  to build  bench,  pilot  and  commercial  scale
facilities  based on these  technologies  under  the  EALA.  GS  CleanTech  is a
wholly-owned  subsidiary  of GreenShift  Corporation,  which company is majority
owned by our majority shareholder, Viridis Capital, LLC.

On August 18,  2009,  the Company  signed a  Forbearance  Agreement  with Anchor
Light, LP. According to this agreement, the Company acknowledges that the Anchor
Light  note  was in  default  as of  that  date  due in  part  to the  inventory
liquidation.  Under the agreement, Anchor Light will forbear from exercising its
rights to foreclose as long as the Company fulfills various conditions including
obtaining  the  appropriate  insurance  on the  property  and paying the monthly
interest payments. The Company has fulfilled all conditions and Anchor Light has
agreed to continue to forbear any collection  efforts until the loan becomes due
and payable on its maturity date of December 8, 2009.

The Company's Culbertson subsidiary is party to the matter entitled GS AgriFuels
Corporation v. Chaykin,  et al. The action was filed in the Supreme Court of the
State of New York,  County of New York, on February 2, 2009. The Complaint seeks
damages for defendants'  fraudulent  misrepresentations,  tortious interference,
breach of acquisition  agreements and related claims relating to the sale by the
defendants  of the  stock of  Sustainable  Systems,  Inc.  ("Culbertson")  to GS
AgriFuels,  and arising from the  disclosure by the defendants  that  Culbertson
owned its Culbertson,  Montana oilseed crushing facility when in fact Culbertson
merely  held the  right to  purchase  the  Montana  facility  at the time of the
acquisition  by GS  AgriFuels;  the failure to disclose by the  defendants  that
Culbertson's  right to purchase the Montana facility,  as well as any investment
made in the  Montana  facility,  was  subject  to  forfeiture  within  months of
entering into the acquisition  agreements with GS AgriFuels;  and, the provision
by the  defendants of materially  false  financial  statements.  The  defendants
served a separate  action entitled Max, et al. v. GS AgriFuels  Corporation,  et
al. in the Montana Fourth  Judicial  District Court in response to GS AgriFuels'
New York  complaint.  GS AgriFuels has  petitioned  for dismissal of the Montana
action.  Three of the former shareholders of Culbertson,  corresponding to about
64% of the former  shareholders'  prior ownership  interest in Culbertson,  have
entered  into  settlement  agreements  pursuant to which GS  AgriFuels  has been
released from all  obligations  under the relevant  acquisition  agreements  and
otherwise. During the three months ended September 30, 2009, Carbonics agreed to
issue 129 shares of the Company's  Series D Preferred Stock to two of the former
shareholders of the Company's  Culbertson  subsidiary (see Note 5, Shareholders'
Equity,  above) in exchange for the execution of mutual general releases amongst
the parties and the commitment of the relevant  shareholders  to provide certain
assistance  relative to the negotiation  and execution of settlement  agreements
with  the  balance  of  the  former  shareholders  of the  Company's  Culbertson
subsidiary.  Despite  these  settlements,  Management  is unable to evaluate the
probability of an  unfavorable  outcome at this time. An estimate of loss cannot
be determined  and therefore,  no accrual has been made in connection  with this
contingency.   GS  AgriFuels  is  a   wholly-owned   subsidiary   of  GreenShift
Corporation,   which  company  is  majority  owned  by  the  Company's  majority
shareholder, Viridis Capital, LLC.

On  September  15,  2009  Sustainable  Systems,  LLC was  served a  summons  and
complaint by Sheridan Electric  Cooperative for monies owed to Sheridan Electric
for electrical  service to the Culbertson  oilseed  processing plant. The amount
claimed to be owed in the  complaint  was  $67,811.44.  The Company has retained
Montana  counsel  and is  responding  to the  complaint  and the outcome of this
litigation is uncertain at this time.

