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

Form 10-Q

(Mark One)
x           QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended January 31, 2009

o           TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from ________________ to ________________

Commission file number 000-53425
 
 
CARBON CREDITS INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

Nevada
 3825
26-1240905
(State or other jurisdiction of
incorporation or organization)
 (Primary Standard Industrial
Classification Code Number)
(IRS Employer
Identification No.)
 
2300 E. Sahara Avenue, Suite 800, Las Vegas, Nevada USA 89102
(Address of principal executive offices) (Zip Code)

(888) 579-7771
(Registrant’s telephone number, including area code)
 
Not applicable
(Former name, former address and former fiscal year, if changed since last report)

 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed 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.  x Yes     o No

 
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.
 
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).  o Yes     x No

 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: As of February 20, 2009, there were 24,887,000 shares of Common Stock, $0.0001 par value.
 

 
1

 

CARBON CREDITS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
 
TABLE OF CONTENTS

 
Index
Page Number
     
PART I
FINANCIAL INFORMATION
 
     
ITEM 1.
Financial Statements (unaudited)
F-1
     
ITEM 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
3
     
ITEM 3.
Quantitative and Qualitative Disclosures About Market Risk 
5
   
 
ITEM 4T.
Controls and Procedures
5
     
PART II
OTHER INFORMATION
 
   
 
ITEM 1.
Legal Proceedings
6
     
ITEM 1A.
Risk Factors 
6
     
ITEM 2.
Unregistered Sales of Equity Securities and Use of Proceeds
6
     
ITEM 3.
Defaults Upon Senior Securities
6
     
ITEM 4.
Submission of Matters to Vote of Security Holders
6
     
ITEM 5.
Other Information
6
     
ITEM 6.
Exhibits
6
     
SIGNATURES
 
6

 
 


2

 
CARBON CREDITS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
 
INDEX TO FINANCIAL STATEMENTS
 
 
 
Page No.
Condensed Balance Sheets as of January  31, 2009 (Unaudited) and October 31, 2008 (Audited)
F-2
   
Condensed Statements of Operations for the Three Months Ended January 31, 2009 and 2008,  and Cumulative from Inception (October 15, 2007) to January  31, 2009 (Unaudited)
F-3
   
Condensed Statements of Cash Flows for the Three Months Ended January 31, 2009 and 2008 and Cumulative from Inception (October 15, 2007) to January 31, 2009 (Unaudited)
F-4
   
Condensed notes to Financial Statements as of January 31, 2009 (Unaudited)
F-5
   
 
 



 






 
 

 
F-1

 

CARBON CREDITS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEETS
             
             
             
   
January 31,
   
October 31,
 
   
2009
   
2008
 
         
(AUDITED)
 
ASSETS
             
CURRENT ASSETS
           
             
     Cash
  $ 40,857     $ 75,223  
     Accounts receivable-affiliate
            767  
     Prepaid expenses
    754       1,410  
                 
Total current assets
    41,611       77,400  
                 
EQUIPMENT
               
                 
     Computer, net of accumulated depreciation
    1,978       2,182  
                 
OTHER ASSETS
               
                 
     Website development costs, net of accumalated amortization
    6,530       7,124  
                 
Total other assets
    6,530       7,124  
                 
Total assets
  $ 50,119     $ 86,706  
                 
                 
                 
LIABILITIES AND STOCKHOLDERS' EQUITY /(DEFICIT)
                 
CURRENT LIABILITIES
               
                 
       Accounts payable
  $ 1,250     $ 1,096  
       Accrued liabilities
    103,906       -  
       Shareholders' advances
    36,752       72,196  
                 
       Total current liabilities
    141,908       73,292  
                 
                 
STOCKHOLDERS' EQUITY /(DEFICIT)
               
                 
Class A Convertible Preferred stock, $.0001 par value,
               
  10,000,000 shares authorized,  8,000,000 issued and outstanding
    800       800  
                 
Common stock, par value $.0001,100,000,000 shares
               
  authorized, 24,887,000 shares issued and outstanding (2008)
               
24,781,000 shares issued and outstanding (2007)
    2,489       2,478  
Paid in capital
    535,365       482,004  
Stock subscriptions payable
    8,472       15,180  
Deficit accumulated during development stage
    (638,915 )     (487,048 )
                 
Total stockholders' equity/(deficit)
    (91,789 )     13,414  
                 
Total liabilities & stockholders' equity/(deficit)
  $ 50,119     $ 86,706  
                 
                 
                 
The accompanying notes are an integral part of these financial statements.

