Summary of CARBON SCIENCES, INC.

ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

OVERVIEW

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

This initial application of the Company's technology is a process that will transform CO2 into a high value chemical compound, currently used in the manufacture of paper, pharmaceuticals and plastics.

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, California 93117, and our telephone number is (805) 690-9090. 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. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to impairment of property, plant and equipment, intangible assets, deferred tax assets and fair value computation using the Black Scholes option pricing model. We base our estimates on historical experience and on various other assumptions, such as the trading value of our common stock and estimated future undiscounted cash flows, that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions; however, we believe that our estimates, including those for the above-described items, are reasonable.

Revenue Recognition

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

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

Use of Estimates

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

Fair Value of Financial Instruments

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

Recently Issued Accounting Pronouncements

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

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

RESULTS OF OPERATIONS - THREE AND SIX MONTHS ENDED JUNE 30, 2008 COMPARED TO THE THREE AND SIX MONTHS ENDED JUNE 30, 2007

Selling and Marketing Expenses

Selling and Marketing ("S&M") expenses increased by $41,925 or 35.98% to $158,446 for the three months ended June 30, 2008, compared to the prior period. S&M expenses decreased by $100,965 or 24.68% to $308,082 for the six months ended June 30, 2008, compared to the prior period. The decrease in S&M expenses was due primarily to a decrease in salaries and consulting fees.

General and Administrative Expenses

General and administrative ("G&A") expenses decreased by $37,407 or 44.76% to $46,167 for the three months ended June 30, 2008, compared to the prior period. G&A expenses decreased by $47,186 or 37.69% to $78,008 for the six months ended June 30, 2008, compared to the prior period. The decrease in G&A expenses was due primarily to a decrease in professional fees.

Research and Development

Research and Development ("R&D") costs increased by $43,692 or 970.93% to $48,192 for the three months ended June 30, 2008, compared to the prior period. R&D costs increased by $84,951 or 1544.56% to $90,451 for the six months ended June 30, 2008, compared to the prior period. The increase in R&D was the result of testing of product alternatives, and consulting fees.

Net Loss

Net Loss for the three months ended June 30, 2008 was $251,250 compared to $206,323 for the prior period. Net Loss for the six months ended June 30, 2008, was $470,638 compared to $543,870 for the prior period. Currently the Company is in its development stage and had no revenues.

Liquidity and Capital Resources

As of June 30, 2008, we had $477,568 of working capital as compared to $942,782 as of December 31, 2007. This decrease of $465,214 was due primarily to the use of funds for operating expenses.

Net cash flow used in operating activities was $400,689 for six months ended June 30, 2008, as compared to net cash used of $480,697 for the prior period. This decrease of $80,008 was primarily attributable to an decrease in salaries.

Net cash provided by investing activities was $485,674 for the six months ended June 30, 2008, as compared to net cash provided of $0 for the prior period. The increase of net cash provided by investing activities was primarily due to withdrawals from certificates of deposits for operating expenses.

Net cash provided from financing activities was $0 the six months ended June 30, 2008, as compared to net cash provided of $637,500 for the prior period. From inception to June 30, 2008, we received a total of $2,228,875 from the sale of shares of our common stock through private placements of shares of common stock pursuant to Subscription Agreements, which we entered into with accredited and/or institutional buyers.

PLAN OF OPERATION AND FINANCING NEEDS

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

Off-Balance Sheet Arrangements

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