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

                            -------------------------
                                    FORM 10-K
                            -------------------------


                 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2008

                          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)


Indicate by check mark if the  registrant is a well-known  seasoned  issuer,  as
defined in Rule 406 of the Securities Act. Yes __ No X

Indicate  by  check  mark if the  registrant  is not  required  to file  reports
pursuant to Section 13 or Section 15(d) of the Act. Yes __ No X

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by  Sections  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 __

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of  Regulation  S-K  (ss.  229.405)  is not  contained  herein,  and will not be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information  statements  incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [ ]

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 held by  non-affiliates of the
Registrant as of April 14, 2009 was 133,179,481.


<PAGE>

<TABLE>

                          CARBONICS CAPITAL CORPORATION
                            ANNUAL REPORT ON FORM 10K
                   FOR THE FISCALYEAR ENDED DECEMBER 31, 2008

                                TABLE OF CONTENTS
<CAPTION>

                                                                                                           Page

Part I
<S>        <C>                                                                                              <C>
Item 1      Business ........................................................................................4
Item 1A     Risk Factors.....................................................................................5
Item 2      Description of Properties........................................................................7
Item 3      Legal Proceedings................................................................................7
Item 4      Submission of Matters to a Vote of Security Holders .............................................7

Part II
Item 5      Market for Registrant's Common Equity, Related Stockholder Matters
                and Issuer Purchase of Equity Securities ....................................................8
Item 6      Selected Financial Data
Item 7      Management's Discussion and Analysis.............................................................9
Item 8      Financial Statements and Supplementary Data.....................................................11
Item 9      Changes and Disagreements with Accountants on Accounting and Financial Disclosure ..............23
Item 9A     Controls and Procedures ........................................................................23
Item 9B     Other Information...............................................................................25

Part III
Item 10     Directors, Executive Officers and Corporate Governance  ........................................25
Item 11     Executive Compensation .........................................................................25
Item 12     Security Ownership of Certain Beneficial Owners and Management and
            Related Stockholder Matters ....................................................................26
Item 13     Certain Relationships and Related Transactions and Director Independence .......................26
Item 14     Principal Accountant Fees and Services .........................................................28

Part IV
Item 15     Exhibits and Financial Statement Schedules .....................................................28

Signatures..................................................................................................34

</TABLE>

                                       2
<PAGE>



                                     PART I

Basis of Presentation

In this Annual Report on Form 10-K, the terms "we," "our," "us," "Carbonics," or
the "Company" refer to Carbonics Capital Corporation,  and its subsidiaries on a
consolidated basis. The term "Carbonics Capital Corporation" refers to Carbonics
Capital Corporation on a stand alone basis only, and not its subsidiaries.

Forward Looking Statements

We make certain  forward-looking  statements  in this Annual Report on Form 10-K
and  in  the  documents  that  are  incorporated  herein  by  reference.   These
forward-looking  statements  relate to our outlook or expectations for earnings,
revenues,  expenses,  asset  quality  or  other  future  financial  or  business
performance,  strategies or expectations,  or the impact of legal, regulatory or
supervisory  matters  on  our  business,  results  of  operations  or  financial
condition.  Specifically,  forward-looking  statements  may  include  statements
preceded  by,  followed  by  or  that  include  the  words  "estimate,"  "plan,"
"project,"  "forecast,"  "intend,"  "expect,"  "anticipate,"  "believe," "seek,"
"target" or similar  expressions.  These  statements  reflect  our  management's
judgment based on currently available  information and involve a number of risks
and  uncertainties  that could cause actual  results to differ  materially  from
those in the forward-looking  statements.  Future performance cannot be ensured.
Actual  results  may  differ  materially  from  those  in  the   forward-looking
statements. Some factors that could cause our actual results to differ include:

>>   the volatility and uncertainty of commodity prices;

>>   the costs and business risks  associated  with  developing new products and
     entering new markets;

>>   our ability to locate and integrate future acquisitions;

>>   the impact of new, emerging and competing technologies on our business;

>>   the  possibility  of one or more of the  markets in which we compete  being
     impacted  by  political,  legal and  regulatory  changes or other  external
     factors over which they have no control;

>>   changes in or elimination of  governmental  laws,  tariffs,  trade or other
     controls or enforcement practices;

>>   our reliance on key management personnel;

>>   limitations  and  restrictions  contained in the instruments and agreements
     governing our indebtedness;

>>   our ability to raise additional capital and secure additional financing;

>>   our ability to implement  additional  financial  and  management  controls,
     reporting  systems  and  procedures  and  comply  with  Section  404 of the
     Sarbanes-Oxley Act, as amended; and

>>   other risks  referenced  from time to time in our filings  with the SEC and
     those  factors  listed  in this  Form 10K  under  Item 1A,  Risks  Factors,
     beginning on page 24.

You are cautioned not to place undue reliance on any forward-looking statements,
which speak only as of the date of this Form 10-K,  or in the case of a document
incorporated by reference,  as of the date of that document.  Except as required
by law, we undertake no obligation  to publicly  update or release any revisions
to these forward-looking statements to reflect any events or circumstances after
the date of this Form 10-K or to reflect the occurrence of unanticipated events.

                                       3

<PAGE>



ITEM 1     BUSINESS

OVERVIEW

We develop  renewable  energy projects that facilitate the more efficient use of
carbon in energy supply chains. Our development activities during 2008 primarily
involved  evaluation  of a number of different  chemical and other  technologies
designed to separate carbon dioxide from exhaust for conversion into value-added
carbonaceous products.

We  are  party  to a  technology  commercialization  agreement  with  GreenShift
Corporation,  which  company  is  majority  owned by our  majority  shareholder,
Viridis  Capital,  LLC,  pursuant  to which  GreenShift  has  agreed to  provide
commercialization support services and access to GreenShift's rights to sell and
use a proprietary  biomass  gasification  technology in fields of use outside of
the corn ethanol industry.  Carbonics will pay GreenShift a royalty equal to 10%
of the pre-tax net income generated by Carbonics through use of this technology.

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.

INTELLECTUAL PROPERTIES

Carbonics,  Carbonics  Capital  Corporation,  and the  "Carbonics  Logo" are the
registered trademarks of Carbonics Capital Corporation.

Carbonics is party to a technology  commercialization agreement with GreenShift,
pursuant to which  GreenShift  has agreed to provide  commercialization  support
services and access to GreenShift's rights to sell and use a proprietary biomass
gasification  technology in fields of use outside of the corn ethanol  industry.
This technology was developed by ZeroPoint Clean Tech,  Inc., a renewable energy
technology  and project  development  company.  ZeroPoint  believes  that it has
developed a highly efficient biomass  gasification process capable of converting
biomass into renewable synthesis gas to create carbon-neutral energy. Additional
information is available online at www.zeropointcleantech.com.

EMPLOYEES

As of December 31, 2008,  Carbonics Capital employed 2 at will employees.  There
is no union representation for any of our employees.

ITEM 1A    RISK FACTORS

There are many  important  factors that have  affected,  and in the future could
affect, Carbonics' business, including, but not limited to the factors discussed
below,  which  should be  reviewed  carefully  together  with other  information
contained in this report.  Some of the factors are beyond our control and future
trends are difficult to predict.

There is  substantial  doubt  concerning  our  ability  to  continue  as a going
concern.

Carbonics had income from  continuing  operations of $388,740  during the twelve
months  ended  December  31,  2008,  and we had $0 in cash at December 31, 2008.
These matters raise  substantial  doubt about our ability to continue as a going
concern.  Management's plans include raising  additional  proceeds from debt and
equity transactions and completing strategic acquisitions.

We are  implementing  new business  plans which make the results of our business
uncertain.

Our limited  operating  history makes it difficult  for  potential  investors to
evaluate our business.  Therefore, our proposed operations are subject to all of
the risks inherent in the initial expenses, challenges, complications and delays
frequently  encountered in connection with the formation of any new business, as
well as those risks that are  specific to the  biodiesel,  ethanol and  culinary
oils industry in general. Investors should evaluate an investment in our company
in light of the problems and uncertainties  frequently  encountered by companies
attempting  to develop  markets for new  products,  services  and  technologies.
Despite best efforts, we may never overcome these obstacles to achieve financial
success.  Our business is speculative and dependent upon the  implementation  of
our business  plan, as well as our ability to enter into  agreements  with third
parties for necessary  financing,  the provision of necessary feedstock sources,
engineering, procurement and construction services and the sale and distribution
of our biodiesel  fuel on terms that will be  commercially  viable for us. There
can be no assurance  that our efforts will be successful or result in revenue or
profit. There is no assurance that we will earn significant revenues or that our
investors will not lose their entire investment.

The fiscal efficiencies of highly capitalized competitors in biotechnology could
defeat our efforts to capture a viable market share.

The business of developing new  biotechnologies  is a capital-intense  business,
requiring  substantial  capital  resources.  The  costs  that  we may  incur  in
obtaining capital are substantially greater per dollar than the cost incurred by
large scale  enterprises in the industry.  This  situation  could cause us to be
unable to compete effectively.

The  exercise of our  outstanding  warrants  and options and  Carbonics  Capital
Corporation's various anti-dilution and price-protection  agreements could cause
the market  price of our common stock to fall,  and may have  dilutive and other
effects on our existing stockholders.

The  exercise  of our  outstanding  warrants  and  options  could  result in the
issuance of up to 1,438,516  shares of common  stock,  assuming all  outstanding
warrants and options are currently exercisable.  Such issuances would reduce the
percentage of ownership of our existing  common  stockholders  and could,  among
other  things,  depress  the  price  of our  common  stock.  This  result  could
detrimentally  affect  our  ability  to  raise  additional  equity  capital.  In
addition,  the sale of these  additional  shares of  common  stock may cause the
market price of our stock to decrease.

                                       4
<PAGE>
We lack capital to fund our operations.

During the twelve months ended December 31, 2008 our operations used $632,453 in
cash, but our debt service  obligations  required cash in excess of that amount.
Loans from some of our shareholders  and the issuance of convertible  debentures
funded our debt service.  Those  individuals may not be able to continue to fund
our operations or our debt service.

Our failure to attract qualified engineers and management personnel could hinder
our success.

Our ability to attract and retain  qualified  engineers  and other  professional
personnel  when we need them will be a major  factor in  determining  our future
success.  There is a very  competitive  market  for  individuals  with  advanced
engineering  training,  and we are not  assured  of  being  able to  retain  the
personnel we will need.

Key personnel are critical to our business and our future success depends on our
ability to retain them.

Our success depends on the contributions of our key management,  and engineering
personnel.  The loss of these officers could result in lost sales opportunities,
lost  business,   difficulties   operating  our  assets,   difficulties  raising
additional  funds  and  could  therefore   significantly  impair  our  financial
condition.  Our future  success  depends on our ability to retain and expand our
staff  of  qualified  personnel,   including  environmental  technicians,  sales
personnel and engineers.

