[X] QUARTERLY
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR
THE
QUARTERLY PERIOD ENDED SEPTEMEBR 30, 2007
[_] TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT FOR
THE
TRANSITION PERIOD FROM __________ TO __________ COMMISSION
FILE NUMBER 333-144931
Carbon
Sciences, Inc.
(Exact
name of small business issuer as specified in its charter)
Nevada
20-5451302
(State
or other jurisdiction of incorporation or
organization)
Check
whether the issuer (1) filed all
reports required to be filed by Section 13 or 15(d) of the Exchange Act during
the past 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
[_]
APPLICABLE
ONLY TO CORPORATE ISSUERS
State
the number of shares outstanding
of each of the issuer’s classes of common equity, as of the latest practicable
date: As of November 5, 2007, the issuer had 148,042,000 outstanding shares
of
Common Stock.
Transitional
Small Business Disclosure
Format (check one): Yes [_] No [X]
TABLE
OF CONTENTS
Page
PART
I – FINANCIAL INFORMATION
Item
1. Financial
Statements
3
Balance
Sheet
3
Statements
of Operations
4
Statements
of Cash Flows
5
Notes
to Condensed Financial Statements
7
Item
2. Management’s Discussion and
Analysis or Plan of Operation
9
Item
3. Controls and
Procedures
12
PART
II – OTHER INFORMATION
Item
1. Legal
Proceedings
13
Item
2. Unregistered Sales of Equity
Securities and Use of Proceeds
13
Item
3. Defaults Upon Senior
Securities
13
Item
4. Submission of Matters to a
Vote of Security Holders
13
Item
5. Other
Information
13
Item
6. Exhibits and Reports on Form
8-K
13
SIGNATURES
15
2
PART
I – FINANCIAL INFORMATION
Item
1.
Financial
Statements.
CARBON
SCIENCES, INC.
(formerly
ZINGERANG, INC.) (A Developmental Stage Company)
The
Company was incorporated in the State of Nevada on August 25, 2006, as
Zingerang, Inc. On April 2, 2007the Company changed its name to
Carbon Sciences, Inc.
Overview
of Business
The
Company was initially in the business of offering a real-time and interactive
mobile communication services to businesses and consumers under the Zingerang
trade name. As of April, 2007 the Company has entered into an
agreement to sell substantially all the assets of this business. The
Company has been pursuing a new line of business. The company is
developing a technology to convert earth destroying carbon dioxide (CO2)
into a
useful form that will not contribute to greenhouse gases. This
technology is based on a patent filed by the company and developed under
the
brand name, GreenCarbon™ Technology. By eliminating harmful CO2 from human
created sources, such as power plants and industrial factories, the technology
will provide a partial solution to the problem of global
warming. GreenCarbon™ Technology is initially targeted at electrical
power plants. CO2 makes up nearly 80% of all greenhouse gases.
More than a quarter of that CO2 comes from electrical power
plants.
Basis
of Presentation
The
accompanying unaudited condensed financial statements have been prepared
in
accordance with accounting principles generally accepted in the United States
of
America for interim financial information and with the instructions to Form
10-QSB and Rule 10-01 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all normal recurring adjustments considered necessary for a fair
presentation have been included. Operating results for the nine month
period ended September 30, 2007 are not necessarily indicative of the results
that may be expected for the year ending December 31, 2007. For
further information refer to the financial statements and footnotes thereto
included in the Company's Form 10K-SB for the year ended December 31,2006.
2.
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
This
summary of significant accounting policies of Carbon Sciences, Inc. is presented
to assist in understanding the Company’s financial statements. The financial
statements and notes are representations of the Company’s management, which is
responsible for their integrity and objectivity. These accounting policies
conform to accounting principles generally accepted in the United States
of
America and have been consistently applied in the preparation of the financial
statements.
