UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





FORM
10-Q


(Mark
One)





T QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED September 30,
2008




 ̈ TRANSITION REPORT UNDER
SECTION13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934




FOR THE
TRANSITION PERIOD FROM __________ TO __________


COMMISSION
FILE NUMBER: 333-144931





CARBON SCIENCES,
INC.


(Name of
registrant in its charter)





Nevada
            
            20-5451302(State
      or other jurisdiction of incorporation or
              organization)
            
            (I.R.S.
      Employer Identification No.)




5511C  Ekwill
Street, Santa Barbara, California 93111


(Address
of principal executive offices) (Zip Code)





Issuer’s
telephone Number: (805)
456-7000





WITH
COPIES TO:





Gregory
Sichenzia, Esq.


Marcelle
S. Balcombe, Esq.


Sichenzia
Ross Friedman Ference LLP


61
Broadway, 32 nd
Flr.


New York,
New York 10006


(212)
930-9700





Indicate
by check mark whether the registrant (1) has filed all reports required by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes  x
  No  o




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
definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.





Large
      accelerated filer o
            
            Accelerated
      filer oNon-accelerated
      filer o
            
            Smaller
      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  o
  No  x




The
number of shares of registrant’s common stock outstanding, as of November 12,
2008 was 148,342,000.







1












CARBON
SCIENCES, INC.


INDEX





PART
      I: FINANCIAL INFORMATIONITEM
      1:
            
            FINANCIAL
      STATEMENTS (Unaudited)
            
            3Balance
      Sheets
            
            3Statements
      of Operations
            
            4Statements
      of Cash Flows
            
            5Notes
      to the Financial Statements
            
            6-8ITEM
      2:
            
            MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS
            
            9ITEM
      3 :
            
            QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
            
            12ITEM
      4:
            
            CONTROLS
      AND PROCEDURES
            
            12PART
      II: OTHER INFORMATIONItem
      1
            
            LEGAL
      PROCEEDINGS
            
            13ITEM
      1A :
            
            RISK
      FACTORS
            
            13ITEM
      2
            
            UNREGISTERED
      SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
            
            13ITEM
      3
            
            DEFAULTS
      UPON SENIOR SECURITIES
            
            13ITEM
      4
            
            SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY HOLDERS
            
            13ITEM
      6:
            
            EXHIBITS
            
            13SIGNATURES
            
            14







2










PART I   – FINANCIAL INFORMATION




ITEM
1. FINANCIAL STATEMENTS




CARBON
SCIENCES, INC.
 (A
Development Stage Company)
  BALANCE
SHEETS


(Unaudited)September
      30, 2008
                              
                              
                              December
      31, 2007ASSETSCURRENT
      ASSETSCash
                              
                              $
                              26,733
                              
                              
                              $
                              9,539Certificates
      of deposit
                              
                              
                              139,119
                              
                              
                              
                              821,505Other
      receviable
                              
                              
                              2,400
                              
                              
                              
                              -Prepaid
      expenses
                              
                              
                              9,167
                              
                              
                              
                              122,488Total
      Current Assets
                              
                              
                              177,419
                              
                              
                              
                              953,532PROPERTY
      & EQUIPMENT, at costMachinery
      & equipment
                              
                              
                              71,498
                              
                              
                              
                              20,599Computer
      equipment
                              
                              
                              17,559
                              
                              
                              
                              17,559Mobile
      vehicle
                              
                              
                              40,252
                              
                              
                              
                              40,252129,309
                              
                              
                              
                              78,410Less
      accumulated depreciation
                              
                              
                              (22,272
                              )
                              
                              
                              (9,637
                              )Net
      Property and Equipment
                              
                              
                              107,037
                              
                              
                              
                              68,773OTHER
      ASSETSPatent
                              
                              
                              5,425
                              
                              
                              
                              -Total
      Other Assets
                              
                              
                              5,425
                              
                              
                              
                              -TOTAL
      ASSETS
                              
                              $
                              289,881
                              
                              
                              $
                              1,022,305LIABILITIES
      AND SHAREHOLDERS' EQUITYCURRENT
      LIABILITIESAccounts
      payable
                              
                              $
                              36,995
                              
                              
                              $
                              2,676Accrued
      expenses
                              
                              
                              -
                              
                              
                              
                              8,074TOTAL
      CURRENT LIABILITIES
                              
                              
                              36,995
                              
                              
                              
                              10,750SHAREHOLDERS'
      EQUITY EQUITYCommon
      Stock, $0.001 par value;500,000,000
      authorized common shares148,342,000
      shares issued and outstanding, respectively
                              