Viridis  Capital  can  exert  control  over us and may not make  decisions  that
further the best interests of all stockholders.

Viridis Capital,  LLC controls 100% of our outstanding Series C preferred stock.
The preferred  shares are convertible into 80% of our Common Stock. As a result,
Viridis exerts a significant degree of influence over our management and affairs
and over  matters  requiring  stockholder  approval,  including  the election of
directors and approval of significant corporate transactions.  In addition, this
concentration  of  ownership  may delay or prevent a change in control of us and
might affect the market price of our common stock, even when a change in control
may be in the best interest of all stockholders.  Furthermore,  the interests of
this  concentration  of ownership may not always  coincide with our interests or
the  interests of other  stockholders  and  accordingly,  they could cause us to
enter into transactions or agreements which we would not otherwise consider.

Investing in our stock is highly  speculative  and you could lose some or all of
your investment.

The value of our common stock may decline and may be affected by numerous market
conditions, which could result in the loss of some or the entire amount invested
in our stock. The securities  markets  frequently  experience  extreme price and
volume  fluctuations  that affect  market  prices for  securities  of  companies
generally and very small capitalization companies such as us in particular.

The volatility of the market for Carbonics Capital  Corporation common stock may
prevent a shareholder from obtaining a fair price for his shares.

The common stock of Carbonics  Corporation is quoted on the OTC Bulletin  Board.
It is impossible to say that the market price on any given day reflects the fair
value of Carbonics  Corporation,  since the price  sometimes moves up or down by
50% or more in a week's time. A shareholder in Carbonics  Corporation  who wants
to sell his shares,  therefore, runs the risk that at the time he wants to sell,
the market price may be much less than the price he would consider to be fair.

Our common stock  qualifies as a "penny stock" under SEC rules which may make it
more difficult for our stockholders to resell their shares of our common stock.

Our common stock trades on the OTC Bulletin Board.  As a result,  the holders of
our  common  stock  may find it more  difficult  to obtain  accurate  quotations
concerning  the market  value of the  stock.  Stockholders  also may  experience
greater difficulties in attempting to sell the stock than if it were listed on a
stock  exchange  or quoted on the NASDAQ  Global  Market or the  NASDAQ  Capital
Market.  Because our common  stock does not trade on a stock  exchange or on the
NASDAQ Global Market or the NASDAQ Capital  Market,  and the market price of the
common  stock is less than $5.00 per  share,  the common  stock  qualifies  as a
"penny stock." SEC Rule 15g-9 under the Securities  Exchange Act of 1934 imposes
additional  sales practice  requirements  on  broker-dealers  that recommend the
purchase or sale of penny  stocks to persons  other than those who qualify as an
"established   customer"  or  an  "accredited   investor."   This  includes  the
requirement   that  a   broker-dealer   must   make  a   determination   on  the
appropriateness  of  investments  in penny stocks for the customer and must make
special  disclosures  to the  customer  concerning  the  risks of penny  stocks.
Application  of the penny  stock  rules to our common  stock  affects the market
liquidity of the shares,  which in turn may affect the ability of holders of our
common stock to resell the stock.

                                       5
<PAGE>

Only a small portion of the investment  community  will purchase  "penny stocks"
such as our common stock.

Carbonics  Corporation  common  stock is defined  by the SEC as a "penny  stock"
because it trades at a price less than  $5.00 per share.  Carbonics  Corporation
common stock also meets most common  definitions  of a "penny  stock,"  since it
trades for less than $1.00 per share. Many brokerage firms will discourage their
customers from purchasing  penny stocks,  and even more brokerage firms will not
recommend a penny stock to their customers.  Most  institutional  investors will
not invest in penny stocks.  In addition,  many  individual  investors  will not
consider a purchase of a penny stock due,  among other  things,  to the negative
reputation  that attends the penny stock market.  As a result of this widespread
disdain  for  penny  stocks,  there  will  be a  limited  market  for  Carbonics
Corporation  common stock as long as it remains a "penny  stock." This situation
may limit the liquidity of your shares.

ITEM 2     DESCRIPTION OF PROPERTIES

Carbonics  Capital  Corporation  currently  maintains  office at One Penn Plaza,
Suite 1612,  New York,  NY. The lease for this space  expires in May of 2011. We
paid $0 in rent  during  2008.  During  2008 we are being  permitted  to use the
premises for no charge by GreenShift Corporation, the primary tenant. We believe
these offices will be sufficient for our needs for the foreseeable future.

ITEM 3     LEGAL PROCEEDINGS

None.

ITEM 4     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.
























                                       6

<PAGE>

                                     PART II

ITEM 5     MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

Carbonics  Capital  Corporation's  Common Stock trades on the OTC Bulletin Board
under the symbol  "CICS."  The  following  table  sets  forth,  for the  periods
indicated, the range of high and low closing bid prices for the Company's Common
Stock  during the past two years as  reported  by the  National  Association  of
Securities  Dealers  composite feed or other  qualified  inter-dealer  quotation
medium. The reported bid quotations reflect  inter-dealer  prices without retail
markup,  markdown  or  commissions,  and may not  necessarily  represent  actual
transactions.
<TABLE>
<CAPTION>
Period                                                    High                       Low
----------------------------------------------------------------------------------------
<S>                                                       <C>                       <C>
2007 First Quarter                                        2.61                      1.70
2007 Second Quarter                                       1.76                      0.50
2007 Third Quarter                                        1.08                      0.58
2007 Fourth Quarter                                       0.76                      0.24

2008 First Quarter                                       0.030                    0.0200
2008 Second Quarter                                      0.004                    0.0040
2008 Third Quarter                                       0.004                    0.0040
2008 Fourth Quarter                                      0.002                    0.0012

Title of Class              Approximate Number of Holders of Record as of April 14, 2009
Common Stock, 0.001 par                                                              145
</TABLE>


The number of holders  does not give effect to  beneficial  ownership  of shares
held in the street name of stock  brokerage  houses or clearing  agents and does
not necessarily reflect the actual ownership of the shares.

REVERSE SPLIT

On February 11, 2008, the Company completed a 1 for 20 reverse stock-split.  All
stock prices,  share  amounts,  per share  information,  stock options and stock
warrants in this Report reflect the reverse stock split.

DIVIDENDS

We have no present intention of paying dividends in the foreseeable  future. Our
policy  for the time  being is to  retain  earnings  and  utilize  the funds for
operations and growth.  Future dividend policies will be determined by the Board
of Directors based on our earnings,  financial  condition,  capital requirements
and other existing conditions.


                                       7

<PAGE>
SALE OF UNREGISTERED SECURITIES

Carbonics  Capital  Corporation did not sell any unregistered  equity securities
during the 4th quarter of 2008.

REPURCHASE OF EQUITY SECURITIES

Carbonics  Capital  Corporation did not repurchase any of its equity  securities
that were  registered  under  Section  12 of the  Securities  Act during the 4th
quarter of 2008.

ITEM 6.              SELECTED FINANCIAL DATA

Not applicable.





























                                       8
<PAGE>



ITEM 7.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS
            AND RESULTS OF OPERATIONS

We develop  renewable  energy projects that facilitate the more efficient use of
carbon in energy supply chains. Our development activities during 2008 primarily
involved  evaluation  of a number of different  chemical and other  technologies
designed to separate carbon dioxide from exhaust for conversion into value-added
carbonaceous products.

We  are  party  to a  technology  commercialization  agreement  with  GreenShift
Corporation,  which  company  is  majority  owned by our  majority  shareholder,
Viridis  Capital,  LLC,  pursuant  to which  GreenShift  has  agreed to  provide
commercialization support services and access to GreenShift's rights to sell and
use a proprietary  biomass  gasification  technology in fields of use outside of
the corn ethanol industry.  Carbonics will pay GreenShift a royalty equal to 10%
of the pre-tax net income generated by Carbonics through use of this technology.

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.

RESULTS OF OPERATIONS

Year Ended December 31, 2008 Compared to Year Ended December 31, 2007

Revenues

There were no revenues from  continuing  operations  for the year ended December
31, 2008 or for the twelve months ended December 31, 2007.

All revenues realized in discontinued  operations during the year ended December
31,  2007  were due to the  operating  activities  of our  former  subsidiaries,
GreenShift  Corporation,  GS EnviroServices,  Inc., GS AgriFuels Corporation and
EcoSystem Corporation.

Cost of Revenues

There was no cost of revenues  for the year ended  December  31, 2008 or for the
year ended December 31, 2007.

All cost of revenues  realized in discontinued  operations during the year ended
December  31,  2007  were  due  to  the  operating   activities  of  our  former
subsidiaries,  GreenShift  Corporation,  GS  EnviroServices,  Inc., GS AgriFuels
Corporation and EcoSystem Corporation.

Selling, General and Administrative Expenses Operating Expenses

Selling,  general and administrative expenses during the year ended December 31,
2008 totaled $448,531, including $203,531 in selling, general and administrative
expenses and $245,000 in stock based  compensation.  In the comparable period of
the prior year, selling, general and administrative expenses totaled $4,777,553,
including  $2,189,158  in  selling,  general  and  administrative  expenses  and
$2,588,396  in stock based  compensation  attributable  to selling,  general and
administrative  expenses.  Selling,  general and administrative  expenses during
2008 primarily  consisted of accounting and legal fees,  office related expenses
as  well  as  costs  associated  with  payroll.  Due  to the  divestment  of our
operations at the end of 2007, selling,  general and administrative  expenses in
2008 consisted of development costs associated with our planned future projects.
Selling,  general and  administrative  expenses are expected to remain high as a
percentage of sales until such time that the Company can achieve  enough revenue
growth and obtain the economies of scale necessary to support these expenses.

Interest Expense

Interest  expense for the twelve  months ended  December 31, 2008 was  $177,425,
representing a increase of $56,037 from $121,388 for the same period in 2007.

Expenses Associated with Derivative Instruments

As of December 31, 2008 Carbonics Capital had several convertible debentures due
to YA Global  Investments,  LP. The  conversion  feature on these  debentures is
variable  based on trailing  market  prices and  therefore  contains an embedded
derivative.  We value the  conversion  feature at the time of issuance using the
Black-Scholes Model and record a note discount and derivative  liability for the

                                       9
<PAGE>

calculated  value.  We  recognize  interest  expense for  accretion  of the note
discount over the term of the note.  The  derivative  liability is valued at the
end of each  reporting  period  and  results in a gain or loss for the change in
fair value. Due to the volatile nature of our stock, as well as the stock of our
subsidiaries,  the change in the derivative  liability and the resulting gain or
loss is usually material to our results.

The principal amount on our convertible debentures due to Global was $2,290,476,
$2,006,387  net of $284,089  discount as of December  31,  2008.  For the twelve
months  ended  December 31,  2008,  we  recognized a loss for the change in fair
value of the  derivative  of $8,528,477  for these  debentures.  The  derivative
liability as of December 31, 2008 was $10,310,380.