 
F-2

 

CARBON CREDITS INTERNATIONAL, INC.
 
(A DEVELOPMENT STAGE ENTERPRISE)
 
CONDENSED STATEMENTS OF OPERATIONS
 
(unaudited)
 
   
                   
                   
                   
                   
               
Cumulative
 
               
from Inception
 
   
Three Months
   
Three Months
   
(October 15, 2007)
 
   
Ended
   
Ended
   
to
 
   
January 31, 2009
   
January 31, 2008
   
January 31, 2009
 
                   
                   
REVENUES
  $ 1,145     $ -     $ 1,912  
                         
EXPENSES
                       
   General and administrative:
                       
        Consulting fees
    123,660       83,125       477,403  
        Other
    28,721       15,943       162,593  
   Depreciation and amortization
    798       -       1,070  
                         
   Total expenses
    153,179       99,068       641,066  
                         
OTHER INCOME-Interest
    167       -       239  
                         
NET LOSS
  $ (151,867 )   $ (99,068 )   $ (638,915 )
                         
NET LOSS PER SHARE - BASIC
  $ (0.01 )     *          
                         
WEIGHTED AVERAGE NUMBER OF
                       
  COMMON SHARES OUTSTANDING - BASIC
    24,871,413       24,607,685          
                         
*  less than $(.01) per share
                       
                         
                         
                         
                         
                         
                         
                         
                         
                         
The accompanying notes are an integral part of these financial statements.
 

 
F-3

 

CARBON CREDITS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS
(unaudited)
                   
                   
               
Cumulative
 
               
from
 
   
Three Months
   
Three Months
   
Inception
 
   
Ended
   
Ended
   
(October 15, 2007) to
 
   
January 31, 2009
   
January 31, 2008
   
January 31, 2009
 
                   
OPERATING ACTIVITIES
                 
Net loss
  $ (151,867 )   $ (99,068 )   $ (638,915 )
Adjustments to reconcile net loss to net
                       
Cash used by operating activities:
                       
Depreciation and amortization
    798       -       1,070  
Common stock issued issued at spin off
    -       -       2,420  
Common stock issued for services
    -       -       800  
Compensation considered as addition to capital
    19,754       -       333,197  
 
                       
Changes in operating assets and liabilities:
                       
(Increase)/decrease in accounts receivable-affiliate
    767       (1,000 )     -  
Increase in accounts payable
    154               1,250  
(Increase)/decrease in prepaid expenses
    656       20,569       (754 )
Increase in accrued liabilities
    103,906       58,205       103,906  
                         
Net cash used by operating activities
    (25,832 )     (21,294 )     (197,026 )
                         
INVESTING ACTIVITIES
                       
Increase in deferred offering costs
    -       (40,000 )     -  
Website development costs
    -       -       (7,124 )
Purchase of equipment
    -       -       (2,454 )
                         
Net cash used by investing activities
            (40,000 )     (9,578 )
                         
FINANCING ACTIVITIES
                       
Proceeds from sale of common stock
    18,438       48,999       187,057  
Increase in shareholders' advances
    6,066       114       104,129  
Proceeds received in advance of stock subscriptions
    8,472       -       23,652  
Shareholder advances - repaid
    (41,510 )     (867 )     (67,377 )
                         
Net cash provided (used) by financing activities
    (8,534 )     48,246       247,460  
                         
NET INCREASE/(DECREASE) IN CASH
    (34,366 )     (13,048 )     40,857  
 
                       
CASH, BEGINNING OF PERIOD
    75,223       43,934       -  
                         
CASH, END OF PERIOD
  $ 40,857     $ 30,886     $ 40,857  
                         
                         
                         
The accompanying notes are an integral part of these financial statements.
 