                              
                              148,342
                              
                              
                              
                              148,342Additional
      paid in capital
                              
                              
                              2,155,533
                              
                              
                              
                              2,155,533Accumulated
      deficit during the development stage
                              
                              
                              (2,050,989
                              )
                              
                              
                              (1,292,320
                              )TOTAL
      SHAREHOLDERS' EQUITY
                              
                              
                              252,886
                              
                              
                              
                              1,011,555TOTAL
      LIABILITIES AND SHAREHOLDERS' EQUITY
                              
                              $
                              289,881
                              
                              
                              $
                              1,022,305


The
accompanying notes are an integral part of these financial
statements
  3
  CARBON
SCIENCES, INC.
 (A
Development Stage Company)
  STATEMENTS
OF OPERATIONS
 (Unaudited)
 From
      Inception onAugust
      25,2006Three
      Months Ended September 30,
                                  
                                  
                                  Nine
      Months Ended September 30,
                                  
                                  
                                  through2008
                                  
                                  
                                  2007
                                  
                                  
                                  2008
                                  
                                  
                                  2007
                                  
                                  
                                  September
      30, 2008REVENUE
                                  
                                  $
                                  -
                                  
                                  
                                  $
                                  -
                                  
                                  
                                  $
                                  -
                                  
                                  
                                  $
                                  -
                                  
                                  
                                  $
                                  -OPERATING
      EXPENSESSelling
      and marketing expenses
                                  
                                  
                                  133,612
                                  
                                  
                                  
                                  74,181
                                  
                                  
                                  
                                  441,694
                                  
                                  
                                  
                                  483,228
                                  
                                  
                                  
                                  1,428,266General
      and administrative expenses
                                  
                                  
                                  49,002
                                  
                                  
                                  
                                  26,058
                                  
                                  
                                  
                                  127,012
                                  
                                  
                                  
                                  151,253
                                  
                                  
                                  
                                  372,333Research
      and development
                                  
                                  
                                  104,493
                                  
                                  
                                  
                                  35,425
                                  
                                  
                                  
                                  194,943
                                  
                                  
                                  
                                  40,925
                                  
                                  
                                  
                                  265,626Depreciation
      expense
                                  
                                  
                                  4,212
                                  
                                  
                                  
                                  1,463
                                  
                                  
                                  
                                  12,635
                                  
                                  
                                  
                                  4,390
                                  
                                  
                                  
                                  22,272TOTAL
      OPERATING EXPENSES
                                  
                                  
                                  291,319
                                  
                                  
                                  
                                  137,127
                                  
                                  
                                  
                                  776,284
                                  
                                  
                                  
                                  679,796
                                  
                                  
                                  
                                  2,088,497LOSS
      FROM OPERATIONS BEFORE  OTHER INCOME/(EXPENSES)
                                  
                                  
                                  (291,319
                                  )
                                  
                                  
                                  (137,127
                                  )
                                  
                                  
                                  (776,284
                                  )
                                  
                                  
                                  (679,796
                                  )
                                  
                                  
                                  (2,088,497
                                  )OTHER
      INCOME/(EXPENSE)Interest
      income
                                  
                                  
                                  3,288
                                  
                                  
                                  
                                  10,548
                                  
                                  
                                  
                                  17,615
                                  
                                  
                                  
                                  10,548
                                  
                                  
                                  
                                  39,119Interest
      expense
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (332
                                  )
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (1,533
                                  )
                                  
                                  
                                  (1,611
                                  )TOTAL
      OTHER INCOME/(EXPENSES)
                                  
                                  
                                  3,288
                                  
                                  
                                  
                                  10,216
                                  
                                  
                                  
                                  17,615
                                  
                                  
                                  
                                  9,015
                                  
                                  
                                  
                                  37,508NET
      LOSS
                                  
                                  $
                                  (288,031
                                  )
                                  
                                  $
                                  (126,911
                                  )
                                  
                                  $
                                  (758,669
                                  )
                                  
                                  $
                                  (670,781
                                  )
                                  
                                  $
                                  (2,050,989
                                  )BASIC
      AND DILUTED LOSS PER SHARE
                                  
                                  $
                                  (0.00
                                  )
                                  
                                  $
                                  (0.00
                                  )
                                  
                                  $
                                  (0.01
                                  )
                                  
                                  $
                                  (0.00
                                  )WEIGHTED-AVERAGE
      COMMON SHARES OUTSTANDINGBASIC
      AND DILUTED
                                  