Net Income or Loss

Net loss from  continuing  operations  for the twelve months ended  December 31,
2008,  was  $9733,673  as  compared  to a loss  from  continuing  operations  of
$14,329,724  from the same period in 2007. The Company  transferred its interest
in all of its  subsidiaries to GreenShift  Corporation  during the twelve months
ended  December  31,  2007  resulting  in a loss  on  disposal  of  discontinued
operations of  $28,741,853  for the twelve  months ended  December 31, which was
excluded from the above  figures.  Net gain of $9,733,673  for the twelve months
ended  December 31, 2008 as compared to a net loss of  $43,071,577  for the same
period in 2007 was due primarily to the loss on the disposal of its subsidiaries
as well as increased operating expenses, adjustments to the fair market value of
the  derivative  liability   instruments,   interest  and  amortization  charges
associated with financing, and issuance of stock based compensation.

Liquidity and Capital Resources

The Company had $13,348,148 in liabilities at the end of the twelve months ended
December 31, 2008, and may need to obtain additional  financing to satisfy these
obligations.

Our primary  sources of liquidity  are cash  provided by investing and financing
activities.  For the twelve months ended December 31, 2008, net cash used in our
operating activities was $607,566. 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 stock. The Company plans to fund ongoing  operations during 2008 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 twelve months ended December 31, 2008 used
$607,566 in cash. At December 31, 2008,  accounts  payable and accrued  expenses
totaled  $591,511.  At December 31, 2008 the Company had $0 cash. For the twelve
months ended December 31, 2008,  investing  activities  provided $0 in cash, and
cash from financing  activities of provided $607,566.  The Company had a working
capital deficit of $12,962,016 at December 31, 2008,  which includes  derivative
liabilities  of $10,310,380  and  convertible  debentures of $2,006,387,  net of
discounts.

At the present time,  Carbonics Capital 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.




                                       10
<PAGE>


ITEM 8     FINANCIAL STATEMENTS AND SUPPLEMENTARY SCHEDULES

<TABLE>
<CAPTION>
                                                                                                     Page No
FINANCIAL STATEMENTS

<S>                                                                                                   <C>
Report of Independent Registered Public Accounting Firm...................................................12

Consolidated Balance Sheet ...............................................................................13

Consolidated Statements of Operations ....................................................................14

Consolidated Statements of Stockholders' Equity........................................................15-16

Consolidated Statements of Cash Flows.....................................................................17

Notes to Consolidated Financial Statements ...............................................................18
</TABLE>




























                                       11

<PAGE>



             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors and Stockholders
Carbonics Capital Corporation fka GreenShift Corporation

We have audited the accompanying balance sheets of Carbonics Capital Corporation
as of  December  31,  2008 and 2007 and the related  statements  of  operations,
stockholders'  equity  (deficiency)  and cash flows for each of the two years in
the periods then ended. These financial statements are the responsibility of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with the auditing standards established by
the Public Company Accounting  Oversight Board (United States).  Those standards
require that we plan and perform the audits to obtain reasonable assurance about
whether the financial  statements  are free of material  misstatement.  An audit
includes  examining,  on a test  basis,  evidence  supporting  the  amounts  and
disclosures in the financial  statements.  An audit also includes  assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation.  We believe that our
audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the financial position of Carbonics Capital  Corporation
as of December 31, 2008 and 2007, and the results of its operations and its cash
flows for each of the two years in the  periods  then ended in  conformity  with
accounting principles generally accepted in the United States of America.


The  accompanying  financial  statements  have been  prepared  assuming that the
Company will continue as a going concern.  As more fully  discussed in Note 3 to
the financial  statements,  the Company has suffered  losses from operations and
has a working capital deficiency as of December 31, 2008. These conditions raise
substantial doubt about its ability to continue as a going concern. Management's
plans in regard to these matters are also  described in Note 3. These  financial
statements do not include any adjustments  that might result from the outcome of
this uncertainty.




                                    /s/ Rosenberg Rich Baker Berman & Company
Bridgewater, New Jersey
April 15, 2008






                                       12
<PAGE>
                          CARBONICS CAPITAL CORPORATION
                                  BALANCE SHEET
                                DECEMBER 31, 2008

<TABLE>
<CAPTION>
                                                                       12/31/2008       12/31/2007
                                                                    ------------------------------
ASSETS
Current Assets:

<S>                                                                 <C>              <C>
   Cash .........................................................   $        --      $        --
   Note receivable - related party ..............................         386,132        2,948,831
   Interest receivable - related party ..........................            --            196,832
                                                                    -------------    -------------
      Total current assets ......................................         386,132        3,145,663

Furniture and equipment - net ...................................            --             69,628

   Deposits .....................................................            --             32,515
                                                                    -------------    -------------

TOTAL ASSETS ....................................................   $     386,132    $   3,247,806
                                                                    =============    =============

LIABILITIES AND STOCKHOLDERS' DEFICIENCY

Current Liabilities:

   Accounts payable and accrued expenses ........................   $     591,511    $   1,064,672
   Liabilities to be settled in stock ...........................            --            407,333
   Accrued interest .............................................         439,870          262,445
   Convertible debentures, net of discount ......................       2,006,387        1,490,247
   Derivative liability .........................................      10,310,380        1,781,903
   Current maturities of long term debt .........................            --             26,329
                                                                    -------------    -------------
      Total current liabilities .................................      13,348,148        5,032,929
                                                                    -------------    -------------
   TOTAL LIABILITIES ............................................      13,348,148        5,032,929
                                                                    -------------    -------------

Preferred stock
   Series C, par $0.001, 1,000,000 shares authorized,
   805,767 and 974,140 issued and outstanding ...................             806              974
Common stock, par $0.001, 500,000,000 authorized
   127,279,406 and 9,549,649 issued and outstanding, respectively         127,279            9,549
Additional paid-in capital ......................................     124,963,498      126,524,280
Accumulated deficit .............................................    (138,053,599)    (128,319,926)
                                                                    -------------    -------------
   Total stockholders' deficiency ...............................     (12,962,016)      (1,785,123)
                                                                    -------------    -------------

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY ..................   $     386,132    $   3,247,806
                                                                    =============    =============


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


                                       13
<PAGE>

<TABLE>

                          CARBONICS CAPITAL CORPORATION
                            STATEMENTS OF OPERATIONS
                 FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007
<CAPTION>

                                                                   2008             2007
                                                         --------------    -------------
<S>                                                      <C>               <C>
Revenue ..............................................   $         --      $         --
Cost of revenues .....................................             --                --
                                                         --------------    --------------
  Gross profit .......................................             --                --
                                                         --------------    --------------

Operating expenses:
   General and administrative expenses ...............          203,531         2,189,157
    Stock based compensation .........................          245,000         2,588,396
                                                         --------------    --------------
     Total operating expenses ........................          448,531         4,777,553
                                                         --------------    --------------

Operating loss .......................................         (448,531)       (4,777,553)
                                                         --------------    --------------

Other income (expense):
   Loss on fair value of derivative instruments ......       (8,528,477)         (637,817)
   Amortization of deferred financing costs and
     debt discount ...................................         (579,240)       (2,130,031)
   Loss on impairment of assets ......................             --          (6,395,879)
   Loss on extinguishment of debt ....................             --                --
   Settlement expense ................................             --            (267,056)
   Interest expense ..................................         (177,425)         (121,388)
                                                         --------------    --------------
     Total other income (expense) ....................       (9,285,142)       (9,552,171)

Loss before provision for income taxes ...............       (9,733,673)      (14,329,724)

Provision for income taxes ...........................             --                --

Net Loss from continuing operations ..................       (9,733,673)      (14,329,724)
                                                         --------------    --------------

Discontinued operations:
Loss from discontinued operations ....................             --         (32,171,517)
Gain on disposal of discontinued operations ..........             --           3,429,664
                                                         --------------    --------------
   Total discontinued operations .....................             --         (28,741,853)
                                                         --------------    --------------

Net Loss  ............................................   $   (9,733,673)   $  (43,071,577)
                                                         ==============    ==============

Common share, basic and diluted
income (loss) per share from continuing operations ...   $         0.00    $        (1.61)

Common share, basic and diluted
income (loss) per share from discontinued operations .   $         --      $        (3.22)
                                                         --------------    --------------

Common share, basic and diluted
income (loss) per share ..............................   $         0.00    $        (4.83)
                                                         ==============    ==============

Weighted average share of common stock
   outstanding, basic and diluted ....................      100,532,324         8,919,229
                                                         ==============    ==============


        The notes to the Consolidated Financial Statement are an integral
                           part of these statements.

</TABLE>











                                       14
<PAGE>


<TABLE>

                          CARBONICS CAPITAL CORPORATION
                     STATEMENTS OF STOCKHOLDERS' DEFICIENCY
                 FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007

<CAPTION>

                                                            Series C   Preferred Stock                   Common Stock
                                                              Shares           Amount          Shares          Amount
                                                         ------------------------------------------------------------
<S>               <C> <C>                                   <C>          <C>                <C>          <C>
Balance, December 31, 2006 ...........................      1,000,000    $      1,000       5,911,292    $      5,911
                                                         ============    ============    ============    ============

Issuance of common stock upon conversion of debt .....           --              --           274,414             274
Stock issued for compensation ........................           --              --         1,412,500
                                                                                                                1,413
Liabilities to be settled in stock ...................           --              --              --              --
Stock compensation included in discontinued operations           --              --           698,191             698
Conversion of Series C Preferred into common stock ...        (25,860)            (26)      2,006,202           2,006
Warrants issued for deferred financing fees ..........           --              --              --              --
Stock issued in consideration of cancellation of debt            --              --           513,250             513
Forgiveness of affiliate debt ........................           --              --              --              --
Issuance of note payable in consideration of
  cancellation of shares .............................           --              --        (1,263,250)         (1,263)
Cancellation of shares by related party ..............           --              --            (3,333)             (3)
Distribution of subsidiaries to GreenShift ...........           --              --              --
                                                         ------------    ------------    ------------    ------------
Property distribution to shareholders ................           --              --              --              --
Net loss .............................................           --              --              --
                                                         ------------    ------------    ------------    ------------

Balance, December 31, 2007 ...........................        974,140    $        974       9,549,266    $      9,549
                                                         ============    ============    ============    ============

Issuance of common stock upon conversion of debt .....           --              --         9,730,140           9,730
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 ........................           --              --              --              --
Net loss .............................................           --              --              --              --
                                                         ------------    ------------    ------------    ------------

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


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


</TABLE>





                                       15
<PAGE>

<TABLE>


           CARBONICS CAPITAL CORPORATION (FKA GREENSHIFT CORPORATION)
                     STATEMENTS OF STOCKHOLDERS' DEFICIENCY
                 FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007