Sustainable  Systems,  LLC is  party to wage  claim  hearings  with the  Montana
Department of Labor for non-payment of accrued vacation to five former employees
of the Culbertson oilseed crush operation. According to the Sustainable Systems,
LLC employee policy, vacation time is accrued on behalf of the employee and upon
termination of employment  the accrued  vacation time not used by employee is to
be paid in cash.  According to Montana Department of Labor policy,  unpaid wages
are subject to penalties of up to 55% of the amount owed.  Accrued  vacation pay
for former employees  totaled  $9,170.14.  Total liability  including  penalties
Sustainable Systems, LLC total $14,214.

                                       14
<PAGE>

9        ACQUISITION

The Company follows  Appendix D of FASB Accounting  Standards  Codification  80.
Effective June 30, 2009, the Company and GS AgriFuels Corporation entered into a
Stock  Purchase  Agreement  pursuant to which the Company  acquired  100% of the
stock of Sustainable  Systems,  Inc.  ("Culbertson") from GS AgriFuels in return
for  assumption  of  $4,000,000  of GS  AgriFuels'  indebtedness  to  YA  Global
Investments,   L.P.  ("YAGI").  GS  AgriFuels  is  a  subsidiary  of  GreenShift
Corporation,   which  company  is  majority  owned  by  the  Company's  majority
shareholder, Viridis Capital, LLC.

10       RESTATEMENT

The Company has restated its financial  statements  for the year ended  December
31, 2008.  During  preparation of this report,  Management  determined  that the
Company's  prior  policies  relating to accounting  for the impact of conversion
features  embedded in the  Company's  various  derivative  securities  should be
revised to be consistent with recent guidance  involving the  interpretation  of
FASB Accounting  Standards  Codification  480, due to the variable number of the
Company's  common  shares  issuable upon  conversion  of the  company's  various
derivative  securities.   Accordingly,   Management  reviewed  and  revised  its
conclusions regarding the Company's derivative instruments at December 31, 2008.

The Company has  restated  its  financial  statements  for the nine months ended
September  30, 2009.  The Company and GS AgriFuels  had  previously  intended to
effect an  assignment of GS AgriFuels'  note payable and  convertible  debenture
obligations  and  related  accrued  interest  that  may  be due  (the  "Purchase
Obligations")  from GS AgriFuels to certain selling  shareholders  (the "Selling
Shareholders")   of  the  Company's   Sustainable   Systems,   Inc.   subsidiary
("Culbertson").  GS  AgriFuels  did  not  receive  the  consent  of the  Selling
Shareholders to the assignment of the Purchase Obligations to the Company, which
was required  pursuant to the  agreement  between GS  AgriFuels  and the Selling
Shareholders.  Therefore,  GS AgriFuels was not permitted to assign the relevant
debt to the Company.  Accordingly,  this debt and related accrued  interest have
been removed from the Company's  balance sheet presented in this filing and have
been returned to GS AgriFuels.
<TABLE>

The following shows the effect of the restatements on the financial statements:

Balance Sheets:
<CAPTION>
                                                                9/30/09          9/30/09
                                                            As reported      As restated
                                                           ------------    -------------
<S>                                                       <C>              <C>
Accounts payable and accrued expenses .................   $   1,938,201    $   2,046,733
Accrued interest payable ..............................   $   1,335,771    $     840,316
Notes payable .........................................       2,206,942        1,404,600
Convertible debentures, current .......................      10,948,105        7,948,120
Derivative liabilities ................................          37,673             --
Liability for conversion features on Series D Preferred          91,327             --
Additional paid-in capital ............................     119,586,512      123,849,832
Accumulated deficit ...................................    (135,407,756)    (135,352,826)

                                                               12/31/08         12/31/08
                                                            As reported      As restated
                                                          -------------   --------------
Total liabilities .....................................   $   3,456,714    $  10,210,201
Total equity ..........................................   $  (3,014,781)   $  (9,824,069)
</TABLE>

<TABLE>
Statements of Operations:
<CAPTION>
                                                           Three Months Ended 9/30/09        Six Months Ended 9/30/09
                                                           As reported    As restated     As reported     As restated
                                                          ---------------------------    ----------------------------