                                  
                                  148,342,000
                                  
                                  
                                  
                                  146,185,870
                                  
                                  
                                  
                                  148,342,000
                                  
                                  
                                  
                                  140,025,260
  The
accompanying notes are an integral part of these financial
statements
  4
  CARBON
SCIENCES, INC.
 (A
Development Stage Company)
  STATEMENT
OF SHAREHOLDERS' EQUITY
 DeficitAccumulatedAdditional
                                          
                                          
                                          during
      theCommon
      stock
                                          
                                          
                                          Paid-in
                                          
                                          
                                          DevelopmentShares
                                          
                                          
                                          Amount
                                          
                                          
                                          Capital
                                          
                                          
                                          Stage
                                          
                                          
                                          TotalBalance
      at December 31, 2007
                                          
                                          
                                          148,342,000
                                          
                                          
                                          $
                                          148,342
                                          
                                          
                                          $
                                          2,155,533
                                          
                                          
                                          $
                                          (1,292,320
                                          )
                                          
                                          $
                                          1,011,555Net
      Loss (unaudited)
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (758,669
                                          )
                                          
                                          
                                          (758,669
                                          )Balance
      at September 30, 2008 (unaudited)
                                          
                                          
                                          148,342,000
                                          
                                          
                                          $
                                          148,342
                                          
                                          
                                          $
                                          2,155,533
                                          
                                          
                                          $
                                          (2,050,989
                                          )
                                          
                                          $
                                          252,886
  The
accompanying notes are an integral part of these financial
statements
  5
   CARBON
SCIENCES, INC.
 (A
Development Stage Company)
  STATEMENTS
OF CASH FLOWS
 (Unaudited)
 
 From
      Inception onAugust
      25,2006Nine
      Months Ended
                                  
                                  
                                  throughSeptember
      30, 2008
                                  
                                  
                                  September
      30, 2007
                                  
                                  
                                  September
      30, 2008CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      loss
                                  
                                  $
                                  (758,669
                                  )
                                  
                                  $
                                  (670,781
                                  )
                                  
                                  $
                                  (2,050,989
                                  )Adjustment
      to reconcile net loss to net cashused
      in operating activitiesDepreciation
      expense
                                  
                                  
                                  12,635
                                  
                                  
                                  
                                  4,390
                                  
                                  
                                  
                                  22,272Stock
      issuance for services
                                  
                                  
                                  -
                                  
                                  
                                  
                                  153,450
                                  
                                  
                                  
                                  -(Increase)
      Decrease in:Other
      receivable
                                  
                                  
                                  (2,400
                                  )
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (2,400
                                  )Prepaid
      expenses
                                  
                                  
                                  113,321
                                  
                                  
                                  
                                  (26,956
                                  )
                                  
                                  
                                  (9,167
                                  )Other
      asset
                                  
                                  
                                  (5,425
                                  )
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (5,425
                                  )Increase
      (Decrease) in:Accounts
      payable
                                  
                                  
                                  34,319
                                  
                                  
                                  
                                  37,621
                                  
                                  
                                  
                                  36,995Accrued
      expenses
                                  
                                  
                                  (8,074
                                  )
                                  
                                  
                                  (15,564
                                  )
                                  
                                  
                                  -NET
      CASH USED IN OPERATING ACTIVITIES
                                  
                                  
                                  (614,293
                                  )
                                  
                                  
                                  (517,840
                                  )
                                  
                                  
                                  (2,008,714
                                  )CASH
      FLOWS FROM INVESTING ACTIVITIES:Investment
      in certificates of deposit
                                  
                                  
                                  682,386
                                  
                                  
                                  
                                  (910,548
                                  )
                                  
                                  
                                  (139,119
                                  )Purchase
      of equipment
                                  
                                  
                                  (50,899
                                  )
                                  
                                  
                                  (40,252
                                  )
                                  
                                  
                                  (129,309
                                  )NET
      CASH PROVIDED/(USED) IN INVESTING ACTIVITIES
                                  
                                  
                                  631,487
                                  
                                  
                                  
                                  (950,800
                                  )
                                  
                                  
                                  (268,428
                                  )CASH
      FLOWS FROM FINANCING ACTIVITIES:Advances
      from officer
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  73,000Loan
      from investor
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  160,000Repayment
      of advances and loans
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (233,000
                                  )Proceeds
      from issuance of common stock
                                  
                                  
                                  -
                                  
                                  
                                  
                                  1,497,300
                                  
                                  
                                  