<CAPTION>

                                                                                                    Total
                                                            Additional       Cumulative     Stockholders'
                                                       Paid-In-Capital          Deficit            Equity
                                                       --------------------------------------------------

<S>               <C> <C>                                <C>              <C>              <C>
Balance, December 31, 2006 ...........................   $  58,695,961    $ (71,042,862)   $ (12,339,990)
                                                         =============    =============    =============


Issuance of common stock upon conversion of debt .....         209,814             --            210,088
Stock issued for compensation ........................       2,560,146             --          2,561,559
Liabilities to be settled in stock ...................        (407,333)            --           (407,333)
Stock compensation included in discontinued operations         794,489             --            795,187
Conversion of Series B Preferred into common stock ...         (40,098)            --            (38,118)
Warrants issued for deferred financing fees ..........         266,361             --            266,361
Stock issued in consideration of cancellation of debt        2,126,068             --          2,126,581
Forgiveness of affiliate debt ........................         108,763             --            108,763
Issuance of note payable in consideration of
  cancellation of share ..............................        (732,587)            --           (733,850)
Cancellation of shares by related party ..............              67             --                 64
Distribution of subsidiaries to GreenShift ...........      62,942,629      (12,601,487)      50,341,142
Property distribution to shareholders ................            --         (1,604,000)      (1,604,000)
Net loss .............................................            --        (43,071,577)     (43,071,577)
                                                         -------------    -------------    -------------

Balance, December 31, 2007 ...........................   $ 126,524,280    $(128,319,926)   $  (1,785,123)
                                                         =============    =============    =============
Issuance of common stock upon conversion of debt .....          53,370             --             63,100
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 ........................      (1,796,318)            --         (1,796,318)
Net income (loss) ....................................            --         (9,733,673)      (9,733,673)
                                                         -------------    -------------    -------------
Balance, December 31, 2008 ...........................   $ 124,963,498    $(138,053,599)   $ (12,962,016)
                                                         =============    =============    =============







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



                                       16

<PAGE>

<TABLE>


           CARBONICS CAPITAL CORPORATION (FKA GREENSHIFT CORPORATION)
                            STATEMENTS OF CASH FLOWS
                 FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007

<CAPTION>

                                                                                      2008             2007
                                                                              ------------    -------------
CASH FLOW FROM OPERATING ACTIVITIES

<S>                                                                           <C>             <C>
   Net loss from continuing operations ....................................   $ (9,733,673)   $(14,329,724)
   Net loss from discontinued operations ..................................           --       (28,741,853)

Adjustments to reconcile net loss to net cash used in operating activities:
   Depreciation and amortization ..........................................        (59,235)         33,527
   Amortization of debt discount and deferred financing fees ..............        579,240       2,130,031
   Stock based compensation ...............................................        245,000       2,588,396
   Impairment of investments ..............................................           --         6,395,879
   Stock for services .....................................................         60,000            --
   Changes in fair market value of derivatives ............................      8,528,477         637,817

Changes in Assets and Liabilities
   Assets of discontinued operations ......................................           --        46,913,175
   Prepaid expenses and other current assets ..............................           --            25,811
   Accounts payable .......................................................       (122,925)        168,740
   Accrued expenses .......................................................       (314,380)        306,945
   Interest payable - affiliates ..........................................        177,415         229,047
   Deposits ...............................................................         32,515            --
   Liabilities of discontinued operations .................................           --       (17,358,201)
                                                                              ------------    ------------
      Net cash provided by (used in) operating activities .................       (607,566)     (1,000,410)
                                                                              ------------    ------------
CASH FLOWS FROM FINANCING ACTIVITIES

   Issuances (Repayments) of short-term borrowings ........................        (66,628)        (61,042)
   Repayment of convertible debentures ....................................        (10,547)     (1,060,542)
   Proceeds from convertible debentures - related parties .................        684,741       1,500,231
   Proceeds from convertible debentures ...................................           --           493,000
                                                                              ------------    ------------
      Net cash provided by financing activities ...........................        607,566         871,647
                                                                              ------------    ------------
   Net increase (decrease) in cash ........................................           --          (128,763)

   Cash at beginning of period ............................................           --           128,763
                                                                              ------------    ------------

   Cash at end of period ..................................................   $       --      $       --
                                                                              ============    ============



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

</TABLE>


                                       17
<PAGE>

           CARBONICS CAPITAL CORPORATION (FKA GREENSHIFT CORPORATION)
                          NOTES TO FINANCIAL STATEMENTS

1        BASIS OF PRESENTATION

We develop  renewable  energy projects that facilitate the more efficient use of
carbon in energy supply chains. Our development activities during 2008 primarily
involved  evaluation  of a number of different  chemical and other  technologies
designed to separate carbon dioxide from exhaust for conversion into value-added
carbonaceous products.

We  are  party  to a  technology  commercialization  agreement  with  GreenShift
Corporation,  which  company  is  majority  owned by our  majority  shareholder,
Viridis  Capital,  LLC,  pursuant  to which  GreenShift  has  agreed to  provide
commercialization support services and access to GreenShift's rights to sell and
use a proprietary  biomass  gasification  technology in fields of use outside of
the corn ethanol industry.  Carbonics will pay GreenShift a royalty equal to 10%
of the pre-tax net income generated by Carbonics through use of this technology.

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.

2        NATURE OF OPERATIONS

COMPLETION OF NAME CHANGE AND REVERSE STOCK SPLIT

Effective  February  11,  2008,  the Company  changed  its name from  GreenShift
Corporation to Carbonics Capital Corporation (f/k/a GreenShift  Corporation) and
completed a 1 for 20 reverse stock split. All stock prices,  share amounts,  per
share  information,  stock options and stock warrants in this Report reflect the
reverse split.

RESTRUCTURING

On November 9, 2007, the Company  completed a series of transactions,  including
the transfer to  GreenShift  Corporation  of  Carbonics'  stakes in GS AgriFuels
Corporation  and  EcoSystem  Corporation.  GreenShift  assumed all of Carbonics'
intercompany,  affiliate  related party notes payable and receivable,  all trade
payables,  and all  receivables,  but did not assume Carbonics debt to YA Global
Investments,  LP. In exchange,  GreenShift issued to Carbonics a promissory note
in the aggregate net amount of $2,948,831  (the "Carbonics  Note").  On December
12, 2007,  Carbonics  distributed  1,000,000 shares of GS  EnviroServices,  Inc.
common stock, 2,000,000 shares of EcoSystem Corporation common stock, and all of
what was then  Carbonics' 80% stake in GreenShift on a pro-rated basis to all of
Carbonics'  shareholders.  To accomplish the distribution,  Carbonics  converted
200,000 shares of GreenShift  Series D Preferred Stock into 20,800,000 shares of
GreenShift  common stock,  which it distributed to the minority  shareholders of
GreenShift,  and  distributed  800,000  shares of GreenShift  Series D Preferred
Stock to Viridis Capital, LLC, Carbonics' majority shareholder.  Kevin Kreisler,
the sole member of Viridis Capital,  is the Chairman and Chief Executive Officer
of the Company.

FORGIVENESS OF RELATED PARTY DEBT

During the year ended December 31, 2008,  the company  waived  $2,000,000 of the
debenture  receivable from  GreenShift  Corporation.  Additionally,  the company
waived interest receivable from GreenShift in the amount of $196,832, as well as
other related company notes receivable of $6,821 in the first quarter of 2008.

3        GOING CONCERN

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  The  Company  had a net  loss of
$9,733,673  for the twelve months ended December 31, 2008 and had an accumulated
deficit and  negative  cash flow from  operations.  As of December  31, 2008 the
Company's  current  liabilities  exceeded  current assets by $12,962,016.  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.

                                       18
<PAGE>

3        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

For  the  year  ended  December  31,  2008,  the  company  had  no  consolidated
subsidiaries.  For the year ended  December  31,  2007,  the  operations  of all
consolidated companies are reflected in the discontinued operations.  During the
fourth  quarter  2007,  the Company  divested  100% of its interest in EcoSystem
Corporation, GS AgriFuels Corporation,  GS EnviroServices,  Inc., and GreenShift
Corporation (See note 10).

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
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 SFAS 123(r). 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 SFAS 123(r),  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).

BASIC AND DILUTED EARNINGS PER SHARE ("EPS")

Basic  (loss)  earnings  per share is  computed  by  dividing  net income by the
weighted  average  common shares  outstanding  during a period.  Diluted  (loss)
earnings per share is based on the treasury stock method and includes the effect
from potential  issuance of common stock such as shares issuable pursuant to the
exercise of stock  options,  assuming  the  exercise of all  in-the-money  stock
options. Common share equivalents have been excluded where their inclusion would
be anti-dilutive.

FURNITURE AND EQUIPMENT

Furniture and equipment are depreciated using the straight-line  method over the
estimated  useful lives of the assets.  Gains and losses on  depreciable  assets
retired  or sold  are  recognized  in  statement  of  operations  in the year of
disposal,  and repair and  maintenance  expenditures  are  expensed as incurred.
Property, plant and equipment are stated at cost.

LOAN AND DEBT SECURITIES

For loans and debt securities, fair value generally approximates cost unless the
borrower's  enterprise value,  overall financial condition or other factors lead
to a determination of fair value at a different amount.

When  the  Company  issues  nominal  cost  warrants  or free  equity  securities
("nominal cost equity"),  the Company allocates its cost basis in its investment
between  its  debt  securities  and  its  nominal  cost  equity  at the  time of
origination. At that time, the original issue discount basis of the nominal cost
equity is recorded by increasing the cost basis in the equity and decreasing the
cost basis in the related debt securities.

RECENT ACCOUNTING PRONOUNCEMENTS

In 2007, the Financial  Accounting  Standards  Board (FASB) issued  Statement of
Financial   Accounting   Standard   (SFAS)  No.  141  (revised   2007)  Business
Combinations.   This  Statement   replaces  FASB  Statement  No.  141,  Business
Combinations.  This  Statement  requires  an acquirer  to  recognize  the assets
acquired,  the  liabilities  assumed,  and any  non-controlling  interest in the
acquiree at the acquisition date, measured at their fair values as of that date,
with limited exceptions specified in the Statement.

SFAS No. 141  (revised) is effective  for  business  combinations  for which the
acquisition  date is on or after the  beginning  of the first  annual  reporting
period  beginning on or after December 15, 2008.  Management does not expect the
implementation  of this new standard to have a material  impact on the Company's
financial position, results of operations and cash flows.