<S>                                                      <C>             <C>             <C>             <C>
Interest expense .....................................   $   (258,316)   $   (203,386)   $   (496,435)   $   (441,505)
Income (loss) from continuing operations .............       (145,613)        (90,683)      3,103,936       3,158,866
Net income (loss) ....................................       (145,613)        (90,683)      3,103,936       3,158,866
Earnings (loss) per share:
Continuing operations ................................   $       --      $       --      $       0.02    $       0.02
Total, basic and diluted .............................   $       --      $       --      $       0.02    $       0.02
</TABLE>


                                       15
<PAGE>
<TABLE>
<CAPTION>
                                                           Three Months Ended 9/30/09        Six Months Ended 9/30/09
                                                           As reported    As restated     As reported     As restated
                                                        -----------------------------    ----------------------------
<S>                                                     <C>             <C>              <C>            <C>
Total other income (expense).........................   $    (75,495)   $   (266,468)    $    546,078   $ (3,073,099)
Net income (loss) ...................................        (96,898)       (428,172)         130,763     (3,641,314)
Earnings (loss) per share: ..........................   $       --      $       --       $       --     $      (0.04)
</TABLE>
<TABLE>

Statements of Stockholders' Equity:
<CAPTION>
                                                              9/30/09         9/30/09
                                                          As reported     As restated
                                                        -----------------------------
<S>                                                     <C>             <C>
Issuance of Series D Preferred for debt .............   $   1,009,340   $        --
Forgiveness of debt .................................         139,914          31,382
Net income ..........................................       3,103,936       3,158,866

Statements of Cash Flows:
                                                              9/30/09          9/30/09
                                                          As reported      As restated
                                                        ------------------------------
Net loss from continuing operations .................   $   3,103,936   $    3,158,866
Accrued interest ....................................         344,491          289,561
Forgiveness of amount owed to related party .........   $   1,246,872   $         --

</TABLE>


















                                       16
<PAGE>

ITEM 2          MANAGEMENT DISCUSSION AND ANALYSIS

Carbonics Capital Corporation ("we," "our," "us," "Carbonics," or the "Company")
was founded to recycle carbon dioxide into value-added products.

Our development  activities during 2009 have primarily involved  evaluation of a
number of  different  biological,  chemical and other  technologies  designed to
recycle  carbon  dioxide into  value-added  products.  Our  strategic  plan also
involves the  acquisition of accretive  assets and cash flows that are strategic
to our technology  development  efforts. We are currently evaluating a number of
qualified   opportunities   that  produce  the  raw  materials  needed  for  our
technologies, or that have the infrastructure we need to scale our technologies,
or that have the ability to refine the products we produce with our technologies
into finished goods. Our plan in this respect is to leverage the targeted assets
and cash flows to defray our technology  and financing risk as we  commercialize
our technologies.

Our operations  during the nine months ended September 30, 2009, mostly involved
the maintenance of our idled oilseed crush facility in Culbertson,  Montana.  We
are currently seeking  investment for the  revitalization of this facility based
on its potential value in the biofuel and culinary markets.

RESULTS OF OPERATIONS

Three Months Ended  September 30, 2009 Compared to Three Months Ended  September
30, 2008

Revenues

Total  revenues for the three months ended  September  30, 2009 were $149,153 as
compared to the three months ended  September 30, 2008  revenues of  $1,559,187.
All revenue for the three months ended September 30, 2009 and 2008 resulted from
the Company's oilseed crush facility.

Cost of Revenues

Cost of revenues  for the three months ended  September  30, 2009 were  $121,815
compared  to  $1,348,654  for the  same  period  in 2008.  All cost of  revenues
resulted from the Company's oilseed crush facility.

General and Administrative Expenses Operating Expenses

General and administrative  expenses during the three months ended September 30,
2009  totaled  $199,994  with $0 related  to stock  based  compensation.  In the
comparable period of the prior year, general and administrative expenses totaled
$372,238 with $0 related to stock based compensation. General and administrative
expenses during the three months ended September 30, 2009 primarily consisted of
legal fees and office related expenses and expenses resulting from the Company's
oilseed crush facility.

