PINX:CABN Quarterly Report 10-Q Filing - 3/31/2012

Effective Date 3/31/2012

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q
(Mark One)

x QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2012
 
¨ TRANSITION REPORT UNDER SECTION13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
FOR THE TRANSITION PERIOD FROM __________ TO __________
COMMISSION FILE NUMBER: 333-144931

CARBON SCIENCES, INC.
(Name of registrant in its charter)

Nevada
 
20-5451302
(State or other jurisdiction of incorporation or
organization)
 
(I.R.S. Employer Identification No.)
 
5511C Ekwill Street, Santa Barbara, California 93111
(Address of principal executive offices) (Zip Code)

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


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

 Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  x    No  o

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

Large accelerated filer o
 
Accelerated filer o
Non-accelerated filer o
 
Smaller reporting company x
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  o   No  x
 
The number of shares of registrant’s common stock outstanding, as of May 14, 2012 was 10,323,179.


 
1

 

 
 
CARBON SCIENCES, INC. 
INDEX

PART I: FINANCIAL INFORMATION
 
ITEM 1:
 
FINANCIAL STATEMENTS (Unaudited)
 
   
Balance Sheets
3
   
Statements of Operations
4
   
Statement of Stockholder’s Deficit
5
   
Statements of Cash Flows
6
   
Notes to the Financial Statements
7
ITEM 2:
 
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
11
ITEM 3 :
 
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
13
ITEM 4:
 
CONTROLS AND PROCEDURES
13
PART II: OTHER INFORMATION
 
ITEM 1
 
LEGAL PROCEEDINGS
14
ITEM 1A :
 
RISK FACTORS
14
ITEM 2
 
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
14
ITEM 3
 
DEFAULTS UPON SENIOR SECURITIES
14
ITEM 4
 
MINE SAFETY DISCLOSURES
14
Item 5
 
OTHER INFORMATION
14
ITEM 6:
 
EXHIBITS
14
SIGNATURES
15
 


 
 
2

 

PART I    – FINANCIAL INFORMATION  
 
ITEM 1. FINANCIAL STATEMENTS

CARBON SCIENCES, INC.
(A Development Stage Company)
 
Balance Sheets

   
March 31, 2012
   
December 31, 2011
 
   
(Unaudited)
       
ASSETS
           
             
CURRENT ASSETS
           
  Cash
  $ 10,963     $ 7,265  
  Prepaid expenses
    48,442       17,719  
                 
                        TOTAL CURRENT ASSETS
    59,405       24,984  
                 
PROPERTY & EQUIPMENT, at cost
               
   Machinery & equipment
    133,344       133,344  
   Computer equipment
    31,434       31,434  
   Furniture & fixtures
    1,459       1,459  
      166,237       166,237  
   Less accumulated depreciation
    (71,255 )     (65,229 )
                 
                        NET PROPERTY AND EQUIPMENT
    94,982       101,008  
                 
OTHER ASSETS
               
   Patents
    70,585       70,585  
                 
                       TOTAL ASSETS
  $ 224,972     $ 196,577  
                 
                 
                 
LIABILITIES AND SHAREHOLDERS' DEFICIT
               
                 
CURRENT LIABILITIES
               
    Accounts payable
  $ 300,452     $ 141,361  
    Accrued expenses
    96,113       6,763  
    Accrued interest, notes payable
    9,498       7,714  
    Note payable, shareholder
    220,000       100,000  
                 
                       TOTAL CURRENT LIABILITIES
    626,063       255,838  
                 
SHAREHOLDERS' DEFICIT
               
   Preferred Stock, $0.001 par value,
               
    20,000,000 authorized common shares
    -       -  
   Common Stock, $0.001 par value;
               
    100,000,000 authorized common shares
               
    9,893,138 and 9,594,567 shares issued and outstanding, respectively
    9,894       9,595  
   Additional paid in capital
    8,154,876       7,609,816  
   Accumulated deficit during the development stage
    (8,565,861 )     (7,678,672 )
                 
                      TOTAL SHAREHOLDERS' DEFICIT
    (401,091 )     (59,261 )
                 
    TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT
  $ 224,972     $ 196,577  
                 
 
The accompanying notes are an integral part to these financial statements

 

 
3

 
 
 
CARBON SCIENCES, INC.
(A Development Stage Company)
 
Statements of Operations
(Unaudited)
 
               
From Inception on
 
               
August 25,2006
 
   
Three Months Ended
   
through
 
   
March 31, 2012
   
March 31, 2011
   
March 31, 2012
 
                   
                   