                                       19
<PAGE>

In February  2007,  the  Financial  Accounting  Standards  Board  (FASB)  issued
Statement  of  Financial  Accounting  Standard  (SFAS) No. 159,  "The Fair Value
Option for Financial Assets and Financial Liabilities" including an amendment of
FASB  Statement No. 115 with respect to  improvement  of financial  reporting of
certain  investments  in debt and  equity  securities.  This  Statement  permits
entities to choose to measure many financial instruments and certain other items
at fair value.  The  objective  is to improve  financial  reporting by providing
entities with the opportunity to mitigate volatility in reported earnings caused
by measuring related assets and liabilities  differently without having to apply
complex hedge  accounting  provisions.  This Statement is expected to expand the
use of fair value  measurement,  which is consistent with the Board's  long-term
measurement objectives for accounting for financial instruments.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying  amounts  reported in the balance sheet as of December 31, 2008 for
cash equivalents,  accounts receivable, other receivables, accounts payable, and
accrued  expenses  approximate fair value because of the immediate or short-term
maturity of these  financial  instruments.  The fair value of notes  payable and
long-term  debt  approximates  their  carrying value as the stated or discounted
rates of the debt reflect  recent  market  conditions.  It was not  practical to
estimate  the fair  value of the  convertible  debt due to the  nature  of these
items.  These  estimates  would be based on the  carrying  amounts,  maturities,
effective interest rates and volatility of the Company's stock. The Company does
not believe it is practical due to the  significant  volatility of the Company's
stock.

Fair value estimates are made at a specific point in time, based on the terms of
the financial  instrument.  These estimates are subjective in nature and involve
uncertainties  and  matters of  significant  judgment  and  therefore  cannot be
determined with precision.  Changes in assumptions  could  significantly  affect
these estimates.

The Company partially adopted SFAS 157 on January 1, 2008, delaying  application
for  non-financial  assets and  non-financial  liabilities  as  permitted.  This
statement  establishes  a  framework  for  measuring  fair  value,  and  expands
disclosures  about fair value  measurements.  SFAS 157  establishes a fair value
hierarchy that  prioritizes  the inputs to valuation  techniques used to measure
fair value into three levels as follows:

o    Level 1 -- quoted  prices  (unadjusted)  in active  markets  for  identical
     assets or liabilities  that the Company has the ability to access as of the
     measurement date. Financial assets and liabilities utilizing Level 1 inputs
     include active exchange-traded securities and exchange-based derivatives.

o    Level 2 -- inputs other than quoted prices included within Level 1 that are
     directly  observable  for the asset or liability or  indirectly  observable
     through  corroboration  with observable  market data.  Financial assets and
     liabilities  utilizing  Level 2 inputs  include  fixed  income  securities,
     non-exchange-based derivatives, mutual funds, and fair-value hedges.

o    Level 3 --  unobservable  inputs for the asset or liability  only used when
     there is little,  if any, market activity for the asset or liability at the
     measurement date. Financial assets and liabilities utilizing Level 3 inputs
     include infrequently-traded,  non-exchange-based derivatives and commingled
     investment funds, and are measured using present value pricing models.

The  following  table  presents  the embedded  derivative,  the  Company's  only
financial   assets  measured  and  recorded  at  fair  value  on  the  Company's
Consolidated Balance Sheets on a recurring basis and their level within the fair
value hierarchy during the year ended December 31, 2008:
<TABLE>
<CAPTION>
                                                                              Fair Value
--------------------------------------------------------------------------------------------------------------------
As of December 31, 2008                                 Level 1         Level 2         Level 3          Total
--------------------------------------------------------------------------------------------------------------------
<S>                                                    <C>             <C>             <C>              <C>
Embedded derivative liabilities                        $    --         $    --         $10,310,380      $10,310,380

The  following  table  reconciles,  for the  year  ended  December 31,  2008,  the
beginning and ending balances for financial  instruments  that are recognized at
fair value in the consolidated financial statements:

Balance of Embedded derivative at December 31, 2006                                                     $ 7,708,546
Transferred with debt to related party                                                                   (7,583,949)
Loss on fair value adjustments to embedded derivatives                                                    1,657,306
                                                                                                        -----------
Balance of Embedded derivative at December 31, 2007                                                       1,781,903
Loss on fair value adjustments to embedded derivatives                                                    8,528,477
                                                                                                        -----------
Balance at December 31, 2008                                                                            $10,310,380
                                                                                                        ===========
</TABLE>
                                       20
<PAGE>

The valuation of the derivatives are calculated using a complex binomial pricing
model that is based on changes in the volatility of our shares, our stock price,
the probability of a reduction in exercise and conversion price, and the time to
conversion of the related financial instruments. See No3e 6 for more information
on the valuation methods used.

IMPAIRMENT OF LONG-LIVED ASSETS

The Company follows  Statement of Financial  Accounting  Standards  ("SFAS") no.
144,  "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No.
144 requires  that  long-lived  assets,  including  property and  equipment,  be
reviewed for impairment  whenever  events or changes in  circumstances  indicate
that their carrying amount may not be recoverable.  Assets to be disposed of are
reported at the lower of the carrying amount or fair value,  less costs to sell.
Impairment is measured as the difference  between carrying value and fair market
value.  Fair value is based on  appraised  values or  estimated  sales values of
similar assets in recent  transactions.  SFAS No. 144 also requires companies to
separately report discontinued  operations for a component of an entity that has
been disposed of or is classified as held for sale.

LIMITATIONS

Fair value  estimates  are made at a specific  point in time,  based on relevant
market  information  and  information  about  the  financial  statement.   These
estimates  are  subjective  in nature and involve  uncertainties  and matters of
significant judgment and therefore cannot be determined with precision.  Changes
in assumptions could significantly affect the estimates.

DEFERRED FINANCING COSTS AND DEBT DISCOUNTS

Deferred finance costs represent costs which may include direct costs paid to or
warrants issued to third parties in order to obtain long-term financing and have
been  reflected as other assets.  Costs  incurred with parties who are providing
the actual long-term  financing,  which generally include the value of warrants,
fair value of the  derivative  conversion  feature,  or the  intrinsic  value of
beneficial   conversion  features  associated  with  the  underlying  debt,  are
reflected as a debt discount.  These costs and discounts are generally amortized
over the life of the related debt. On April 2, 2007,  YA Global  Investment,  LP
declared certain debentures to be in default (See Note 5). As a result, deferred
financing  fees  related  to these  debentures  were  deemed  to be  permanently
impaired and were written off to amortization expense.

Amortization  expense  related to these costs and  discounts  was  $579,240  and
$2,130,031 for the years ended December 31, 2008 and 2007, respectively.

4        FINANCING ARRANGEMENTS
<TABLE>
<CAPTION>
The following is a summary of the Company's financing arrangements as of
December 31, 2008:

Current portion of convertible debentures:
<S>                                                                              <C>
YAGI convertible debenture payable from Carbonics Capital issued October 2005    $    602,907
YAGI convertible debenture payable from Carbonics Capital issued July 2005            570,000
YAGI convertible debenture payable from Carbonics Capital issued April 2006         1,117,569
Note discounts                                                                       (284,089)
                                                                                 ------------
     Total current convertible debentures                                        $  2,006,387
                                                                                 ============
</TABLE>

The following chart is presented to assist the reader in analyzing the Company's
ability to fulfill its fixed debt service  requirements  (net of note discounts)
of as of December 31, 2008 and the Company's ability to meet such obligations:

Year                                                       Amount
----------------------------------------------- ------------------
2009                                                  $ 2,290,476
                                                      -----------
Total minimum payments due under current and
long term obligations                                 $ 2,290,476
                                                      ===========
                                       21
<PAGE>


CONVERTIBLE DEBENTURES

YA Global Investments, LP

On April 2, 2007 YA Global Investments,  LP ("YAGI") declared certain debentures
issued by the Company to YAGI to be in default for the failure by the Company to
maintain  an  effective  registration  statement  as  required  by the  Investor
Registration Rights Agreement executed  contemporaneous with the issuance of the
debentures.  The Debentures are  unconditionally  guaranteed by Viridis Capital,
LLC  ("Viridis"),  a  wholly-owned  affiliate of Kevin  Kreisler,  the Company's
chairman and chief executive officer (the "Guaranty").

In  addition,  on April 2, 2007 the  Company,  YAGI and Viridis  entered  into a
Forbearance Agreement,  pursuant to which YAGI agreed to forbear from exercising
the remedies  available to it under the Debentures and the related  security and
stock pledge agreements,  which would have included the liquidation by YAGI of a
portion  of the  Company's  holdings.  The  terms of the  Forbearance  Agreement
provided that YAGI shall instead accept, convert and liquidate sufficient shares
of Viridis'  Series C  Preferred  Stock in the  Company to  facilitate  the full
repayment of the  Debentures.  YAGI shall accept the Series C Preferred Stock in
tranches, and it shall not convert a tranche until it has sold 80% of the shares
of Company common stock issuable upon  conversion of the previous  tranche.  Any
such conversions shall be subject to the ownership  limitations specified in the
Debentures  (i.e.,  limitations  to  ownership  of no  more  than  4.9%  of  the
outstanding  capital  stock of the Company.  YAGI shall apply the net  proceeds,
which are defined in the Forbearance  Agreement as 90% of the lowest closing bid
price for the  Company's  common stock for the five trading days  preceding  the
conversion  date  of the  Series  C  shares,  to the  full  satisfaction  of the
Company's  obligations  under the  Debentures in the following  priorities:  (a)
first, to accrued  interest on the most recently issued  Debenture,  (b) then to
principal on the most recently issued Debenture, (c) then to accrued interest on
the next most recently issued Debenture,  (d) then to principal on the next most
recently issued Debenture,  and so forth until all of the Company's  obligations
under the Debentures have been satisfied in full.

On June 26, 2007,  Carbonics entered into a Securities  Purchase Agreement (this
"Agreement"),  with YAGI.  In connection  with this  Agreement,  YAGI  purchased
secured convertible  debentures  amounting to $570,000 due on June 26, 2009. The
June 26,  2007 YAGI  debentures  provide  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.  YAGI will be entitled to convert the June 26,
2007  debenture  on the basis of the  conversion  price into  Carbonics'  common
stock,  provided  that YAGI cannot  convert into shares that would cause YAGI to
own more 4.9% of Carbonics Capital's outstanding common stock.

In addition,  Carbonics  issued to YAGI a warrant to purchase  500,000 shares of
Carbonics  Capital's  common stock at $1.00 per share.  The value of the warrant
was  calculated  to be $570,000 at the time of the  issuance  using the guidance
found in APB Opinion 14,  "Accounting for Convertible  Debt and Debt issued with
Detachable Stock Purchase Warrants" and was recorded as a discount. The discount
is amortized to interest  expense over the term of the loan using the  effective
interest  method of  amortization.  During the year  ended  December  31,  2008,
interest expense from accretion of the debt discount was $579,240.


                                       22
<PAGE>
On January 25,  2008,  a financing  was  completed  that  resulted in  EcoSystem
becoming  the  guarantor of the debts of several of its former  affiliates.  The
beneficiary  of the  guarantees was YA Global  Investments,  LP ("YAGI"),  which
committed to extend credit to those  affiliates.  As of September 30, 2008,  the
outstanding principal and accrued interest of the debt was $44,758,833.