F-4

CARBON CREDITS INTERNATIONAL, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS
January 31, 2009
(UNAUDITED)

NOTE 1 - BASIS OF PRESENTATION

In the opinion of management, the accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. 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 adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the Company’s financial position as of January 31, 2009, and the results of its operations and cash flows for the three months ended January 31, 2009 and 2008 have been made. Operating results for the three and nine months ended January 31, 2009 are not necessarily indicative of the results that may be expected for the year ended October 31, 2009.

These financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company’s audited financial statements for the year ended October 31, 2008 included in Company’s Form 10-K. The Company follows the same accounting policies in the preparation of this interim report.
 
Going Concern
 
The Company has realized $1,912 of revenues since inception. As of January 31, 2009, the Company has an accumulated deficit of $638,915.

Our financial statements have been presented on the basis that we are a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

Our ability to continue in existence is dependent on our ability to develop our business plan and to achieve profitable operations. Our business plan involves our pursuing additional product approvals such as that provided by United Laboratories, (UL) for all of the products we are licensed to sell or use. This will enable us to have a worldwide customer base from which we can ultimately obtain our potentially largest source of revenue, the sharing of energy savings on a long-term basis.  Since we anticipate being unable to achieve profitable operations and/or adequate cash flows in the near term, we will have to continue to pursue additional equity financing through private placements of our common stock.   The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.
 
NOTE 2 - INCOME TAXES

There was no current federal tax provision or benefit recorded for any period since inception, nor were there any recorded deferred income tax assets, as such amounts were completely offset by valuation allowances since there is no assurance of future taxable income.

NOTE 3 - THE EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS
 
New Accounting Standards Not Yet Adopted

In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments and Hedging Activities", an amendment of SFAS No. 133. SFAS 161 applies to all derivative instruments and non-derivative instruments that are designated and qualify as hedging instruments pursuant to paragraphs 37 and 42 of SFAS 133 and related hedged items accounted for under SFAS 133. SFAS 161 requires entities to provide greater transparency through additional disclosures about how and why an entity uses derivative instruments, how derivative instruments and related hedged items are accounted  for under SFAS 133 and its related interpretations, and how derivative instruments and related hedged items affect an entity's financial position, results of operations, and cash flows. SFAS 161 is effective as of the beginning of an entity's first fiscal year that begins after November 15, 2008. The Company does not expect the adoption of SFAS 161 will have a material impact on its financial condition or results of operation.
 
 
 
F-5

CARBON CREDITS INTERNATIONAL, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS
January 31, 2009
(UNAUDITED)

NOTE 3 - THE EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS - continued
 
In May 2008, the FASB issued SFAS No. 163, “Accounting for Financial Guarantee Insurance Contracts – an interpretation of FASB Statement No. 60.”  SFAS 163 requires that an insurance enterprise recognize a claim liability prior to an event of default (insured event) when there is evidence that credit deterioration has occurred in an insured financial obligation.  This Statement also clarifies how Statement 60 applies to financial guarantee insurance contracts, including the recognition and measurement to be used to account for premium revenue and claim liabilities. Those clarifications will increase comparability in financial reporting of financial guarantee insurance contracts by insurance enterprises. This Statement requires expanded disclosures about financial guarantee insurance contracts. The accounting and disclosure requirements of the Statement will improve the quality of information provided to users of financial statements.  SFAS 163 will be effective for financial statements issued for fiscal years beginning after December 15, 2008.  The Company does not expect the adoption of SFAS 163 will have a material impact on its financial condition or results of operation.
 
NOTE 4 - EARNINGS PER SHARE

During the three months ended January 31, 2009 and 2008, our loss per share was ($.01) and less than ($.01), respectively, per share based on the weighted average number of shares outstanding during those periods of 24,871,413 and 24,607,685, respectively.  There were no dilutive securities outstanding.
 
NOTE 5 - EQUITY TRANSACTIONS

During the three month period ended January 31, 2009, we received proceeds of $18,438 for 60,000 additional shares of common stock and reclassified the $15,180 received in advance in October 2008 for stock subscriptions dated in November and December 2008 as common stock issuances for 46,000 shares. In addition, we received $8,472 for future common stock issuances of 24,000, which issuances will be recorded upon receipt of the underlying stock subscription. Our Board of Directors approved the sale of 4,500,000 shares of our restricted common stock to unaffiliated non resident aliens for $0.33 per share on October 15, 2008, of which 266,000 shares have been issued through January 31, 2009.