                                  2,303,875NET
      CASH PROVIDED BY FINANCING  ACTIVITIES
                                  
                                  
                                  -
                                  
                                  
                                  
                                  1,497,300
                                  
                                  
                                  
                                  2,303,875NET
      INCREASE IN CASH
                                  
                                  
                                  17,194
                                  
                                  
                                  
                                  28,660
                                  
                                  
                                  
                                  26,733CASH,
      BEGINNING OF PERIOD
                                  
                                  
                                  9,539
                                  
                                  
                                  
                                  75,142
                                  
                                  
                                  
                                  -CASH,
      END OF PERIOD
                                  
                                  $
                                  26,733
                                  
                                  
                                  $
                                  103,802
                                  
                                  
                                  $
                                  26,733SUPPLEMENTAL
      DISCLOSURES OF CASH FLOW INFORMATIONInterest
      paid
                                  
                                  $
                                  -
                                  
                                  
                                  $
                                  332
                                  
                                  
                                  $
                                  1,611Taxes
      paid
                                  
                                  $
                                  59
                                  
                                  
                                  $
                                  800
                                  
                                  
                                  $
                                  800SUPPLEMENTAL
      SCHEDULE FOR NON-CASH TRANSACTIONSDuring
      the nine months ended September 30, 2007, the Companyissued
      1,472,000 shares of common stock for services at a price of
      $0.10and
      500,000 shares of common stock for services at a price of
      $0.15.
  The
accompanying notes are an integral part of these financial
statements
  6
   CARBON
SCIENCES, INC.
 (A
Development Stage Company)
 NOTES TO
FINANCIAL STATEMENTS-UNAUDITED
 SEPTEMBER
30, 2008
    1.     Basis of
Presentation
 The
accompanying unaudited financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America
for interim financial information and with the instructions to Form 10-Q and
Rule 10-01 of Regulation S-X.  Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
normal recurring adjustments considered necessary for a fair presentation have
been included.  Operating results for the nine month period ended
September 30, 2008 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2008.  For further
information refer to the financial statements and footnotes thereto included in
the Company's Form 10-K for the year ended December 31, 2007.
 
 Going
Concern
 The
accompanying financial statements have been prepared on a going concern basis of
accounting, which contemplates continuity of operations, realization of assets
and liabilities and commitments in the normal course of business.  The
accompanying financial statements do not reflect any adjustments that might
result if the Company is unable to continue as a going concern.  The
Company does not generate significant revenue, and has negative cash flows from
operations, which raise substantial doubt about the Company’s ability to
continue as a going concern.  The ability of the Company to continue
as a going concern and appropriateness of using the going concern basis is
dependent upon, among other things, additional cash infusion.  The
Company has obtained funds from its shareholders since its’ inception , and
believes this funding will continue, and is also actively seeking new
investors.  Management believes the existing shareholders and the
prospective new investors will provide the additional cash needed to meet the
Company’s obligations as they become due, and will allow the development of its
core of business.
 
 2.   SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
 
 This
summary of significant accounting policies of Carbon Sciences, Inc. is presented
to assist in understanding the Company’s financial statements. The financial
statements and notes are representations of the Company’s management, which is
responsible for their integrity and objectivity. These accounting policies
conform to accounting principles generally accepted in the United States of
America and have been consistently applied in the preparation of the financial
statements.
 
 Development Stage Activities
and Operations
 The
Company is in its initial stages of formation and has insignificant revenues.
FASB #7 defines a development stage activity as one in which all efforts are
devoted substantially to establishing a new business and even if planned
principal operations have commenced, revenues are insignificant.
 
 Revenue
Recognition
 The
Company will recognize revenue when services are performed, and at the time of
shipment of products, provided that evidence of an arrangement exists, title and
risk of loss have passed to the customer, fees are fixed or determinable, and
collection of the related receivable is reasonably assured. To date, the Company
has had no revenues and is in the development stage.
 
 Cash and Cash
Equivalent
 The
Company considers all highly liquid investments with an original maturity of
three months or less to be cash equivalents.
 