REVENUE
  $ -     $ -     $ -  
                         
OPERATING EXPENSES
                       
  General and administrative expenses
    521,742       242,743       7,039,965  
  Research and development
    98,746       84,148       1,204,409  
  Depreciation and amortization expense
    6,026       4,300       92,052  
                         
TOTAL OPERATING EXPENSES
    626,514       331,191       8,336,426  
                         
LOSS FROM OPERATIONS BEFORE  OTHER INCOME/(EXPENSES)
    (626,514 )     (331,191 )     (8,336,426 )
                         
OTHER INCOME/(EXPENSE)
                       
  Interest income
    -       -       39,521  
  Gain on sale of asset
    -       -       5,045  
  Foreign exchange gain/(loss)
    -       -       (2,327 )
  Common stock incentive fee
    (258,400 )     -       (258,400 )
  Penalties
    -       -       (94 )
  Interest expense
    (2,275 )     (375 )     (13,180 )
                         
TOTAL OTHER INCOME/(EXPENSES)
    (260,675 )     (375 )     (229,435 )
                         
NET LOSS
  $ (887,189 )   $ (331,566 )   $ (8,565,861 )
                         
BASIC AND DILUTED LOSS PER SHARE
  $ (0.09 )   $ (0.06 )        
                         
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING
                 
      BASIC AND DILUTED
    9,644,818       5,250,989          
                         

The accompanying notes are an integra part to these financial statements


 

 
4

 


CARBON SCIENCES, INC.
(A Development Stage Company)
 
Statement of Shareholders' Deficit
 
                                 
Deficit
       
                                 
Accumulated
       
                           
Additional
   
during the
       
   
Preferred stock
   
Common stock
   
Paid-in
   
Development
       
   
Shares
   
Amount
   
Shares
   
Amount
   
Capital
   
Stage
   
Total
 
Balance at December 31, 2011
    -     $ -       9,594,567     $ 9,595     $ 7,609,816     $ (7,678,672 )   $ (59,261 )
                                                         
Issuance of common stock for cash
                                                       
(price per share $0.70) (unaudited)
    -       -       78,571       79       54,921       -       55,000  
                                                         
Issuance of common stock for services at fair value (unaudited)
    -       -       50,000       50       75,950       -       76,000  
                                                         
Issuance of common stock at fair value for an incentive fee (unaudited)
    -       -       170,000       170       258,230       -       258,400  
                                                         
Stock compensation cost (unaudited)
    -       -       -       -       155,959       -       155,959  
                                                         
Net Loss for the three months ended March 31, 2012 (unaudited)
    -       -       -       -       -       (887,189 )     (887,189 )
                                                         
Balance at March 31, 2012 (Unaudited)
    -     $ -       9,893,138     $ 9,894     $ 8,154,876     $ (8,565,861 )   $ (401,091 )
 
 
The accompanying notes are an integral part to these financial statements

 
5

 

 
CARBON SCIENCES, INC.
(A Development Stage Company)
 
Statements of Cash Flows
(Unaudited)
 
               
From Inception on
 
               
August 25, 2006
 
   
Three Months Ended
   
through
 
   
March 31, 2012
   
March 31, 2011
   
March 31, 2012
 
CASH FLOWS FROM OPERATING ACTIVITIES:
                 
   Net loss
  $ (887,189 )   $ (331,566 )   $ (8,565,861 )
   Adjustment to reconcile net loss to net cash
                       
     used in operating activities
                       
   Depreciation expense
    6,026       4,300       92,052  
   Common stock issuance for services
    76,000       -       327,038  
   Common stock issuance for incentive fee
    258,400       -       258,400  
   Stock compensation cost
    155,959       -       1,603,720  
   Gain on sale of asset
    -       -       (5,045 )
  Changes in Assets and Liabilities
                       
   (Increase) Decrease in:
                       
   Prepaid expenses
    (30,723 )     (16,171 )     (48,442 )
   Increase (Decrease) in:
                       
   Accounts payable
    159,091       818       300,452  
   Accrued expenses
    91,134       289       105,611  
                         
NET CASH USED IN OPERATING ACTIVITIES
    (171,302 )     (342,330 )     (5,932,075 )
                         
CASH FLOWS USED IN INVESTING ACTIVITIES:
                       
   Proceeds from sale of vehicle
    -       -       24,500  
   Patent expenditures
    -       -       (70,585 )
   Purchase of equipment
    -       -       (206,489 )
                         