Interest/Other Expense

Interest  expenses for the three months ended  September  30, 2009 were $203,386
and $91,255 for the three months ended September 30, 2008. Included in the three
months ended September 30, 2009 was $243,402 of interest expense,  consisting of
$203,386  in accrued  interest,  $40,016 in  accrued  interest  due to a related
party; Other expense included $250,026 in non-cash expenses  associated with the
conversion features embedded in the convertible debentures issued by the Company
during the three months ended September 30, 2009.  Amortization of note discount
was $0 and $250,  respectively for the three months ended September 30, 2009 and
2008.

Gain Associated with Change in Convertible Liabilities

As of September 30, 2009,  Carbonics Capital had several convertible  debentures
due to YA Global  Investments,  LP. The Company  accounted  for the  convertible
debentures in accordance  with SFAS No. 150,  Accounting  for Certain  Financial
Instruments with  Characteristics  of both Liabilities and Equity (SFAS 150), as
the conversion  feature  embedded in the convertible  debentures could result in
the note principal and related  accrued  interest being  converted to a variable
number of the  Company's  common  shares.  We  calculate  the fair  value of the
conversion feature at the time of issuance and record a conversion liability for
the calculated value. We recognize interest expense for the conversion liability
which is added to the principal of the  debenture.  We also  recognize  interest
expense for accretion of the conversion liability over the term of the note. For
the three months ended  September  30, 2009 and 2008,  we recognized $0 interest
expense for the conversion liability for these debentures.

Net Income

Net income  (loss) for the three months ended  September 30, 2009 was $90,683 as
compared to a net loss of $428,172 from the same period in 2008.

                                       17
<PAGE>

Nine months Ended September 30, 2009 Compared to Nine months Ended September 30,
2008

Revenues

Total revenues for the nine months ended  September 30, 2009 were  $1,786,983 as
compared to the nine months ended  September  30, 2008  revenues of  $7,742,630.
Revenue for the nine months ended  September 30, 2009 and 2008 resulted from the
Company's oilseed crush facility.

Cost of Revenues

Cost of revenues for the three months ended  September 30, 2009 were  $2,098,827
compared to $6,950,383  for the same period in 2008.  Cost of revenues  resulted
from the Company's oilseed crush facility, which was acquired on June 30, 2009.

General and Administrative Expenses Operating Expenses

General and  administrative  expenses during the nine months ended September 30,
2009  totaled  $796,697  with $0 related  to stock  based  compensation.  In the
comparable period of the prior year, general and administrative expenses totaled
$1,360,462  with  $250,000  related to stock  based  compensation.  General  and
administrative  expenses  during  the  nine  months  ended  September  30,  2009
primarily  consisted  of legal fees and office  related  expenses  and  expenses
resulting from the Company's oilseed crush facility.

Interest/Other Expense

Interest  expense for the nine months ended  September 30, 2009 was $542,596 and
$378,579  for the  same  period  in 2008.  Included  in the  nine  months  ended
September  30,  2009 was  $411,505 in accrued  interest,  and  $101,091  accrued
interest due to a related party;  Other expenses  included  $464,144 in non-cash
expenses  associated  with the conversion  features  embedded in the convertible
debentures  issued by the Company  during the nine months  ended  September  30,
2009.  Amortization of note discount was $46,712 and $750,  respectively for the
nine months ended September 30, 2009 and 2008.

Gain Associated with Change in Convertible Liabilities

As of September 30, 2009,  Carbonics Capital had several convertible  debentures
due to YA Global  Investments,  LP. The Company  accounted  for the  convertible
debentures in accordance  with SFAS No. 150,  Accounting  for Certain  Financial
Instruments with  Characteristics  of both Liabilities and Equity (SFAS 150), as
the conversion  feature  embedded in the convertible  debentures could result in
the note principal and related  accrued  interest being  converted to a variable
number of the  Company's  common  shares.  We  calculate  the fair  value of the
conversion feature at the time of issuance and record a conversion liability for
the calculated value. We recognize interest expense for the conversion liability
which is added to the principal of the  debenture.  We also  recognize  interest
expense for accretion of the conversion liability over the term of the note. For
the nine months ended  September 30, 2009 and 2008, we recognized a gain for the
change in fair value of the  conversion  liability of  $5,183,296  and a loss of
$2,819,738 for these debentures.