 
 7
 
  CARBON
SCIENCES, INC.
 (A
Development Stage Company)
 NOTES TO
FINANCIAL STATEMENTS-UNAUDITED
 SEPTEMBER
30, 2008
  2.
                  SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
 Loss per Share
Calculations
 The
Company adopted Statement of Financial Standards (“SFAS”) No. 128 for the
calculation of “Loss per Share”.  SFAS No. 128 dictates the
calculation of basic earnings per share and diluted earnings per share. Basic
earnings per share are computed by dividing income available to common
shareholders by the weighted-average number of common shares available. Diluted
earnings per share is computed similar to basic earnings per share except that
the denominator is increased to include the number of additional common shares
that would have been outstanding if the potential common shares had been issued
and if the additional common shares were dilutive. The Company’s diluted loss
per share is the same as the basic loss per share for the period ended September
30, 2008 as the inclusion of any potential shares would have had an
anti-dilutive effect due to the Company generating a loss.
 
 Reclassification
 The
expenses for the nine  months ended September 30, 2007 were
reclassified to conform with the expenses for the nine months ended September
30, 2008.
 
 3.
                CAPITAL
      STOCK
 
 At
September 30, 2008, the Company’s authorized stock consists of 500,000,000
shares of common stock, par value $0.001 per share. During the nine months ended
September 30, 2007, the Company through a private placement issued 17,625,000
shares of common stock for cash of $1,762,500 at a price of $0.10. The private
placements, was made in reliance upon an exemption from registration under Rule
506 of Regulation D promulgated under Section 4(2) of the Securities Act of
1933; Also, the Company issued 1,472,000 shares of common stock at
a  price of $0.10 per share for cash and 500,000 shares of common
stock at a price of $0.15 per share for services;
 
 4.
                INCOME
      TAXES
 
 The
      Company files income tax returns in the U.S. Federal jurisdiction, and the
      state of California. With few exceptions, the Company is no longer subject
      to U.S. federal, state and local, or non-U.S. income tax examinations by
      tax authorities for years before
2005.
 
 The
      Company adopted the provisions of FASB Interpretation No. 48, Accounting
      for Uncertainty in Income Taxes, on January 1, 2007.  Deferred
      income taxes have been provided by temporary differences between the
      carrying amounts of assets and liabilities for financial reporting
      purposes and the amounts used for tax purposes. To the extent allowed by
      GAAP, we provide valuation allowances against the deferred tax assets for
      amounts when the realization is
uncertain.
 
 Included
      in the balance at September 30, 2008, are no tax positions for which the
      ultimate deductibility is highly certain but for which there is
      uncertainty about the timing of such deductibility.  Because of
      the impact of deferred tax accounting, other than interest and penalties,
      the disallowance of the shorter deductibility period would not affect the
      annual effective tax rate but would accelerate the payment of cash to the
      taxing authority to an earlier
period.
 
 The
      Company's policy is to recognize interest accrued related to unrecognized
      tax benefits in interest expense and penalties in operating
      expenses.




8




I TEM 2:  MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS




Certain
statements contained herein constitute forward-looking statements. In some
cases, you can identify forward-looking statements by terminology such as "may,"
"will," "should," "expect," "plan," "anticipate," "believe," "estimate,"
"predict," "potential" or "continue," the negative of such terms, or other
comparable terminology. All statements other than statements of historical fact
made in this report are forward looking. In particular, the statements herein
regarding industry prospects and future results of operations or financial
position are forward-looking statements. Because such statements include risks
and uncertainties, actual results may differ materially from those expressed or
implied by such forward-looking statements as a result of certain factors,
including, but not limited to, risks associated with the integration of
businesses following an acquisition, competitors with broader product lines and
greater resources, emergence into new markets, the termination of any of our
significant contracts, our inability to maintain working capital requirements to
fund future operations, or our inability to attract and retain highly qualified
management, technical and sales personnel.





OVERVIEW




Carbon
Sciences is currently developing a technology to convert the greenhouse gas,
carbon dioxide (CO2), into gasoline and other fuels.




The fuels
we use today, such as gasoline and jet fuel, are made up of chains of hydrogen
and carbon atoms aptly called hydrocarbons. In general, the greater the number
of carbon atoms there are in a hydrocarbon molecule, the greater the energy
content of that fuel. For example, gasoline has hydrocarbons with 7 to 10 carbon
atoms and jet fuel has 10 to 16 carbon atoms. Hydrocarbons are naturally
occurring in fuel sources such as petroleum and natural gas. To create fuel,
hydrogen and carbon atoms must be bonded together to create hydrocarbon
molecules.




Our
CO2-to-Fuel technology directly transforms CO2 and H20 (water) into low level
hydrocarbons.  These low level hydrocarbons can then be easily used to
produce high level fuels, such as gasoline and jet fuel with readily available
technology.  The key to our CO2-to-Fuel technology lies in a
proprietary multi-step biocatalytic process. Instead of using expensive
inorganic catalysts, such as zinc, gold or zeolite, with traditional high energy
catalytic chemical processes, our process uses inexpensive, renewable
biomolecules to catalyze certain chemical reactions required to transform CO2
into basic hydrocarbon building blocks. Of greatest significance, our process
occurs at low temperature and low pressure, thereby requiring far less energy
than other approaches.