On August 14, 2008,  certain Secured  Convertible  Debentures  between Carbonics
Capital Corporation and YA Global Investments,  L.P. were amended.  The maturity
date of the following  Secured  Convertible  Debentures have been extended until
December 31, 2011: a debenture dated October 12, 2005 in the original  principal
amount of  $1,475,000;  a  debenture  dated  February  8,  2006 in the  original
principal  amount of  $3,050,369;  and a  debenture  dated June 26,  2007 in the
original principal amount of $570,000.

5        DERIVATIVES

In accordance  with SFAS No. 133,  "Accounting  for Derivative  Instruments  and
Hedging  Activities"  and  EITF  00-19  "Accounting  for  Derivative   Financial
Instruments  Indexed to, and Potentially Settled in, a Company's Own Stock", the
conversion features associated with the convertible  debentures are variable and
contain an  embedded  derivative  that  requires  bifurcation  from their  hosts
contracts. The Company has recognized the embedded derivatives as a liability at
the date the debentures were issued.

As of December 31, 2008, the change in the fair value of the derivative resulted
in an accounting gain of $8,528,477.  Amortization of the debt discount  totaled
$579,240 for the year ended  December 31, 2008. The  unamortized  portion of the
debt discount  related to the  derivatives was $284,089 at December 31, 2008. As
of  December  31,  2008,  the  fair  value  of the  derivative  liabilities  was
$10,310,380.

6        INCOME TAXES

The Company adopted the provisions of FASB  Interpretation  No. 48,  "Accounting
for  Uncertainty in Income  Taxes-An  Interpretation  of FASB Statement No. 109,
Accounting  for Income Taxes" ("FIN 48"), on January 1, 2007. As a result of the
implementation of FIN 48, the Company  recognized no material  adjustment in the
liability for unrecognized income tax benefits.  At the adoption date of January
1, 2007,  and at December 31, 2007,  there were no  unrecognized  tax  benefits.
Interest and penalties  related to uncertain tax positions will be recognized in
income tax expense.  As of December 31, 2008,  no interest  related to uncertain
tax positions had been accrued.

The Company has incurred  losses,  which have generated net operating loss carry
forwards for the Company as of December 31, 2008.  These loss carry forwards are
subject to limitation in future years should  certain  ownership  changes occur.
For the years ended December 31, 2008 and 2007, the Company's effective tax rate
differs from the federal  statutory rate principally due to net operating losses
and other temporary differences for which no benefit was recorded. The provision
for income  taxes for the years ended  December  31, 2008 and 2007  consisted of
state income tax provisions. Deferred tax assets are as follows:
<TABLE>
<CAPTION>
                                                                    12/31/2008       12/31/2007
                                                              ----------------------------------
Deferred Tax Asset:
<S>                                                           <C>                <C>
Net operating loss carry forwards                             $     87,956,000   $    78,223,000
                                                              ================   ===============
Total deferred tax assets                                           32,300,000        28,700,000
Less: Valuation allowance                                          (32,300,000)      (28,700,000)
                                                              ----------------   ---------------
Net deferred tax asset                                        $             --   $            --
                                                              ================   ===============
</TABLE>
7      STOCK OPTIONS
<TABLE>
Summarized information about the Company's stock options outstanding at December
31, 2008 is as follows:
<CAPTION>
  Weighted Average                                           Number of Shares     Exercise Price
                                                            ------------------------------------
<S>                                                         <C>                  <C>
Outstanding at January 31, 2007                             $      3,318,748     $         0.05
  Granted at fair value                                                  --                  --
  Forfeited                                                              --                  --
  Exercised                                                              --                  --
                                                              --------------     --------------
Outstanding at December 31, 2007                                         --                  --
  Granted at fair value                                                  --                  --
  Forfeited                                                              --                  --
  Exercised                                                              --                  --
                                                              --------------     --------------
Outstanding at December 31, 2008                            $     3,318,748      $         0.05
                                                            ===============      ==============
</TABLE>
All of the above noted options were exercisable as of December 31, 2008.

                                       23
<PAGE>
STOCK BASED COMPENSATION

The  Company  accounts  for stock and stock  options  issued  for  services  and
compensation by employees under the fair value method.  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  determined  the fair  market  value of the
options issued under the  Black-Scholes  Pricing Model.  The Company adopted the
provisions  of  Statement  of  Financial   Accounting   Standards   SFAS  123(R)
SHARE-BASED  PAYMENT,   which  establishes  accounting  for  equity  instruments
exchanged  for  employee   services.   Under  the  provisions  of  SFAS  123(R),
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). The
Company used the following  assumptions in its  calculation:  Dividend yield $0;
Expected volatility 99.86%; Risk-free interest rate 4.94%; Expected life 1 year.
The  Company  recorded  expenses  of  $34,884 in 2007  related to the  3,212,354
options that were issued. No options were issued in 2008.

COMMON STOCK

During the nine months ended  September 30, 2008,  the Company issued a total of
10,000,000  shares of Common Stock,  $0.001 par value, for services  provided to
the Company.  The Company's  directors,  David Winsness and Kurt Gordon received
3,000,000 and 2,000,000 of these shares, respectively.

The shares were issued at $0.02,  the market price as of the date of issuance on
April 23,  2008 for a total  value of  $200,000.  During the nine  months  ended
September 30, 2008,  Viridis  Capital LLC converted  168,373  shares of Series C
Preferred  Stock into a total of 95,000,000  shares of Common Stock,  $0.001 par
value.

8        RELATED PARTY TRANSACTIONS

REDUCTION OF DEBT PAYABLE TO RELATED PARTIES

Effective March 31, 2008, the Company waived  $2,000,000 of note receivable from
GreenShift,  which  note was  issued in  connection  with the  November  9, 2007
transfer of GS AgriFuels  Corporation  and EcoSystem  Corporation  to GreenShift
Corporation.  This  reduction  was in part  attributable  to the  fact  that the
appraised value of GS AgriFuels,  which appraisal was completed during the first
quarter  of 2008,  was  assessed  to be less than the total  debt  payable by GS
AgriFuels,   and  the  fact  that  GreenShift  realized  impairment  charges  of
$11,153,816  relating to the impairment of GS AgriFuels' NextGen Fuel, Inc., and
Sustainable Systems, Inc. subsidiaries.

9        DISCONTINUED OPERATIONS

During the fourth  quarter  2007,  the Company  divested 100% of its interest in
EcoSystem Corporation,  GS AgriFuels Corporation,  GS EnviroServices,  Inc., and
GreenShift Corporation.  In exchange GreenShift issued to Carbonics a promissory
note in the aggregate amount of $2,948,831 (the "Carbonics Note"). The principal
and interest on the Carbonics  Note,  which accrues at the per annum rate of 8%,
are due and payable in full on December 31, 2008.  On July 1, 2007,  the Company
sold its interest in Seaway Valley  Corporation  in return for the assumption of
certain legacy liabilities of GS Carbon.

As a  result  of the  above  transactions,  the  Company  realized  a loss  from
discontinued  operations  of $0 and  $32,171,517  for the  twelve  months  ended
December 31, 2008 and 2007, respectively.  Additionally,  the Company realized a
gain on the disposal of GS Carbon in the amount of $3,429,664. The net effect of
the  divesture  of  EcoSystem   Corporation,   GS  AgriFuels   Corporation,   GS
EnviroServices,  Inc. and GreenShift  Corporation was recorded in  stockholders'
equity  as this was a  transfer  between  entities  under  common  control.  The
components of  discontinued  operations for the twelve months ended December 31,
2008 and 2007 are as follows:

                                       24
<PAGE>
<TABLE>
<CAPTION>
                                                               2008          2007
                                                     --------------  -------------
<S>                                                  <C>             <C>
Revenues .........................................   $        --     $ 29,985,351
Cost of revenues .................................            --       24,062,095
                                                     -------------   ------------
   Gross profit ..................................            --        5,923,256

Selling, general and administrative expense ......            --       15,324,513

Loss from operations .............................            --       (9,401,257)

Interest expense .................................            --       (5,233,177)
Other income and expenses, net ...................            --      (19,958,944)
                                                     -------------   ------------
   Total other income and expense ................            --      (25,192,121)

Income before provision for income taxes .........            --      (34,593,378)

Total provision for tax ..........................            --          (46,605)
                                                     -------------   ------------

Net income (loss) from continuing operations .....            --             --
                                                     -------------   ------------

Income (loss) from discontinued operations .......            --          (13,225)
Gain (loss) on disposal of discontinued operations            --        2,481,691
                                                     -------------   ------------
Gain on disposal of discontinued operations ......            --        2,468,466
                                                     -------------   ------------
Net loss .........................................   $        --     $(32,171,517)
                                                     =============   ============
</TABLE>

The results presented above for 2008 and 2007 include the operating activity for
the   discontinued   operations  for  the  twelve  month  periods  of  EcoSystem
Corporation,  GS AgriFuels Corporation,  GS EnviroServices,  Inc. and GreenShift
Corporation.  The operating  activity of GS Carbon is included in the year ended
December 31, 2007.

10       WARRANTS

The Company's February 7, 2006 financing with YA Global Investment, LP provides
that Carbonics will issue to YA Global five year Warrants to purchase 2,250,000
common shares. The warrants will permit YA Global to purchase 750,000 shares at
$3.00 per share, 750,000 shares at $4.00 per share, and 750,000 shares at $5.00
per share. On June 30, 2006, Carbonics issued 2,250,000 warrants to YA Global.
<TABLE>
Summarized information about GreenShift's stock warrants outstanding at December
31, 2008 is as follows:
<CAPTION>
                                                                Number of         Weighted Average
                                                                   Shares           Exercise Price
                                                          -----------------------------------------
<S>                                                         <C>                     <C>
Outstanding at December 31, 20056                              2,500,000            $          4.00
   Granted at fair value                                         250,000                       1.00
   Forfeited                                                          --                         --
   Exercised                                                          --                         --
                                                            --------------          ---------------
Outstanding at December 31, 2007                                2,750,000           $          4.00
   Granted at fair value                                              --                         --
   Forfeited                                                          --                         --
   Exercised                                                          --                         --
                                                            -------------           ---------------
Outstanding at December 31, 2008                            $   2,750,000           $          3.45
                                                            =============           ===============

All of the above noted warrants were exercisable as of December 31, 2008.
</TABLE>
11        STOCKHOLDERS EQUITY

COMPLETION OF NAME CHANGE AND REVERSE STOCK SPLIT

Effective  February  11,  2008,  the Company  changed  its name from  GreenShift
Corporation to Carbonics Capital Corporation (f/k/a GreenShift  Corporation) and
completed a 1 for 20 reverse stock split. All stock prices,  share amounts,  per
share  information,  stock options and stock warrants in this Report reflect the
reverse split.