NET CASH USED IN INVESTING ACTIVITIES
    -       -       (252,574 )
                         
CASH FLOWS IN FINANCING ACTIVITIES:
                       
   Advances from officer
    -       -       113,000  
   Loans from investors
    120,000       -       745,000  
   Repayment of advances and loans
    -       (25,000 )     (373,000 )
   Proceeds from subscriptions payable
    -       -       362,775  
   Proceeds from issuance of common stock, net
    55,000       400,000       5,347,837  
                         
NET CASH PROVIDED BY FINANCING  ACTIVITIES
    175,000       375,000       6,195,612  
                         
NET INCREASE IN CASH
    3,698       32,670       10,963  
                         
CASH, BEGINNING OF PERIOD
    7,265       38,422       -  
                         
CASH, END OF PERIOD
  $ 10,963     $ 71,092     $ 10,963  
                         
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
                 
   Interest paid
  $ 491     $ 87     $ 3,813  
   Taxes paid
  $ -     $ -     $ -  
                      .  
SUPPLEMENTAL DISCLOSURES OF NON CASH ACTIVITIES
                 
From inception on August 25, 2006 through March 31, 2012, the Company issued 69,737 shares of common stock for converted debt in the
 
   amount of $265,000, at fair value of $3.80 per share. .
                       
                         
 
The accompanying notes are an integral part to these financial statements


 
6

 

CARBON SCIENCES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS-UNAUDITED
MARCH 31, 2012



1. 
Basis of Presentation
The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all normal recurring adjustments considered necessary for a fair presentation have been included.  Operating results for the three month period ended March 31, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012.  For further information refer to the financial statements and footnotes thereto included in the Company's Form 10-K for the year ended December 31, 2011.

Going Concern
The accompanying financial statements have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets and liabilities and commitments in the normal course of business.  The accompanying financial statements do not reflect any adjustments that might result if the Company is unable to continue as a going concern.  The Company does not generate significant revenue, and has negative cash flows from operations, which raise substantial doubt about the Company’s ability to continue as a going concern.  The ability of the Company to continue as a going concern and appropriateness of using the going concern basis is dependent upon, among other things, additional cash infusion.  The Company has obtained funds from its shareholders since its inception , and believes this funding will continue, and is also actively seeking new investors.  Management believes the existing shareholders and the prospective new investors will provide the additional cash needed to meet the Company’s obligations as they become due, and will allow the development of its core of business.

2. 
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This summary of significant accounting policies of Carbon Sciences, Inc. is presented to assist in understanding the Company’s financial statements. The financial statements and notes are representations of the Company’s management, which is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the financial statements.

Development Stage Activities and Operations
The Company is in its initial stages of formation and has insignificant revenues. A development stage activity is 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 Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.

 
 
 
7

 

CARBON SCIENCES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS-UNAUDITED
MARCH 31, 2012
2. 
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Loss per Share Calculations
The Company adopted the accounting pronouncement for loss per share, which dictates the calculation of basic earnings per share and diluted earnings per share. Basic earnings per share are computed by dividing income available to common shareholders by the weighted-average number of common shares available. Diluted earnings per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. The Company’s diluted loss per share is the same as the basic loss per share for the period ended March 31, 2012 as the inclusion of any potential shares would have had an anti-dilutive effect due to the Company generating a loss.

Stock-Based Compensation

Share based payments applies to transactions in which an entity exchanges its equity instruments for goods or services, and also applies to liabilities an entity may incur for goods or services that are to follow a fair value of those equity instruments. We will be required to follow a fair value approach using an option-pricing model, such as the Black Scholes option valuation model, at the date of a stock option grant. The deferred compensation calculated under the fair value method would then be amortized over the respective vesting period of the stock option. The adoption of share based compensation has no material impact on our results of operations.

Recently Issued Accounting Pronouncements

 
Management reviewed accounting pronouncements issued during the three months ended March 31, 2012, and no pronouncements were adopted during the period.

3.
CAPITAL STOCK
 
During the three months ended March 31, 2012, the Company issued 78,571 shares of common stock at a price of $0.70 per share for cash of $55,000; issued 50,000 shares of common stock for services at a fair value of $76,000. Also, the Company issued 170,000 shares of common stock at a fair value of $258,400 for an incentive fee.