The
energy efficient biocatalytic processes we are exploiting in our technology
actually occur in all living organisms where carbon atoms, extracted from CO2,
and hydrogen atoms, extracted from H2O, are combined to create hydrocarbon
molecules.  Our breakthrough technology allows these processes to
operate on a very large industrial scale through advance nano-engineering of the
biocatalysts and highly efficient process design.




Our
corporate mission is to enable a sustainable world of fuel consumption and
climate stability by transforming CO2 into fuel. When commercially developed,
our CO2-to-Fuel technology can be used to transform CO2 emitted from fossil fuel
power plants into gasoline, to power our cars.




We are
also developing technology to transform carbon dioxide (CO2) into high value,
earth-friendly products. We call this technology GreenCarbon Technology.
 Our management believes that energy and CO2 intensive industries, such as
paper production, will welcome this innovative clean technology because it
offers two very important benefits – lower cost and carbon
neutrality.




Corporate
Overview




We were
incorporated in the State of Nevada on August 25, 2006, as Zingerang, Inc. Our
name was changed to Carbon Sciences, Inc. on April 9, 2007. Our principal
executive offices are located at 5511C Ekwill Street, Santa Barbara, California
93111, and our telephone number is (805) 456-7000. Our fiscal year end is
December 31







9




Critical Accounting Policies




Our
discussion and analysis of our financial condition and results of operations are
based upon our financial statements, which have been prepared in accordance with
accounting principles generally accepted in the United States of America. The
preparation of these financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues and
expenses, and related disclosures of contingent assets and liabilities. On an
ongoing basis, we evaluate our estimates, including those related to impairment
of property, plant and equipment, intangible assets, deferred tax assets and
fair value computation using the Black Scholes option pricing model. We base our
estimates on historical experience and on various other assumptions, such as the
trading value of our common stock and estimated future undiscounted cash flows,
that we believe to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying value of assets and
liabilities that are not readily apparent from other sources. Actual results may
differ from these estimates under different assumptions or conditions; however,
we believe that our estimates, including those for the above-described items,
are reasonable.




Revenue
Recognition





Revenue on product sales is
recognized when persuasive evidence of an
arrangement exists, such as when a purchase order or contract is
received from the customer, the selling price is fixed, title to the goods
has changed and there is a reasonable assurance of collection of the
sales proceeds.  We obtain written purchase authorizations from
our customers for a specified amount of product at a specified price
and consider delivery to have occurred at the time
of shipment.  Revenue is recognized at shipment and we
record a reserve for estimated sales returns, which
is reflected as a reduction of revenue at the time of revenue recognition.
We defer revenue on products sold directly to the consumer with a fifteen day
right of return. Revenue is recognized upon the expiration of the right of
return.





Revenues
from research and development activities relating to firm fixed-price
contracts are generally recognized on the percentage-of-completion
method of accounting as costs are incurred (cost-to-cost basis). 
Revenues from research and development activities relating to
cost-plus-fee contracts include costs incurred plus a portion of
estimated fees or profits based on the relationship of costs incurred to
total estimated costs.  Contract costs include all direct
material and labor costs and an allocation of allowable
indirect costs as defined by each contract, as periodically adjusted to
reflect revised agreed upon rates. These rates are subject to audit by the
other party.





Use
of Estimates





In
accordance with accounting principles generally accepted in the United States,
management utilizes estimates and assumptions that affect the reported amounts
of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements as well as the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates. These estimates and assumptions relate to
recording net revenue, collectibility of accounts receivable, useful lives and
impairment of tangible and intangible assets, accruals, income taxes, inventory
realization, stock-based compensation expense and other factors. Management
believes it has exercised reasonable judgment in deriving these estimates.
Consequently, a change in conditions could affect these estimates.





Fair
Value of Financial Instruments





The
Company's cash, cash equivalents, investments, accounts receivable and accounts
payable are stated at cost which approximates fair value due to the short-term
nature of these instruments.