Net Income

Net income for the nine  months  ended  September  30,  2009 was  $3,158,866  as
compared to a net loss of $3,641,314 from the same period in 2008.

Liquidity and Capital Resources

The Company had  $12,979,790  in current  liabilities at September 30, 2009, and
may need to obtain additional financing to satisfy these obligations. The amount
of capital  needed to restart the  operations of our oilseed  crush  facility is
estimated to be in excess of  $3,000,000,  however,  we do not intend to restart
this facility without also completing the previously idled expansion  project to
increase its oil production  capacity to 600 tons per day. This would require in
excess of  $8,000,000  in debt and  equity  financing.  The  Company  is seeking
sufficient financing.

Our primary sources of liquidity are cash provided by and financing  activities.
For the nine months ended  September  30, 2009,  net cash used in our  operating
activities  was  $416,246 as compared to $620,191  used in the nine months ended
September  30,  2008.  The  Company's  capital  requirements  consist of general
working  capital  needs,  scheduled  principal  and  interest  payments on debt,
obligations and capital leases and planned capital  expenditures.  The Company's
capital resources consist primarily of proceeds from issuance of debt and common

                                       18
<PAGE>
stock.  The  Company  plans  to  fund  ongoing  operations  during  2009  with a
combination  of  proceeds  from the  issuance  of debt and equity as well as the
repayment to the Company of loans receivable and other amounts due.

Cash Flows

Our operating  activities  during the nine months ended  September 30, 2009 used
$416,246 in cash. At September 30, 2009,  accounts  payable and accrued expenses
totaled  $2,046,733.  At September 30, 2009, the Company had $7,262 in cash. For
the nine months ended September 30, 2009, investing activities provided $380,557
in cash as compared to $0 used in the nine months ended  September  30, 2008 and
cash from financing activities provided $42,951 as compared to $623,984 provided
in the nine months ended  September 30, 2008. The Company had a working  capital
deficit of  $12,452,327  at  September  30,  2009,  which  includes  convertible
debentures of $7,948,120.

At the  present  time,  Carbonics  has no source of  committed  capital.  We are
currently  investigating  the  availability  of both  equity and debt  financing
necessary to complete the  Company's  current  projects.  We do not know at this
time if the  necessary  funds  can be  obtained  nor on what  terms  they may be
available.

Off Balance Sheet Arrangements

None.






















                                       19
<PAGE>
ITEM 3        QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4        CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

Our principal executive officer and principal financial officer  participated in
and  supervised  the  evaluation of our  disclosure  controls and procedures (as
defined in Rules 13(a)-15(e) and 15(d)-15(e)  under the Securities  Exchange Act
of 1934,  as amended  (the  "Exchange  Act"))  that are  designed to ensure that
information  required  to be  disclosed  by us in the  reports  that  we file is
recorded,  processed,  summarized and reported within the time periods specified
in the Securities and Exchange Commission's rules and forms. Disclosure controls
and procedures include, without limitation,  controls and procedures designed to
ensure that the  information  required to be disclosed by us in the reports that
we  file  or  submit  under  the  Act is  accumulated  and  communicated  to our
management,  including our principal executive officer or officers and principal
financial officer, to allow timely decisions regarding required disclosure.

In the course of making our  assessment of the  effectiveness  of our disclosure
controls and  procedures,  we  identified  a material  weakness.  This  material
weakness consisted of inadequate staffing and supervision within the bookkeeping
and accounting operations of our company. The lack of employees prevents us from
segregating  disclosure  duties.  The  inadequate  segregation  of  duties  is a
weakness because it could lead to the untimely  identification and resolution of
accounting and  disclosure  matters or could lead to a failure to perform timely
and  effective  reviews.  Based on the  results  of this  assessment,  our Chief
Executive  Officer and our Chief Financial Officer concluded that because of the
above condition, our disclosure controls and procedures were not effective as of
the end of the period covered by this report.