During the three months ended March 31, 2011, the Company issued 400,000 shares of common stock at a price of $1.00 per share for cash of $400,000, with warrants attached with the option to purchase 1,200,000 shares of common stock over a period of five years.

4.      STOCK OPTIONS

During the quarter ended March 31, 2012, the Board of Directors of the Company granted non-qualified stock options for 712,500 shares of common stock to its employees. Each Option shall be exercisable to the nearest whole share, in installments or otherwise, as the respective Option agreements may provide. Notwithstanding any other provisions of the Option agreement, each Option expires on the date specified in the Option agreement, which date shall not be later than the seventh (7th) anniversary from the grant date of the options. The stock options vest over 25 months, and are exercisable for a period of seven years from the date of grant at an exercise price of $1.48 per share, the market value of the Company’s common stock on the date of grant.


 
8

 

CARBON SCIENCES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS-UNAUDITED
MARCH 31, 2012

 
4. 
STOCK OPTIONS AND WARRANTS (Continued)
 
   
Risk free interest rate
.67% - 3.3%
Stock volatility factor
92.21% - 98.23%
Weighted average expected option life
2 - 7 years
Expected dividend yield
None
   
 
A summary of the Company’s stock option activity and related information follows:
 
   
3/31/2012
 
         
Weighted
 
   
Number
   
average
 
   
of
   
exercise
 
   
Options
   
price
 
Outstanding, beginning of period
    725,000     $ 3.38  
Granted
    712,500       1.48  
Exercised
    -       -  
Expired
    -       -  
Outstanding, end of period
    1,437,500     $ 2.44  
Exercisable at the end of period
    536,500     $ 2.43  
Weighted average fair value of
               
options granted during the period
    $ 1.48  
                 
Stock-based compensation expense recognized during the period is based on the value of the portion of stock-based payment awards that is ultimately expected to vest. Stock-based compensation expense recognized in the financial statements of operations during the period ended March 31, 2012, included compensation expense for the stock-based payment awards granted prior to, but not yet vested, as of March 31, 2012 based on the grant date fair value estimated, and compensation expense for the stock-based payment awards granted subsequent to March 31, 2012, based on the grant date fair value estimated. We account for forfeitures as they occur. The stock-based compensation expense recognized in the statement of income during the period ended March 31, 2012 and 2011 is $155,959 and $0, respectively.

Warrants
During the period ended March 31, 2012, the Company issued 900,001 warrants. At March 31, 2012, the Company had 900,001 warrants outstanding. On April 4, 2012, through a cashless exercise, the Company issued 423,943 shares of common stock.

5.   
RELATED PARTY TRANSACTION

 
During the first quarter ending March 31, 2012, the Company signed promissory notes with various investors for funds received in the amount of $120,000 for operating expenses. The notes bear interest at 5% per annum, and are due within one year. The balance outstanding on the notes as of March 31, 2012 is $220,000.

 
9

 

CARBON SCIENCES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS-UNAUDITED
MARCH 31, 2012



6.
SUBSEQUENT EVENTS

 
Management has evaluated subsequent events according to the requirements of ASC TOPIC 855, and has reported the following:

 
On April 4, 2012, the Company issued 300,001 units at a price of $0.70 per unit. Each unit consists of a promissory note and a five year warrant to purchase three shares of common stock. The 900,001 warrants were converted through a cashless exercise for 423,943 shares of common stock at a price below fair market value, and the Company will recognize a loss of $225,000 on the issuance of the common stock.

 
On April 6, 2012, the Company issued 6,098 shares of common stock in payment of an accounts payable in the amount of $7,500. The fair value of the shares at date of issuance was $8,110 and the Company recognized a loss of $610.

 
During April and May 2012, the Company signed promissory notes from an investor for funds received in the amount of $21,000 to fund operating expenses. The notes bear interest at 5% per annum, and are due within one year.




 
10

 

ITEM 2:  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
The following discussion and analysis should be read together with our financial statements and the related notes appearing elsewhere in this filing. This discussion contains forward-looking statements reflecting our current expectations that involve risks and uncertainties. See “Forward-Looking Statements” for a discussion of the uncertainties, risks and assumptions associated with these statements. Actual results and the timing of events could differ materially from those discussed in our forward-looking statements as a result of many factors, including those set forth under “Risk Factors” in our annual report on Form 10-K filed with the SEC on March 30, 2012 and other filings made with the SEC.
 