Recently
Issued Accounting Pronouncements





In
December 2004, the Financial Accounting Standards Board issued two FASB Staff
Positions - FSP FAS 109-1, Application of FASB Statement 109 "Accounting for
Income Taxes" to the Tax Deduction on Qualified Production Activities Provided
by the American Jobs Creation Act of 2004, and FSP FAS 109-2 Accounting and
Disclosure Guidance for the Foreign Earnings Repatriation Provision within the
American Jobs Creation Act of 2004. Neither of these affected the Company as it
does not participate in the related activities.







10






In May
2005, the FASB issued FASB Statement No. 154, “Accounting Changes and Error
Corrections.” This new standard replaces APB Opinion No. 20, “Accounting
Changes, and FASB Statement No. 3, Reporting Accounting Changes in Interim
Financial Statements,” and represents another step in the FASB’s goal to
converge its standards with those issued by the IASB. Among other changes,
Statement 154 requires that a voluntary change in accounting principle be
applied retrospectively with all prior period financial statements presented on
the new accounting principle, unless it is impracticable to do so. Statement 154
also provides that (1) a change in method of depreciating or amortizing a
long-lived non-financial asset be accounted for as a change in estimate
(prospectively) that was effected by a change in accounting principle, and (2)
correction of errors in previously issued financial statements should be termed
a “restatement.” The new standard is effective for accounting changes and
correction of errors made in fiscal years beginning after December 15, 2005.
Early adoption of this standard is permitted for accounting changes and
correction of errors made in fiscal years beginning after June 1, 2005. The
Company has evaluated the impact of the adoption of Statement 154 and does not
believe the impact will be significant to the Company's overall results of
operations or financial position





RESULTS
OF OPERATIONS – THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2008 COMPARED TO THE
THREE AND NINE MONTHS ENDED SEPTEMBER  30, 2007




Selling and Marketing
Expenses




Selling
and Marketing ("S&M") expenses increased by $59,431or 80.12% to $133,612 for
the three months ended September 30, 2008, compared to the prior period. S&M
expenses decreased by $(41,534) or 8.60% to $441,694 for the nine months ended
September 30, 2008, compared to the prior period. The increase in S&M
expenses for the three month period was due to an increase in salaries and
market exposure expense. The decrease in S&M expenses for the nine month
period was due primarily to a decrease in salaries, professional and consulting
fees.




General and Administrative
Expenses




General
and administrative ("G&A") expenses increased by $22,944 or 88.05% to
$49,002 for the three months ended September 30, 2008, compared to the prior
period. G&A expenses decreased by $(24,241) or 16.03% to $127,012 for the
nine months ended September 30, 2008, compared to the prior period. The increase
in G&A expenses for the three month period was due to increase in the
overall operating expenses. The decrease in G&A expenses for the nine month
period was due primarily to a decrease in professional fees.




Research
and Development
  Research and Development
("R&D") costs increased by $69,068 or 194.97% to $104,943 for the three
months ended September 30, 2008, compared to the prior period. R&D costs
increased by $154,018 or 376.34% to $194,943 for the nine months ended September
30, 2008, compared to the prior period. The increase in R&D was the result
of testing of product alternatives, and consulting fees.
  Net
Loss
  Net Loss
for the three months ended September 30, 2008 was $288,031compared to $126,911
for the prior period. Net Loss for the nine months ended September 30, 2008, was
$758,669 compared to $670,781 for the prior period. Currently the Company is in
its development stage and had no revenues.
  Liquidity
and Capital Resources
  As of September 30, 2008,
we had $140,424 of working capital as compared to $942,782 as of December 31,
2007. This decrease of $802,358 was due primarily to the use of funds for
operating expenses.
  Net cash
flow used in operating activities was $614,293 for the nine months ended
September 30, 2008, as compared to net cash used of $517,840 for the prior
period. This increase of $96,453 was primarily attributable to an increase in
research and development.
  Net cash
provided by investing activities was $631,487 for the nine months ended
September 30, 2008, as compared to net cash used of $(950,800) for the prior
period. The increase of net cash provided by investing activities was primarily
due to withdrawals from certificates of deposits for operating
expenses.




11




Net cash
provided from financing activities was $0 the nine months ended September 30,
2008, as compared to net cash provided of $1,497,300 for the prior period. From
inception to September 30, 2008, we received a total of $2,303,875 from the sale
of shares of our common stock through private placements of shares of common
stock pursuant to Subscription Agreements, which we entered into with accredited
and/or institutional buyers.




