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

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

Our primary objective for the balance of 2009 is to complete sufficient equity financing to properly capitalize our planned development activities.

RESULTS OF OPERATIONS

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

Revenues

Total revenues for the three months ended June 30, 2009 were $785,932 as compared to the three months ended June 30, 2008 revenues of $2,523,489. All revenue for the three months ended June 30, 2009 and 2008 resulted from the Company's oilseed crush facility.

Cost of Revenues

Cost of revenues for the three months ended June 30, 2009 were $981,007 compared to $2,339,926 for the same period in 2008. All cost of revenues resulted from the Company's oilseed crush facility.

General and Administrative Expenses Operating Expenses

General and administrative expenses during the three months ended June 30, 2009 totaled $209,919 with $0 related to stock based compensation. In the comparable period of the prior year, general and administrative expenses totaled $456,804 with $200,000 related to stock based compensation. General and administrative expenses during the three months ended June 30, 2009 primarily consisted of legal fees and office related expenses and expenses resulting from the Company's oilseed crush facility.

Interest Expense

Interest expenses for the three months ended June 30, 2009 were $908,719 and $135,890 for the three months ended June 30, 2008. Included in the three months ended June 30, 2009 was $194,548 of interest expense, consisting of $133,473 in accrued interest, $61,075 in accrued interest due to a related party, and $714,170 in non-cash expenses associated with the conversion features embedded in the convertible debentures issued by the Company during the three months ended June 30, 2009. Amortization of note discount was $0 and $250, respectively for the three months ended June 30, 2009 and 2008.

Gain Associated with Change in Convertible Liabilities

As of June 30, 2009, Carbonics Capital had several convertible debentures due to YA Global Investments, LP. The Company accounted for the convertible debentures in accordance with SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity (SFAS 150), as the conversion feature embedded in the convertible debentures could result in the note principal and related accrued interest being converted to a variable number of the Company's common shares. We calculate the fair value of the conversion feature at the time of issuance and record a conversion liability for the calculated value. We recognize interest expense for the conversion liability which is added to the principal of the debenture. We also recognize interest expense for accretion of the conversion liability over the term of the note. For the three months ended June 30, 2009 and 2008, we recognized a gain for the change in fair value of the conversion liability of $5,183,296 and a loss of $2,528,363 for these debentures.

Net Income

Net income (loss) for the three months ended June 30, 2009 was $3,931,069 as compared to a net loss of $2,935,839 from the same period in 2008.

Six Months Ended June 30, 2009 Compared to Six Months Ended June 30, 2008

Revenues

Total revenues for the six months ended June 30, 2009 were $1,637,830 as compared to the six months ended June 30, 2008 revenues of $6,183,443. Revenue for the six months ended June 30, 2009 and 2008 resulted from the Company's oilseed crush facility.

Cost of Revenues

Cost of revenues for the three months ended June 30, 2009 were $1,977,013 compared to $5,601,729 for the same period in 2008. Cost of revenues resulted from the Company's oilseed crush facility, which was acquired on June 30, 2009.

General and Administrative Expenses Operating Expenses

General and administrative expenses during the six months ended June 30, 2009 totaled $596,704 with $0 related to stock based compensation. In the comparable period of the prior year, general and administrative expenses totaled $1,003,818 with $245,000 related to stock based compensation. General and administrative expenses during the six months ended June 30, 2009 primarily consisted of legal fees and office related expenses and expenses resulting from the Company's oilseed crush facility.

Interest Expense

Interest expense for the six months ended June 30, 2009 was $1,013,364 and $287,325 for the same period in 2008. Included in the six months ended June 30, 2009 was $299,194 of interest expense, consisting of $238,119 in accrued interest, $61,075 accrued interest due to a related party, and 714,170 in non-cash expenses associated with the conversion features embedded in the convertible debentures issued by the Company during the six months ended June 30, 2009. Amortization of note discount was $46,712 and $500, respectively for the six months ended June 30, 2009 and 2008.

Gain Associated with Change in Convertible Liabilities

As of June 30, 2009, Carbonics Capital had several convertible debentures due to YA Global Investments, LP. The Company accounted for the convertible debentures in accordance with SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity (SFAS 150), as the conversion feature embedded in the convertible debentures could result in the note principal and related accrued interest being converted to a variable number of the Company's common shares. We calculate the fair value of the conversion feature at the time of issuance and record a conversion liability for the calculated value. We recognize interest expense for the conversion liability which is added to the principal of the debenture. We also recognize interest expense for accretion of the conversion liability over the term of the note. For the six months ended June 30, 2009 and 2008, we recognized a gain for the change in fair value of the conversion liability of $5,413,828 and a loss of $2,528,363 for these debentures.

Net Income

Net income for the six months ended June 30, 2009 was  $3,249,547 as compared to
a net loss of $3,228,735 from the same period in 2008.

Liquidity and Capital Resources

The Company had $19,525,542 in current liabilities at June 30, 2009, and may need to obtain additional financing to satisfy these obligations.

Our primary sources of liquidity are cash provided by and financing activities. For the six months ended June 30, 2009, net cash provided in our operating activities was $22,180 as compared to $569,492 used in the six months ended June 30, 2008. The Company's capital requirements consist of general working capital needs, scheduled principal and interest payments on debt, obligations and capital leases and planned capital expenditures. The Company's capital resources consist primarily of proceeds from issuance of debt and common stock. The Company plans to fund ongoing operations during 2009 with a combination of proceeds from the issuance of debt and equity as well as the repayment to the Company of loans receivable and other amounts due.

Cash Flows

Our operating activities during the six months ended June 30, 2009 provided $22,180 in cash. At June 30, 2009, accounts payable and accrued expenses totaled $2,320,503. At June 30, 2009, the Company had $100,623 in cash. For the six months ended June 30, 2009, investing activities provided $62,014 in cash, and cash from financing activities provided $16,429. The Company had a working capital deficit of $18,632,532 at June 30, 2009, which includes convertible debentures of $12,623,949.

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

Off Balance Sheet Arrangements

None.