OVERVIEW

Innovating at the forefront of chemical engineering, Carbon Sciences is developing a breakthrough technology to make cleaner and greener transportation fuels, hydrogen and other valuable, large volume products from natural gas.  Our highly scalable, clean-tech process will enable the world to reduce its dependence on petroleum by transforming abundant and affordable natural gas into gasoline, diesel and jet fuel, and other products, such as hydrogen, methanol, ammonia, solvents, plastics and detergent alcohols.  The key to this process is a breakthrough catalyst that can reduce the cost of reforming natural gas into synthetic gas (syngas), the most costly step in making products from natural gas.

Our goal is to help reduce the world’s dependence on petroleum by developing technology to enable the cost effective use of natural gas as a feedstock to produce clean and green liquid fuels for use in the existing transportation infrastructure.

We believe that natural gas is the world’s next primary source of fuel. While found in abundant supply at affordable prices in the U.S. and throughout the world, natural gas cannot be used directly in cars, trucks, trains and planes without a massive overhaul of the existing liquid fuels infrastructure. We intend to address this problem by developing an industrial clean-tech process to enable the transformation of natural gas into liquid transportation fuels such as gasoline, diesel, jet fuel and other valuable products.  Our competitive advantage over other natural gas reforming technologies is that our processes can significantly lower the cost of reforming natural gas into synthetic gas (syngas), the most costly step in the gas-to-liquids (GTL) process for making liquid transportation fuels from natural gas.  As part of our business plan, we intend to demonstrate and prove this point.  Based on original laboratory testing results and validated in commercial testing facilities, we believe that we have a very robust reforming catalyst to enable cost effective syngas production.

We have not yet generated revenues. We currently have negative working capital and, in connection with our December 31, 2011 financial statements, we received an opinion from our auditors that expressed substantial doubt about our ability to continue as a going concern without additional financing. Subsequent to December 31, 2011, we obtained $55,000 in private placements. We believe that the financings received by us after December 31, 2011 and the net proceeds of this offering will fully address such concern and enable us to complete development of our catalyst and commercially deploy our technology, and implement our business plan through such time as revenues support our operations. If additional funds are required because our plans, expectations or assumptions change, we may also seek funding through additional equity or debt financing. There can be no assurance that such financing will be available or upon such terms that are acceptable to us, if at all.

Corporate Overview

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

Critical Accounting Policies
 
Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America or GAAP. 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. 
 
 
 
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Use of Estimates
 
In accordance with GAAP, 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, collectability 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
 
Management reviewed accounting pronouncements issued during the three months ended March 31, 2012, and no pronouncements were adopted during the period.
 
RESULTS OF OPERATIONS – THREE MONTHS ENDED MARCH 31, 2012 COMPARED TO THE THREE MONTHS ENDED MARCH 31, 2011
 
General and Administrative Expenses
 
General and administrative, or G&A, expenses increased by $278,999 to $521,742 for the three months ended March 31, 2012, compared to $242,743 for the prior period March 31, 2011 The increase in G&A for the three months ended March 31, 2012 was due to an increase in non- cash stock compensation, and investor relations expense of $231,959, and an increase in professional fees.
 
Research and Development
 
Research and Development or R&D costs increased by $14,598 to $98,746 for the three months ended March 31, 2012, compared to $84,148 for the prior period March 31, 2011.  The overall increase in R&D was the result of an increase in lab fees.
 
Net Loss
 
Net Loss for the three months ended March 31, 2012 was $(887,189) compared to $(331,566) for the prior period March 31, 2011. The overall net increase of $(555,623) in net loss was due to a increase in non-cash stock compensation cost, investor relations and an incentive fee of $490,359, and an overall increase in operating expenses of $65,264 for the current period. Currently the Company is in its development stage and had no revenues.
 
Liquidity and Capital Resources
 
As of March 31, 2012, we had a working deficit of $(566,658) compared to a working deficit of $(230,854) for the year ended December 31, 2011. The increase of $(335,804) in working deficit was due primarily to less equity financing and an increase in accounts payable and investor loans.
 
During the three months ended March 31, 2012, the Company used $(171,302) of cash for operating activities, as compared to $(342,330) for the prior period September 30, 2010. The decrease of $171,028 in the use of cash for operating activities was primarily due to an increase in operating net loss, an increase in prepaid expenses, and an increase in accounts payable and accrued expenses.
 
Cash used by investing activities was $0 the three months ended March 31, 2012 and 2011, respectively. There were no purchases of tangible or intangible assets for the current or prior period.
 