RESTRUCTURING

On November 9, 2007, the Company  completed a series of transactions,  including
the transfer to  GreenShift  Corporation  of  Carbonics'  stakes in GS AgriFuels
Corporation and EcoSystem Corporation. GreenShift assumed all of Carbonics'

                                       25
<PAGE>

intercompany,  affiliate  related party notes payable and receivable,  all trade
payables,  and all  receivables,  but did not assume Carbonics debt to YA Global
Investments,  LP. In exchange,  GreenShift issued to Carbonics a promissory note
in the aggregate net amount of $2,948,831  (the "Carbonics  Note").  On December
12, 2007,  Carbonics  distributed  1,000,000 shares of GS  EnviroServices,  Inc.
common stock, 2,000,000 shares of EcoSystem Corporation common stock, and all of
what was then  Carbonics' 80% stake in GreenShift on a pro-rated basis to all of
Carbonics'  shareholders.  To accomplish the distribution,  Carbonics  converted
200,000 shares of GreenShift  Series D Preferred Stock into 20,800,000 shares of
GreenShift  common stock,  which it distributed to the minority  shareholders of
GreenShift,  and  distributed  800,000  shares of GreenShift  Series D Preferred
Stock to Viridis Capital, LLC, Carbonics' majority shareholder.  Kevin Kreisler,
the sole member of Viridis Capital,  is the Chairman and Chief Executive Officer
of the Company.

FORGIVENESS OF RELATED PARTY DEBT

During the year ended December 31, 2008,  the company  waived  $2,000,000 of the
debenture  receivable from  GreenShift  Corporation.  Additionally,  the company
waived interest receivable from GreenShift in the amount of $196,832, as well as
other related company notes receivable of $6,821 in the first quarter of 2008.

COMMON STOCK

During  the  year  ended  December  31,  2008,  the  Company  issued  a total of
10,000,000  shares of Common Stock,  $0.001 par value, for services  provided to
the Company.  The Company's  directors,  David Winsness and Kurt Gordon received
3,000,000 and 2,000,000 of these shares, respectively.

The shares were issued at $0.02,  the market price as of the date of issuance on
April 23, 2008 for a total value of $200,000. During the year ended December 31,
2008,  Viridis Capital LLC converted  168,373 shares of Series C Preferred Stock
into a total of 95,000,000 shares of Common Stock, $0.001 par value.

SERIES C PREFERRED STOCK

On February 15, 2006 Carbonics  filed a Certificate  of  Designation  creating a
class of  1,000,000  shares of Series C  Preferred  Stock.  The  Certificate  of
Designation was corrected by a Certificate of Correction  filed on September 11,
2006. The holder of all 1,000,000 shares of Series C Preferred Stock may convert
it  into  common  shares   representing  80%  of  the  Carbonics  common  shares
outstanding  after  conversion,  but  only if,  at the  time of the  conversion,
Carbonics is not registered with the SEC as a Business  Development Company. The
holder  of the  Series C  Preferred  Stock  may cast  the  number  of votes at a
shareholders  meeting or by  written  consent  that  equals the number of common
shares into which the Preferred  Stock is convertible on the record date for the
shareholder  action.  In the  event  that the  Board  of  Directors  declares  a
dividend,  the holder of each share of Series C Preferred  Stock will  receive a
dividend  equal to the dividend  that would be payable if the Series C Preferred
Stock  were  converted  into  common  stock.  In the event of a  liquidation  of
Carbonics,  the holder of a share of Series C Preferred Stock will receive $.001
and have no further participation in the liquidation.

CONVERSIONS

During the year ended December 31, 2008,  Viridis Capital LLC converted  168,373
shares of Series C Preferred  Stock into a total of 95,000,000  shares of Common
Stock, $0.001 par value.

During the year ended  December  31,  2008,  holders of the certain  convertible
securities  converted  amounts  totaling $63,100 into 9,730,140 shares of common
stock.




                                       26

<PAGE>
ITEM 9   CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
                  AND FINANCIAL DISCLOSURE

None.

ITEM 9A  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.  The
Company's chief executive officer and chief financial  officer  determined that,
as of the  end of  the  period  covered  by  this  report,  these  controls  and
procedures  are adequate and  effective in alerting  them in a timely  manner to
material  information  relating  to the  Company  required to be included in the
Company's periodic SEC filings.

There was no change in internal controls over financial reporting (as defined in
Rule 13a-15(f) promulgated under the Securities Exchange Act of 1934) identified
in connection  with the  evaluation  described in the preceding  paragraph  that
occurred during the Company's fourth fiscal quarter that has materially affected
or is reasonably likely to materially affect the Company's internal control over
financial reporting.

Management's Report on Internal Control Over Financial Reporting

Management is responsible for  establishing  and maintaining  adequate  internal
control over financial reporting,  as defined in rules 13a-15(f) and 15(f) under
the  Exchange  Act.  Internal  control  over  financial  reporting  is a process
designed to provide reasonable  assurance regarding the reliability of financial
reporting and the  preparation of financial  statements in accordance  with U.S.
GAAP.  Because of its inherent  limitations,  internal  control  over  financial
reporting  may not  prevent or detect  misstatements.  Also,  projection  of any
evaluation  of  effectiveness  to future  periods  is  subject  to the risk that
controls  may become  inadequate  because of change in  conditions,  or that the
degree of compliance with the policies or procedures may deteriorate.

Management has conducted,  with the participation of the Chief Executive Officer
and the  Chief  Financial  Officer,  an  assessment,  including  testing  of the
effectiveness of our internal control over financial  reporting.  The assessment
was  conducted  using the  criteria  in Internal  Control--Integrated  Framework
issued by the committee of Sponsoring  Organizations of the Treadway  Commission
("COSO").

A material weakness is a deficiency, or combination of deficiencies, in internal
control over financial  reporting,  such that there is a reasonable  possibility
that a  material  misstatement  of the  company's  annual or  interim  financial
statements  will not be prevented or detected on a timely  basis.  In connection
with  management's  assessment of the company's  internal control over financial
reporting,   management  identified  the  following  material  weakness  in  the
company's  internal  control over  financial  reporting as of December 31, 2008.
Management  determined  that at December  31,  2008,  the company had a material
weakness related to its control environment because it did not have a sufficient
number  of  personnel  with an  appropriate  level of U.S.  GAAP  knowledge  and
experience commensurate with its financial reporting requirements.

Because of the material weakness described above, management has concluded that
the company did not maintain effective internal control over financial reporting
as of December 31, 2008, based on the Internal Control--Integrated Framework
issued by COSO.

This  annual  report  does not include an  attestation  report of the  Company's
registered  public  accounting  firm regarding  internal  control over financial
reporting.  Management's  report was not subject to attestation by the Company's
registered  public accounting firm pursuant to temporary rules of the Securities
and Exchange  Commission  that permit the Company to provide  only  management's
report in this annual report.

ITEM 9B  OTHER INFORMATION

None.


                                       27
<PAGE>

                                    PART III

ITEM 10    DIRECTORS AND EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Name                        Age  Position
---------------------------------------------------------------------
Kevin Kreisler              36   Chairman, Chief Executive Officer
Jacqueline Flynn            43   Chief Financial Officer


Kevin  Kreisler  is the  chairman  and  acting  chief  executive  officer of the
Company.  Mr. Kreisler is the founder,  chairman and chief executive  officer of
GreenShift Corporation.  Mr. Kreisler served as GreenShift's vice president from
1998 to 2000,  president from 2000 to 2002, chief executive officer from 2002 to
2005 and has  served as  GreenShift's  chairman  from 2005 to the  present.  Mr.
Kreisler is a graduate of Rutgers University College of Engineering (B.S., Civil
and Environmental  Engineering,  1994),  Rutgers  University  Graduate School of
Management  (M.B.A.,  1995), and Rutgers University School of Law (J.D.,  1997).
Mr.  Kreisler is admitted  to practice  law in New Jersey and the United  States
District Court for the District of New Jersey.

Jacqueline  Flynn has twenty years  experience in financial  accounting for both
public  and  private  companies.  Ms.  Flynn  has been  employed  since  2006 as
Controller of GreenShift  Corporation,  an affiliate of Carbonics Capital.  From
2002 to 2005,  Ms.  Flynn was  employed  as Chief  Financial  Officer  by Accent
Mortgage  Company of Alpharetta,  Georgia.  During the three years prior to 2002
Ms. Flynn was  employed by Lahaina  Acquisitions,  Inc.,  a public  company that
owned Accent  Mortgage  Company during that period.  She was employed by Lahaina
Acquisitions first as Controller and then as Chief Financial Officer.  Ms. Flynn
was awarded an M.B.A. in 1994 by Brenau University.

NOMINATING, COMPENSATION AND AUDIT COMMITTEE

The Board of  Directors  does not have an audit  committee  or a  nominating  or
compensation  committee  due to the fact  that  there is only one  member of the
Board of Directors.

CODE OF ETHICS

The Company does not have a written code of ethics  applicable  to its executive
officers.  The Board of  Directors  has not  adopted  a  written  code of ethics
because there are only two members of management.

SHAREHOLDER COMMUNICATIONS

The Board of  Directors  will not adopt a  procedure  for  shareholders  to send
communications  to the Board of  Directors  until it has  reviewed the merits of
several alternative procedures.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

None of the  officers,  directors or  beneficial  owners of more than 10% of the
Company's  common stock failed to file on a timely basis the reports required by
Section 16(a) of the Exchange Act during the year ended December 31, 2008.


                                       28
<PAGE>

ITEM 11   EXECUTIVE COMPENSATION

The following table sets forth  compensation  information for Carbonics  Capital
Corporation's  executive officers during the years indicated as relevant.  As of
December 31,  2008,  no executive  officer  held options for  Carbonics  Capital
Corporation's Common Stock.
<TABLE>
<CAPTION>
Name and Principal Position                 Annual Compensation              Long-term Compensation        All Other
                                                                                                        Compensation
---------------------------------------------------------------------------------------------------------------------
                                      Year    Salary      Bonus       Other            Shares Granted
---------------------------------------------------------------------------------------------------------------------
<S>                                   <C>   <C>        <C>             <C>                 <C>            <C>
Kevin Kreisler                        2008  $      --  $      --         --                     --        $        --
Chairman and Chief Executive Officer  2007         --         --         --                     --                 --
                                      2006         --     10,914         --                 56,812                 --
</TABLE>

EMPLOYMENT AGREEMENTS

Carbonics Capital's relationships with its officers are on an at-will basis.