NOTE 6 - SHAREHOLDER ADVANCES

Shareholder advances decreased by $35,444 during the 3 months ended January 31, 2009 representing additional advances of $6,066 and repayments of $41,510, whereas a net decrease for the period ended October 31, 2008 was $68,236 representing repayments of $867 and increases of $69,103.

NOTE 7 - WEBSITE DEVELOPMENT COSTS AND AMORTIZATION

Commencing November 1, 2008, we began amortizing website development costs ratably over a 3 year period. Accordingly, amortization for the three months ended January 31, 2009 was $594.

NOTE 8  - ACCRUED COMPENSATION

Effective December 15, 2008, compensation for our two officers/directors was increased from $150,000 for our president and $180,000 for our CFO for the 12 months ended October 15, 2009 to $210,000 each for the 12 month period ended December 15, 2009. Accordingly, the accrued compensation as of January 31, 2009 consists of accrued salary compensation of $93,750 and accrued benefits of $10,156.  All accrued compensation of $19,754, which included accrued benefits of $1,931 for our CTO, who resigned as of December 11, 2008, was eliminated and treated as contributed capital as of that date.


 
 
F-6

 
 

ITEM 2.                   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Quarterly Report on Form 10-Q contains statements which, to the extent they do not recite historical fact, constitute "forward looking" statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. You can identify these statements by the use of words like "may," "will," "could," "should," "project," "believe," "anticipate," "expect," "plan," "estimate," "forecast," "potential," "intend," "continue," and variations of these words or comparable words. Forward looking statements do not guarantee future performance and involve risks and uncertainties. Actual results may differ substantially from the results that the forward looking statements suggest for various reasons, including those discussed under the caption "Risks Related to Our Business" in our annual report on Form 10-K for the fiscal year ended October 31, 2008. These forward looking statements are made only as of the date of this report. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company's expectations with regard thereto or any change in events, conditions or circumstances on which any statement is based. This discussion should be read together with the financial statements and other financial information included in this Form 10-Q.

The following discussion contains forward-looking statements that are subject to significant risks and uncertainties. There are several important factors that could cause actual results to differ materially from historical results and percentages and results anticipated by the forward-looking statements. The Company has sought to identify the most significant risks to its business, but cannot predict whether or to what extent any of such risks may be realized nor can there be any assurance that the Company has identified all possible risks that might arise. Investors should carefully consider all of such risks before making an investment decision with respect to the Company's stock.

OVERVIEW

The Company is a development stage company in the business of marketing electrical energy savings products.

PLAN OF OPERATION

The Company has limited operations since inception and is financially dependent on its shareholders, who have financed its existence to date.

The Company's plan of operation for the next twelve months is to raise sufficient capital to meet future working capital requirements and to continue to seek UL approval for its products so it can commence sales in North America.

DEVELOPMENT OF WORLDWIDE MARKETING AND SALES RIGHTS

Through an agreement dated July 25, 2008 with CRI, we hold the rights to market and sell worldwide, certain proprietary products. The cost of these products to us is on a mutually agreeable basis.

Initially, we will earn commissions on Asian sales of products until such time as we have retained our own sales personnel or distributors. After that, and in accordance with generally accepted accounting principles, we will report sales and cost of sales since the rights and obligations relating to such sales and cost of sales will be ours. We believe substantial sales will not occur until after UL approval is obtained for non-Asian markets.

DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

As initially forecasted, we have incurred operating losses since our inception, related primarily to general and administrative costs of which accrued consulting service costs for officers is the most significant item. During the current and comparative prior year quarter we had a net loss of $151,867 and $99,068, respectively. The Company has incurred cumulative losses of $638,915 since inception.
 