Going
Concern
The
accompanying financial statements have been prepared on a going concern basis
of
accounting, which contemplates continuity of operations, realization of assets
and liabilities and commitments in the normal course of business. The
accompanying financial statements do not reflect any adjustments that might
result if the Company is unable to continue as a going concern. The
Company has not generated any revenue as of September 30, 2007, and has negative
cash flows from operations, which raise substantial doubt about the Company’s
ability to continue as a going concern. The ability of the Company to
continue as a going concern and appropriateness of using the going concern
basis
is dependent upon, among other things, additional cash infusion. As
discussed in Note 3, the Company has obtained funds from its shareholders
since
it’s’ inception through September 30, 2007. Management believes this funding
will continue, and is also actively seeking new investors. Management
believes the existing shareholders and the prospective new investors will
provide the additional cash needed to meet the Company’s obligations as they
become due, and will allow the development of its core of business.
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Development
Stage Activities and Operations
The
Company is in its initial stages of formation and has no revenues as of
September 30, 2007. FASB #7 defines a development stage activity as one in
which
all efforts are devoted substantially to establishing a new business and
even if
planned principal operations have commenced, revenues are
insignificant.
Revenue
Recognition
The
Company will recognize revenue when services are performed, and at the time
of
shipment of products, provided that evidence of an arrangement exists, title
and
risk of loss have passed to the customer, fees are fixed or determinable,
and
collection of the related receivable is reasonably assured. To date, the
Company
has had no revenues and is in the development stage.
Cash
and Cash Equivalent
The
Company considers all highly liquid
investments with an original maturity of three months or less to be cash
equivalents.
Investments
Certificate
of Deposits with banking institutions are short-term investments with initial
maturities of more than 90 days. The carrying amount of these investments
is a
reasonable estimate of fair value due to their short-term nature.
Loss
per Share
Calculations
The
Company adopted Statement of Financial Standards (“SFAS”) No. 128 for the
calculation of “Loss per Share”. SFAS No. 128 dictates the
calculation of basic earnings per share and diluted earnings per share. Basic
earnings per share is computed by dividing income available to common
shareholders by the weighted-average number of common shares available. Diluted
earnings per share is computed similar to basic earnings per share except
that
the denominator is increased to include the number of additional common shares
that would have been outstanding if the potential common shares had been
issued
and if the additional common shares were dilutive. The Company’s diluted loss
per share is the same as the basic loss per share for the nine months ended
September 30, 2007 as the inclusion of any potential shares would have had
an
anti-dilutive effect due to the Company generating a loss.
3.
CAPITAL
STOCK
At
September 30, 2007, the Company’s authorized stock consists of 500,000,000
shares of common stock, par value $0.001 per share. During the nine months
ended
September 30, 2007, the Company issued through private placements 17,625,000
shares of common stock for $1,762,500 cash; the private placements, were
made in
reliance upon an exemption from registration under Rule 506 of Regulation
D
promulgated under Section 4(2) of the Securities Act of 1933. Also, the Company
issued 1,472,000 shares of common stock at a price of $0.10 per share
and 500,000 shares of common stock at a price of $0.15 per share for
services;
8
Item
2.
Management’s
Discussion and Analysis or Plan of
Operation.
Certain
statements contained herein constitute forward-looking statements. In some
cases, you can identify forward-looking statements by terminology such as "may,""will,""should,""expect,""plan,""anticipate,""believe,""estimate,""predict,""potential" or "continue," the negative of such terms, or other
comparable terminology. All statements other than statements of historical
fact
made in this report are forward looking. In particular, the statements herein
regarding industry prospects and future results of operations or financial
position are forward-looking statements. Because such statements include risks
and uncertainties, actual results may differ materially from those expressed
or
implied by such forward-looking statements as a result of certain factors,
including, but not limited to, risks associated with the integration of
businesses following an acquisition, competitors with broader product lines
and
greater resources, emergence into new markets, the termination of any of our
significant contracts, our inability to maintain working capital requirements
to
fund future operations, or our inability to attract and retain highly qualified
management, technical and sales personnel.
We
are
developing a technology to convert the greenhouse gas, carbon dioxide (CO2),
into a useful form that will not contribute to global warming. We call this
technology GreenCarbon™ Technology. By eliminating harmful CO2 from human
created sources, such as power plants and industrial factories, management
believes that our technology will provide a partial solution to the problem
of
global warming.