Cash provided from financing activities during the three months ended March 31, 2012 was $175,000 as compared to $375,000 for the prior period ended March 31, 2011. Our capital needs have primarily been met from the proceeds of equity financing, and investor loans, as we are currently in the development stage and had no revenues.
 

 
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Our financial statements as of March 31, 2012 have been prepared under the assumption that we will continue as a going concern. Our independent registered public accounting firm has issued their report dated March 30, 2012 that included an explanatory paragraph expressing substantial doubt in our ability to continue as a going concern  as the Company does not generate significant revenue and have negative cash flows from operations. 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. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.
 
During the first quarter of 2012, we issued 78,571 shares of our common stock at a price of $0.70 per share for aggregate gross cash proceeds of $55,000. The net proceeds of the sales were used for working capital purposes

PLAN OF OPERATION AND FINANCING NEEDS

We are engaged in developing a technology to reform natural gas into syngas, the first step in making transportation fuels, hydrogen and other valuable products.  We plan to develop our technology and focus our efforts on licensing this technology to solutions providers in the energy and industrial sectors.
 
Our plan of operation within the next twelve months is to utilize our cash balances to continue research and development of our methane reforming catalyst technology.  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 2012, based upon our current operating plan and condition. We will be investigating additional financing alternatives, including equity and/or debt financing. There is no assurance that capital in any form would be available to us, and if available, on terms and conditions that are acceptable. If we are unable to obtain sufficient funds during the next twelve months, we may be forced to reduce the size of our organization, which could have a material adverse impact on, or cause us to curtail and/or cease the development of our products.

Off-Balance Sheet Arrangements

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

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
n/a
 
ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, we conducted an evaluation, under the supervision and with the participation of our chief executive officer and chief financial officer of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act). Based upon this evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is: (i) recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms, and (ii) accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting
 
There was no change to our internal controls or in other factors that could affect these controls during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.



 
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PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are not a party to any pending legal proceeding, nor is our property the subject of a pending legal proceeding, that is not in the ordinary course of business or otherwise material to the financial condition of our business. None of our directors, officers or affiliates is involved in a proceeding adverse to our business or has a material interest adverse to our business.
 
ITEM 1A. RISK FACTORS
 
There are no material changes from the risk factors previously disclosed in the Registrant’s Form 10-K filed March 30, 2012.
 
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 
During the first quarter of 2012, we issued 78,571 shares of our common stock at a price of $0.70 per share for aggregate gross cash proceeds of $55,000. The net proceeds of the sales were used for working capital purposes. We also issued 50,000 shares in exchange for services valued at $76,000 and issued 170,000 shares, valued at $258,400 as an incentive fee.
 
The Company relied on an exemption pursuant to Rule 506 of Regulation d and/or Section 4(2) of the Securities Act of 1933, as amended in connection with the sale of the shares.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES
 
None
 
ITEM 4. MINE SAFETY DISCLOSURES


ITEM 5. OTHER INFORMATION
 
None
 
ITEM 6. EXHIBITS
 
31.1  
Certification of the Chief Executive Officer and Chief Financial Officer., pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
     
32.1  
Certification of the Chief Executive Officer and Chief Financial Officer., furnished pursuant to Section 1350 of Chapter 63 of 18 U.S.C. as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
     
EX-101.INS
 
XBRL Instance Document
     
EX-101.SCH
 
XBRL Taxonomy Extension Schema Document
     
EX-101.CAL
 
XBRL Taxonomy Extension Calculation Linkbase
     
EX-101.DEF
 
XBRL Taxonomy Extension Definition Linkbase
     
EX-101.LAB
 
XBRL Taxonomy Extension Labels Linkbase
     
EX-101.PRE
 
XBRL Taxonomy Extension Presentation Linkbase



 
14

 

 

 
 
SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Los Angeles, State of California, on May 15, 2012.

   
CARBON SCIENCES, INC.
     
 
By:
/s/ Byron Elton
 
   
Chief Executive Officer (Principal Executive
Officer ) and Acting Chief Financial Officer
(Principal Financial Officer and Principal
Accounting Officer)
 


 
 
 
 
 
 
 
 
 
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PINX:CABN Quarterly Report 10-Q Filling

PINX:CABN Stock - Get Quarterly Report SEC Filing of PINX:CABN stocks, including company profile, shares outstanding, strategy, business segments, operations, officers, consolidated financial statements, financial notes and ownership information.

PINX:CABN Carbon Sciences Inc Quarterly Report 10-Q Filing - 3/31/2012
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