3


ITEM 2.                  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued
 
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION - continued
 
Also included in general and administrative expenses in the current and comparative quarters were the following:
 
   
01/31/09
   
01/31/08
   
               
Office rentals including office in home for our two officers 
  $ 7,540     $ 1,127  
(a)
Auditing services for the year ended October 31, 2008
    11,250       -0-  
(b)
Travel and meals        
    7,759       15,984  
(c)
Other amounts 
    2,172       (1,168 )  
                   
Total general and administrative expense  
  $ 28,721     $ 15,943    
 
(a)
During the current quarter each of the two officers/directors were paid $1,500 per month commencing December 1, 2008 for the use of their office in home which totaled $6,000.

(b)
Auditing services for the year ended October 31, 2007 were incurred and paid subsequent to the comparative quarter shown above.
 
(c)
Travel for the current quarter involved principally the one international trip and related travel expenses for Braverman International, P.C.’s personnel for attendance at the quarterly Board meeting in Bangkok, Thailand, in addition to travel between Thailand and Malaysia by our CEO to handle communications with CRI, whereas in the comparative quarter our SEC counsel and CFO traveled to Kuala Lumpur, Malaysia to facilitate and structure the Company’s operations.

LIQUIDITY AND CAPITAL RESOURCES

Since inception, we have financed our operations principally from private placement financing since we have had limited revenues since inception. We have suffered recurring losses from operations and have a working capital deficiency (current assets less current liabilities) of $100,297 as of January 31, 2009. Our capital requirements are becoming more significant as we move forward in time and develop our business plan.

CASH REQUIREMENTS AND NEED FOR ADDITIONAL FUNDS

In order to develop our business plan in the near term, we anticipate that we will require approximately $500,000 through additional financing by way of private placements, such as we have done in the past, for general and administrative expenses, including consulting fees, UL approval, the establishment of marketing and sales efforts in Asia and elsewhere, and the cost to acquire inventory and related technical personnel to support these efforts.

To provide the capital to enable us to proceed with purchasing CRI products and placing them with customers under the ESPC (Energy Savings Performance Contract) concept (whereby we receive a portion of the monthly energy savings enjoyed by our customers on products we own and they use over a 10 year period) we will require up to $3,000,000.
 
 
 
4


ITEM 3.                  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not required.


ITEM 4T.               CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures

The term “disclosure controls and procedures” is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, or the Exchange Act. This term refers to the controls and procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission. An evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness of the Company’s disclosure controls and procedures as of January 31, 2009. Based on that evaluation, the Company’s management, including the CEO and CFO, concluded that the Company’s disclosure controls and procedures were effective as of January 31, 2009. During the quarter ending on January 31, 2009, there was no change in the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5

 

PART II - OTHER INFORMATION

ITEM 1.                  LEGAL PROCEEDINGS

Management is not aware of any legal proceedings contemplated by any governmental authority or any other party against us. None of our directors, officers or affiliates are (i) a party adverse to us in any legal proceedings, or (ii) have an adverse interest to us in any legal proceedings. Management is not aware of any other legal proceedings that have been threatened against us.


ITEM 1A.               RISK FACTORS

None.


ITEM 2.                  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

During the three month period ended January 31, 2009, we received proceeds of $18,438 for 60,000 additional shares of common stock and reclassified the $15,180 received in advance in October 2008 for stock subscriptions dated in November and December 2008 as common stock issuances for 46,000 shares.

 
ITEM 3.                  DEFAULTS UPON SENIOR SECURITIES

None.


ITEM 4.                  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

 
ITEM 5.                  OTHER INFORMATION

None


ITEM 6.                  EXHIBITS

Exhibit Number
Exhibit
4.1
Consulting Agreement dated December 15, 2008 - Hans Schulte
4.2
Consulting Agreement dated December 15, 2008 - Ivan Braverman
31.1
Rule 13a-14(a) Certification of Chief Executive Officer
31.2
Rule 13a-14(a) Certification of Chief Financial Officer
32.1
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Chief Executive Officer
32.2
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Chief Financial Officer


SIGNATURES

Pursuant to the requirements 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.

 
CARBON CREDITS INTERNATIONAL, INC.
     
Date: March 3, 2009 By:
/s/  Han J Schulte
   
Han J Schulte
   
President and Principal Executive Officer

Date: March 3, 2009 By:
/s/  Ivan Braverman
   
Ivan Braverman
   
Chief Financial Officer
(Principal Financial and Accounting Officer)

 
6