GreenCarbon™
Technology is initially targeted at coal-fired electrical power plants and
fuel
production plants.
We
were
incorporated in the State of Nevada on August 25, 2006, as Zingerang, Inc.
Our
name was changed to Carbon Sciences, Inc. on April 9, 2007. Our principal
executive offices are located at 50 Castilian Dr. Suite C, Santa Barbara,
California93117, and our telephone number is (805) 690-9090. Our fiscal year
end is December 31
Our
discussion and analysis of our financial condition and results of operations
are
based upon our financial statements, which have been prepared in accordance
with
accounting principles generally accepted in the United States of America. The
preparation of these financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues
and
expenses, and related disclosures of contingent assets and liabilities. On
an
ongoing basis, we evaluate our estimates, including those related to impairment
of property, plant and equipment, intangible assets, deferred tax assets and
fair value computation using the Black Scholes option pricing model. We base
our
estimates on historical experience and on various other assumptions, such as
the
trading value of our common stock and estimated future undiscounted cash flows,
that we believe to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying value of assets and
liabilities that are not readily apparent from other sources. Actual results
may
differ from these estimates under different assumptions or conditions; however,
we believe that our estimates, including those for the above-described items,
are reasonable.
Revenue
Recognition
Revenue on product sales is
recognized when persuasive evidence of an
arrangement exists, such as when a purchase order or contract is
received from the customer, the selling price is fixed, title to the goods
has changed and there is a reasonable assurance of collection of the
sales proceeds. We obtain written purchase authorizations from
our customers for a specified amount of product at a specified price
and consider delivery to have occurred at the time
of shipment. Revenue is recognized at shipment and we
record a reserve for estimated sales returns, which
is reflected as a reduction of revenue at the time of revenue recognition.
We defer revenue on products sold directly to the consumer with a fifteen day
right of return. Revenue is recognized upon the expiration of the right of
return.
Revenues
from research and development activities relating to firm fixed-price
contracts are generally recognized on the percentage-of-completion
method of accounting as costs are incurred (cost-to-cost basis).
Revenues from research and development activities relating to
cost-plus-fee contracts include costs incurred plus a portion of
estimated fees or profits based on the relationship of costs incurred to
total estimated costs. Contract costs include all direct
material and labor costs and an allocation of allowable
indirect costs as defined by each contract, as periodically adjusted to
reflect revised agreed upon rates. These rates are subject to audit by the
other party.
9
Use
of Estimates
In
accordance with accounting principles generally accepted in the United States,
management utilizes estimates and assumptions that affect the reported amounts
of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements as well as the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates. These estimates and assumptions relate to
recording net revenue, collectibility of accounts receivable, useful lives
and
impairment of tangible and intangible assets, accruals, income taxes, inventory
realization, stock-based compensation expense and other factors. Management
believes it has exercised reasonable judgment in deriving these estimates.
Consequently, a change in conditions could affect these estimates.
Fair
Value of Financial Instruments
The
Company's cash, cash equivalents, investments, accounts receivable and accounts
payable are stated at cost which approximates fair value due to the short-term
nature of these instruments.
Recently
Issued Accounting Pronouncements
In
December 2004, the Financial Accounting Standards Board issued two FASB Staff
Positions - FSP FAS 109-1, Application of FASB Statement 109 "Accounting for
Income Taxes" to the Tax Deduction on Qualified Production Activities Provided
by the American Jobs Creation Act of 2004, and FSP FAS 109-2 Accounting and
Disclosure Guidance for the Foreign Earnings Repatriation Provision within
the
American Jobs Creation Act of 2004. Neither of these affected the Company as
it
does not participate in the related activities.