There have been no changes in the  Company's  internal  control  over  financial
reporting during the most recently completed fiscal quarter that have materially
affected or are reasonably  likely to materially  affect the Company's  internal
control over financial reporting.









                                       20
<PAGE>



PART II

                                OTHER INFORMATION


ITEM 1            LEGAL PROCEEDINGS

The Company's Culbertson subsidiary is party to the matter entitled GS AgriFuels
Corporation v. Chaykin,  et al. The action was filed in the Supreme Court of the
State of New York,  County of New York, on February 2, 2009. The Complaint seeks
damages for defendants'  fraudulent  misrepresentations,  tortious interference,
breach of acquisition  agreements and related claims relating to the sale by the
defendants  of the  stock of  Sustainable  Systems,  Inc.  ("Culbertson")  to GS
AgriFuels,  and arising from the  disclosure by the defendants  that  Culbertson
owned its Culbertson,  Montana oilseed crushing facility when in fact Culbertson
merely  held the  right to  purchase  the  Montana  facility  at the time of the
acquisition  by GS  AgriFuels;  the failure to disclose by the  defendants  that
Culbertson's  right to purchase the Montana facility,  as well as any investment
made in the  Montana  facility,  was  subject  to  forfeiture  within  months of
entering into the acquisition  agreements with GS AgriFuels;  and, the provision
by the  defendants of materially  false  financial  statements.  The  defendants
served a separate  action entitled Max, et al. v. GS AgriFuels  Corporation,  et
al. in the Montana Fourth  Judicial  District Court in response to GS AgriFuels'
New York  complaint.  GS AgriFuels has  petitioned  for dismissal of the Montana
action.  Three of the former shareholders of Culbertson,  corresponding to about
64% of the former  shareholders'  prior ownership  interest in Culbertson,  have
entered  into  settlement  agreements  pursuant to which GS  AgriFuels  has been
released from all  obligations  under the relevant  acquisition  agreements  and
otherwise.  Management is unable to evaluate the  probability  of an unfavorable
outcome at this time. An estimate of loss cannot be determined and therefore, no
accrual has been made in connection with this contingency.

ITEM 1A  RISK FACTORS

Not  Applicable.

ITEM 2   UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3   DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 5   OTHER INFORMATION

None.


                                       21
<PAGE>




ITEM 6      EXHIBITS

                               INDEX TO EXHIBITS

Exhibit
Number            Description
------------------------------------------------

31.1 Certification    of   Chief    Executive    Officer    pursuant   to   Rule
     13a-14(a)/15d-14(a),   as  adopted   pursuant   to   Section   302  of  the
     Sarbanes-Oxley Act of 2002.

31.2 Certification    of   Chief    Financial    Officer    pursuant   to   Rule
     13a-14(a)/15d-14(a),   as  adopted   pursuant   to   Section   302  of  the
     Sarbanes-Oxley Act of 2002.

32.1 Certification  of Chief  Executive  OffIcer  and  Chief  Financial  Officer
     pursuant  to  18  U.S.C.   Section  1350,   as  adopted   pursuant  to  the
     Sarbanes-Oxley Act of 2002.









                                       21
<PAGE>



                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities  Exchange
Act of 1934,  the  registrant  has duly  caused  this report to be signed on its
behalf by the undersigned, thereunto duly authorized on the date indicated.


CARBONICS CAPITAL CORPORATION
                /S/      PAUL T. MILLER
                -----------------------
By:                      PAUL T. MILLER
                         President and Chief Executive Officer
Date:                    November  23, 2009

                /S/      JACQUELINE FLYNN
                -------------------------
By:                      JACQUELINE FLYNN
                         Chief Financial Officer
Date:                    November  23, 2009









                                       22