PLAN OF OPERATION AND FINANCING NEEDS





Our plan
of operation within the next twelve months is to utilize our cash balances to
continue research and development of our carbon transformation technology and
complete a demonstrable prototype. We believe that our current cash and
investment balances will be sufficient to support development activity and
general and administrative expenses for the next twelve months. Management
estimates that it will require additional cash resources during 2008, based upon
its current operating plan and condition. We will be investigating additional
financing alternatives, including equity and/or debt financing. There is no
assurance that capital in any form would be available to us, and if available,
on terms and conditions that are acceptable. If we are unable to obtain
sufficient funds during the next twelve months, we may be forced to reduce the
size of our organization, which could have a material adverse impact on, or
cause us to curtail and/or cease, the development of our products.




Off-Balance
Sheet Arrangements





We do not
have any off balance sheet arrangements that are reasonably likely to have a
current or future effect on our financial condition, revenues, and results of
operations, liquidity or capital expenditures.





ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK





n/a




ITEM 4T. CONTROLS AND
PROCEDURES





As of the
end of the period covered by this report, we conducted an evaluation, under the
supervision and with the participation of our chief executive officer and chief
financial officer of our disclosure controls and procedures (as defined in Rule
13a-15(e) and Rule 15d-15(e) of the Exchange Act). Based upon this evaluation,
our chief executive officer and chief financial officer concluded that our
disclosure controls and procedures are effective to ensure that information
required to be disclosed by us in the reports that we file or submit under the
Exchange Act is: (1) accumulated and communicated to our management, including
our chief executive officer and chief financial officer, as appropriate to allow
timely decisions regarding required disclosure; and (2) recorded, processed,
summarized and reported, within the time periods specified in the Commission's
rules and forms. There was no change to our internal controls or in other
factors that could affect these controls during our last fiscal quarter that has
materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting.







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PART II - OTHER
INFORMATION





ITEM
1. LEGAL PROCEEDINGS





We are
not a party to any pending legal proceeding, nor is our property the subject of
a pending legal proceeding, that is not in the ordinary course of business or
otherwise material to the financial condition of our business. None of our
directors, officers or affiliates is involved in a proceeding adverse to our
business or has a material interest adverse to our business.




ITEM 1A. RISK FACTORS




There are
no material changes from the risk factors previously disclosed in the
Registrant’s Form 10-K filed on June 30, 2008.




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 6. EXHIBITS





Exhibit
      No.
            
            Description3.1
            
            Articles
      of Incorporation of Carbon Sciences, Inc. filed with the Nevada
      Secretary of State on August 25, 2007. (Incorporated by reference to the
      Company’s Registration Statement on Form SB-2 filed on July 27,
      2007)3.2
            
            Articles
      of Amendment of Articles of Incorporation of Carbon Sciences, Inc. filed
      with the Nevada Secretary of State on April 9, 2007 (Incorporated by
      reference to the Company’s Registration Statement on Form SB-2 filed on
      July 27, 2007)3.4
            
            Bylaws
      of Carbon Sciences, Inc. (Incorporated by reference to the Company’s
      Registration Statement on Form SB-2 filed on July 27,
  2007)5.1
            
            Opinion
      of Sichenzia Ross Friedman Ference LLP. (Incorporated by reference to the
      Company’s Registration Statement on Form SB-2 filed on July 27,
      2007)10.1
            
            Form
      of Subscription Agreement dated as of September 18, 2006 (Incorporated by
      reference to the Company’s Registration Statement on Form SB-2 filed on
      July 27, 2007)10.2
            
            Form
      of Subscription Agreement dated as of October 2, 2006(Incorporated by
      reference to the Company’s Registration Statement on Form SB-2 filed on
      July 27, 2007)10.3
            
            Form
      of Subscription Agreement dated as of March 1, 2007(Incorporated by
      reference to the Company’s Registration Statement on Form SB-2 filed on
      July 27, 2007)10.4
            
            Form
      of Subscription Agreement dated as of April 16, 2007(Incorporated by
      reference to the Company’s Registration Statement on Form SB-2 filed on
      July 27, 2007)31.1
            
            Certification
      by Chief Executive Officer and Chief Financial Officer pursuant to
      Sarbanes-Oxley Section 302 (filed herewith).32.1
            
            Certification
      by Chief Executive Officer and Acting Chief Financial Officer pursuant to
      18 U.S.C. Section 1350 (filed
herewith).






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SIGNATURES





In
accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Los Angeles, State of California, on November 14,
2008.





CARBON
      SCIENCES, INC.By:
            /s/
      Derek W. McLeishChief
      Executive Officer (Principal Executive
              Officer
      ) and Acting Chief Financial Officer
              (Principal
      Financial Officer and Principal
              Accounting
      Officer)


















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