In
May
2005, the FASB issued FASB Statement No. 154, “Accounting Changes and Error
Corrections.” This new standard replaces APB Opinion No. 20, “Accounting
Changes, and FASB Statement No. 3, Reporting Accounting Changes in Interim
Financial Statements,” and represents another step in the FASB’s goal to
converge its standards with those issued by the IASB. Among other changes,
Statement 154 requires that a voluntary change in accounting principle be
applied retrospectively with all prior period financial statements presented
on
the new accounting principle, unless it is impracticable to do so. Statement
154
also provides that (1) a change in method of depreciating or amortizing a
long-lived non-financial asset be accounted for as a change in estimate
(prospectively) that was effected by a change in accounting principle, and
(2)
correction of errors in previously issued financial statements should be termed
a “restatement.” The new standard is effective for accounting changes and
correction of errors made in fiscal years beginning after December 15, 2005.
Early adoption of this standard is permitted for accounting changes and
correction of errors made in fiscal years beginning after June 1, 2005. The
Company has evaluated the impact of the adoption of Statement 154 and does
not
believe the impact will be significant to the Company's overall results of
operations or financial position
10
Results
of Operations for the Three and Nine Months Ended September 30,2007
Selling
and Marketing Expenses
Selling
and Marketing (“S&M”) expenses for the three and nine months ended September30, 2007 were $74,181 and $483,228 respectively, and consist primarily of
salaries and marketing expenses.
General
and Administrative Expenses
General
and administrative (“G&A”) expenses for the three and nine months ended
September 30, 2007 were $27,521 and $155,642 respectively, and consist primarily
of professional fees and rent expenses.
Research
and Development
Research and Development ("R&D") costs for the three and
nine months ended September 30, 2007 were $35,425 and $40,925 respectively,
which was the result of a testing of product alternatives.
Net
Loss
Net
Loss
for the three and nine months ended September 30, 2007 were $126,911 and
$670,781 respectively. Currently the Company is in its development stage and
had
no revenues
Liquidity
and Capital Resources
As
of
September 30, 2007, we had $1,122,435 of working capital as compared to $109,578
from inception (August 25, 2006) through December 31, 2006. This increase of
$1,012,857 was due primarily to private placements of shares of common stock
pursuant to Subscription Agreements, which we entered into with accredited
and/or institutional buyers.
Cash
flow
used in operating activities was $783,040 for nine months ended September 30,2007, as compared to cash used of $446,674 from inception (August 25, 2006)
through December 31, 2006. This increase of $336,366 was primarily attributable
to an increase in professional fees, marketing expenses and
salaries.
Cash
used
in investing activities was $950,800 for the nine months ended September 30,2007, as compared to cash used of $17,559 from inception (August 25, 2006)
through December 31, 2006. The increase of cash used in investing activities
was
primarily due to investing in certificates of deposits, and purchase of a mobile
prototype vehicle .
Cash
provided from financing activities during the nine months ended September 30,2007 was $1,762,500 less issuance cost of $265,200 as compared to
$539,375 from inception (August 25, 2006) through December 31, 2006. From
inception to September 30, 2007, we received a total of $2,301,875 from the
sale
of shares of our common stock through private placements pursuant to
Subscription Agreements, which we entered into with accredited and/or
institutional buyers.
Our
financial statements as of September 30, 2007 have been prepared under the
assumption that we would continue as a going concern from inception (August25,2006) through September 30, 2007. Since the company had 35 days of operations
prior to September 30, 2006, we have prepared the above analysis using our
December 31, 2006 year end numbers as we believe this to be the most
representative of the change in the companies financial position. Our
independent registered public accounting firm has issued their report dated
January 22, 2007 that included an explanatory paragraph expressing substantial
doubt in our ability to continue as a going concern without additional capital
becoming available. Our ability to continue as a going concern ultimately is
dependent on our ability to generate a profit which is dependent upon our
ability to obtain additional equity or debt financing, attain further operating
efficiencies and, ultimately, to achieve profitable operations. The financial
statements do not include any adjustments that might result from the outcome
of
this uncertainty.
11
PLAN
OF OPERATION AND FINANCING NEEDS
We
are
engaged in developing a technology to convert the greenhouse gas, carbon dioxide
(CO2), into a useful form that will not contribute to global warming. We plan
to
develop our products and thereafter focus our efforts on establishing markets
in
the power plants and industrial factories sectors by 2010.