ITEM 12   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The  following  table  sets  forth   information   regarding  the  voting  stock
beneficially owned by any person who, to our knowledge,  owned beneficially more
than 5% of any class of voting  stock as well as by the  members of our Board of
Directors and by all officers and directors as a group.
<TABLE>
                                          Amount and Nature of Beneficial Ownership
<CAPTION>
Name and Address(1)                                 Series B                  Series C               Percentage of
Of Beneficial Owner       Common    % of Class     Preferred   % of Class    Preferred   % of Class   Voting Power
                      ----------   -----------  ------------  -----------  -----------  -----------  -------------
<S>                       <C>          <C>         <C>          <C>            <C>             <C>          <C>
Kevin Kreisler(2)             --            --            --           --      973,054         100%         77.84%
<FN>

(1)  The address of each  shareholder  is c/o GreenShift  Corporation,  One Penn
     Plaza, Suite 1612, New York, NY 10119.

(2)  All shares listed for Mr. Kreisler are owned of record by Viridis  Capital,
     LLC, of which Mr. Kreisler is the sole member.
</FN>
</TABLE>
ITEM 13   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
          AND DIRECTOR INDEPENDENCE

RELATED PARTY TRANSACTIONS

On November 9, 2007, the Company and GreenShift  Corporation  completed a series
of transactions, including the transfer to GreenShift of Carbonics' stakes in GS
AgriFuels  Corporation  and  EcoSystem  Corporation.  GreenShift  assumed all of
Carbonics'  intercompany,  affiliate related party notes payable and receivable,
all trade payables,  and all receivables,  but did not assume Carbonics' debt to
YA Global  Investments,  LP.  In  exchange  GreenShift  issued  to  Carbonics  a
promissory note in the aggregate  amount of $2,948,831  (the "Carbonics  Note").
The principal and interest on the Carbonics Note, which accrues at the per annum
rate of 8%, are due and payable in full on December 31, 2009. The Carbonics Note
was reduced by $2,000,000 in the first quarter 2008.  This reduction was in part
attributable  to the  fact  that the  appraised  value  of GS  AgriFuels,  which
appraisal  was completed  during the first  quarter of 2008,  was assessed to be
less than the total debt payable by GS AgriFuels,  and the fact that  GreenShift
realized  impairment  charges of  $11,153,816  relating to the  impairment of GS
AgriFuels'  NextGen Fuel,  Inc., and  Sustainable  Systems,  Inc.  subsidiaries.
During the year ended December 31, 2008, the note increased a net of $12,234 due
to expenses paid on behalf of GreenShift  and the note also  increased  $443,674
due to the reclassification of amounts that were owed by various subsidiaries to
Carbonics.  These amounts were reclassed so that the subsidiary  owed Greenshift
rather than  Carbonics  and  GreenShift  in turn owed the amounts to  Carbonics.
Additionally the company waived the interest  receivable from GreenShift as well
as other related party notes in the amount of $196,832.

On November 9, 2007, in connection with the transfer to GreenShift of Carbonics'
stakes in GS AgriFuels and EcoSystem,  GreenShift  assumed  liability for a term
note  issued  by  Carbonics  to  Viridis  Capital,  LLC  with a face  amount  of
$1,339,704  (the  "Viridis  Note"),  which  amount is due upon  demand and bears
interest  at the rate of 8%. As of  December  31,  2007,  the  balance  due from
Carbonics to Viridis was $0.

On December 12, 2007,  Carbonics  distributed  2,000,000  and  1,000,000  common
shares of EcoSystem Corporation and GS EnviroServices,  Inc.,  respectively,  to
all  shareholders of Carbonics  except for Viridis  Capital,  LLC, the Company's
majority  shareholder.  On December 12, 2007, Carbonics  distributed all of what

                                       29
<PAGE>

was then  Carbonics'  80% stake in  GreenShift  on a  pro-rated  basis to all of
Carbonics'  shareholders.  This was  accomplished  by  Carbonics'  conversion of
200,000 shares of GreenShift  Series D Preferred Stock into 20,800,000 shares of
GreenShift common stock, which were distributed to the minority  shareholders of
Carbonics,  and the  distribution  by Carbonics of 800,000  shares of GreenShift
Series D  Preferred  Stock to  Viridis  Capital,  LLC,  the  Company's  majority
shareholder. Kevin Kreisler, the sole member of Viridis Capital, is the Chairman
and Chief Executive Officer of the Company.

On January 25,  2008,  a financing  was  completed  that  resulted in  Carbonics
becoming  the  guarantor of the debts of several of its former  affiliates.  The
beneficiary  of the  guarantees was YA Global  Investments,  LP ("YAGI"),  which
committed to extend credit to those  affiliates.  As of September 30, 2008,  the
outstanding principal and accrued interest of the debt was $43,040,070.

DIRECTOR INDEPENDENCE

None of the members of our Board of Directors is independent,  as  "independent"
is defined in the rules of the NASDAQ Stock Market.





















                                       30
<PAGE>
                                     PART IV


ITEM 14  PRINCIPAL ACCOUNTANT FEES AND SERVICES

INDEPENDENT AUDITOR FEES

Audit Fees

Rosenberg  Rich Baker  Berman & Company,  P.A.  billed  $8,250 for  professional
services  rendered for the audit of our 2008 financial  statements and review of
the financial  statements included in our 2008 10-K filings.  For the year ended
2007, $35,875 was billed for services rendered.

Audit-Related Fees

Rosenberg Rich Baker Berman & Company,  P.A. billed $ to the Company in 2008 and
$34,620 in 2007 for services that are reasonably  related to the  performance of
the audit or review of the yearly financial statements.

Tax Fees

Rosenberg Rich Baker Berman & Company,  P.A. billed $ in 2008 and $10,000 to the
Company in 2007 for  professional  services  rendered  for tax  compliance,  tax
advice and tax planning.

All Other Fees

Rosenberg Rich Baker Berman & Company,  P.A. billed $ to the Company in 2008 and
$10,000 to the Company in 2007 for services not described above.

It is the policy of the  Company's  Board of Directors  that all services  other
than  audit,  review or attest  services  must be  pre-approved  by the Board of
Directors.  All of the  services  described  above  were  approved  by the Audit
Committee.



ITEM 15  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

Index to Exhibits

Exhibit Number             Description

3-a  Certificate of Incorporation, as amended through January 2000 - filed as an
     exhibit to the Registration Statement on Form 10-SB and incorporated herein
     by reference.

3-a(1) Certificate of Amendment of Certificate of Incorporation dated January 8,
     2003 - filed as an exhibit  to the Annual  Report on Form 10-K for the year
     ended December 31, 2003 and incorporated herein by reference.

3-a(2) Certificate of Amendment of Certificate of  Incorporation  dated December
     2004 - filed as an exhibit to the Current Report on Form 8-K dated December
     27, 2004 and incorporated herein by reference.

3-a(3) Certificate of Amendment of Certificate  of  Incorporation  - filed as an
     exhibit  to the  Current  Report  on Form 8-K  filed on May 19,  2005,  and
     incorporated herein by reference.

3-a(4) Certificate of Amendment of Certificate  of  Incorporation  - filed as an
     exhibit to the Current  Report on Form 8-K filed on February 13, 2008,  and
     incorporated herein by reference.

3-a(5) Certificate of Designation,  Preferences and Rights of Series C Preferred
     Stock of Carbonics Capital Corporation - filed as an exhibit to the Current
     Report on Form 8-K  dated  February  15,  2006 and  incorporated  herein by
     reference.

3-a(6) Certificate of Correction of Certificate of Designation,  Preferences and
     Rights of Series C Preferred Stock of Carbonics Capital Corporation - filed
     as an exhibit to the Current  Report on Form 8-K/A  (Amendment No. 1) dated
     February 15, 2006 and incorporated herein by reference.

3-b  Bylaws - filed as an exhibit to the  Registration  Statement  on Form 10-SB
     and incorporated herein by reference.

                                       31
<PAGE>

10-a Guaranty  Agreement  dated  October 25, 2006 among  Stillwater  Asset-Based
     Fund,  LP and  Carbonics  Capital  Corporation,  GS AgriFuels  Corporation,
     EcoSystem  Corporation and GreenShift  Corporation - filed as an exhibit to
     the Current  Report on Form 8-K dated  October  31,  2006 and  incorporated
     herein by reference.

10-b Security  Agreement dated October 25, 2006 between  Stillwater  Asset-Based
     Fund,  LP and  Carbonics  Capital  Corporation - filed as an exhibit to the
     Current Report on Form 8-K dated October 31, 2006 and  incorporated  herein
     by reference.

10-c Security  Agreement dated October 25, 2006 among GS AgriFuels  Corporation,
     Carbonics  Capital  Corporation,   EcoSystem   Corporation  and  GreenShift
     Corporation  and YA Global  Investments,  LP - filed as an  exhibit  to the
     Current Report on Form 8-K dated October 31, 2006 and  incorporated  herein
     by reference.

10-d Form of Secured  Convertible  Debenture  due February 8, 2009 - filed as an
     exhibit to the Company's  Current Report on Form 8-K dated February 2, 2006
     and incorporated herein by reference.

10-e Second  Amended and  Restated  Security  Agreement  dated  February 2, 2006
     between Carbonics Capital Corporation and YA Global Investments, LP - filed
     as an exhibit to the Company's Current Report on Form 8-K dated February 2,
     2006 and incorporated herein by reference.

10-f Credit  Agreement  dated January 11, 2008 between GS COES (Yorkville I) LLC
     and YA Global  Investments,  LP - filed as an exhibit to the Current Report
     on Form  8-K  filed  on  January  31,  2008,  and  incorporated  herein  by
     reference.

10-g Amended and  Restated  Forbearance  Agreement  dated as of January 11, 2008
     among  Carbonics  Capital  Corporation,   GreenShift  Corporation,  Viridis
     Capital,  LLC and YA Global  Investments,  LP - filed as an  exhibit to the
     Current  Report on Form 8-K filed on January  31,  2008,  and  incorporated
     herein by reference.

10-h Global Guaranty Agreement dated January 11, 2008 among Viridis Capital LLC,
     Kevin Kreisler,  Carbonics Capital Corporation,  GreenShift Corporation, GS
     AgriFuels   Corporation,   each  of  their  subsidiaries,   and  YA  Global
     Investments,  LP - filed as an  exhibit to the  Current  Report on Form 8-K
     filed on January 31, 2008, and incorporated herein by reference.

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.










                                       32
<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

By:             /S/      KEVIN KREISLER
                -----------------------
                         KEVIN KREISLER
                         Chairman and Chief Executive Officer

Date:                    April 15, 2009

In accordance  with the Exchange Act, this Report has been signed below on March
31,  2008 by the  following  persons,  on  behalf of the  Registrant  and in the
capacities and on the dates indicated.


                /S/      KEVIN KREISLER
                -----------------------
                         KEVIN KREISLER
                         Director, Chief Executive Officer
Date:                    April 15, 2008

                /S/      JACQUELINE FLYNN
                -------------------------
                         JACQUELINE FLYNN
                         Chief Financial Officer
Date:                    April 15, 2009















                                       33