Our
plan
of operation within the next twelve months is to utilize our cash balances
to
continue research and development of our carbon transformation technology and
complete a demonstrable prototype. We believe that our current cash
and investment balances will be sufficient to support development activity
and
general and administrative expenses for the next twelve months. Management
estimates that it will require additional cash resources during 2008, based
upon
its current operating plan and condition. We will be investigating additional
financing alternatives, including equity and/or debt financing. There is no
assurance that capital in any form would be available to us, and if available,
on terms and conditions that are acceptable. If we are unable to obtain
sufficient funds during the next twelve months, we may be forced to reduce
the
size of our organization, which could have a material adverse impact on, or
cause us to curtail and/or cease, the development of our products.
Off-Balance
Sheet Arrangements
We
do not
have any off balance sheet arrangements that are reasonably likely to have
a
current or future effect on our financial condition, revenues, and results
of
operations, liquidity or capital expenditures.
(b)
Changes in Internal Controls.During our last fiscal quarter there were
no changes in our internal control over financial reporting identified in
connection with the evaluation required by paragraph (d) of Rule 13a-15 or
Rule
15d-15 that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.
12
PART
II - OTHER INFORMATION
Item
1.
Legal
Proceedings.
We
are
not a party to any pending legal proceeding, nor is our property the subject
of
a pending legal proceeding, that is not in the ordinary course of business
or
otherwise material to the financial condition of our business. None of our
directors, officers or affiliates is involved in a proceeding adverse to our
business or has a material interest adverse to our business.
Item
2.
Unregistered
Sales of Equity Securities and Use of
Proceeds.
During
the three months ended September 30, 2007 we sold 11,250,000 shares of common
stock for gross proceeds of $1,125,000.
During
the three months ended September 30, 2007, we issued 1,972,000 shares for
services valued at $222,200.
All
of
the above offerings and sales were deemed or determined by Carbon Sciences,
Inc.
to be exempt under rule 506 of Regulation D and Section 4(2) of the Securities
Act of 1933, as amended. No advertising or general solicitation was employed
in
offering the securities. The offerings and sales were made to a limited number
of persons, all of whom were accredited investors, business associates of Carbon
Sciences, Inc. or executive officers of Carbon Sciences, Inc., and transfer
was
restricted by Carbon Sciences, Inc. in accordance with the requirements of
the
Securities Act of 1933. In addition to representations by the above-referenced
persons, we have made independent determinations that all of the
above-referenced persons were accredited or sophisticated investors, and that
they were capable of analyzing the merits and risks of their investment, and
that they understood the speculative nature of their investment.
Item
3.
Defaults
Upon Senior Securities.
None.
Item4.
Submission
of Matters to a Vote of Security
Holders.
There
were no matters submitted to a vote of security holders during the period
covered by this report.
Item
5.
Other
Information.
None.
Item
6.
Exhibits.
13
(a)
Exhibits
Exhibit
No.
Description
3.1
Articles
of Incorporation of Carbon Sciences, Inc. filed with the Nevada
Secretary of State on August 25, 2007. (Incorporated by reference
to the
Company’s Registration Statement on Form SB-2 filed on July 27,2007)
Form
of Subscription Agreement dated as of October 2, 2006(Incorporated
by
reference to the Company’s Registration Statement on Form SB-2 filed on
July 27, 2007)
10.3
Form
of Subscription Agreement dated as of March 1, 2007(Incorporated
by
reference to the Company’s Registration Statement on Form SB-2 filed on
July 27, 2007)
10.4
Form
of Subscription Agreement dated as of April 16, 2007(Incorporated
by
reference to the Company’s Registration Statement on Form SB-2 filed on
July 27, 2007)
31.1
Certification
by Chief Executive Officer and Chief Financial Officer pursuant to
Sarbanes-Oxley Section 302 (filed herewith).
32.1
Certification
by Chief Executive Officer and Acting Chief Financial Officer pursuant
to
18 U.S.C. Section 1350 (filed
herewith).
(b)
The
following is a list of Current Reports on Form 8-K filed by the Company during
and subsequent to the quarter for which this report is filed.
None
14
SIGNATURES
In
accordance with the requirements of
the Exchange Act, the registrant caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
