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 September 30, 2006
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
--- THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-11871
COMMODORE APPLIED TECHNOLOGIES, INC.
------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 11-3312952
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
150 East 58th Street, Suite 3238
New York, New York 10155
------------------ -----
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (212) 308-5800
--------------
Indicate by check mark if the registrant is a well-known seasoned
issuer, as defined in Rule 405 of the Securities Act.
Yes [ ] No [ X ]
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the Exchange Act.
Yes [ ] No [ X ]
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.
Yes [ X ] No [ ]
Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, or a non-accelerated filer. See definition of
"accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange
Act.
Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ X ]
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act).
Yes [ ] No [ X ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at November 14, 2006
----------------------------------- ------------------------------------
Common Stock, $0.001 par value 8,168,217 shares
COMMODORE APPLIED TECHNOLOGIES, INC.
FORM 10-Q
INDEX
Page
----
Item 1. Condensed Consolidated Financial
Statements (unaudited).....................................................2
Condensed Consolidated Balance Sheets at
September 30, 2006 and December 31, 2005................................2
Condensed Consolidated Statements of Operations
for the Three and Nine Month Periods Ended
September 30, 2006 and 2005.............................................4
Condensed Consolidated Statements of Cash Flows
for the Nine Month Periods Ended September 30,
2006 and 2005...........................................................5
Notes to Condensed Consolidated Financial Statements......................6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.............................16
Item 3. Quantitative and Qualitative Disclosures
About Market Risk.........................................................23
Item 4. Controls and Procedures............................................24
PART II. OTHER INFORMATION.................................................25
Item 1. Legal Proceedings.................................................25
Item 1A. Risk Factors......................................................25
Item 6. Exhibits and Reports on Form 8-K..................................26
SIGNATURES..................................................................27
1
PART I - FINANCIAL INFORMATION
ITEM 1: Condensed Consolidated Financial Statements (unaudited)
-------------------------------------------------------
COMMODORE APPLIED TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited - Dollars in Thousands, except per share data)
September 30, December 31,
ASSETS 2006 2005
Current Assets:
Cash and cash equivalents $ 126 $ 65
Accounts receivable, net 2,033 2,065
Prepaid assets and other
current assets 140 139
------------- ------------
Total Current Assets 2,299 2,269
Property and equipment, net 128 148
------------- ------------
Total Assets $ 2,427 $ 2,417
============= ============
See notes to condensed consolidated financial statements.
2
COMMODORE APPLIED TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited - Dollars in Thousands, except per share data)
September 30, December 31,
LIABILITIES AND 2006 2005
STOCKHOLDERS' DEFICIT ------------- ------------
Current Liabilities:
Accounts payable $ 1,196 $ 1,376
Related party payable 252 253
Line of credit 344 141
Notes payable, net 375 635
Other accrued liabilities 5,180 4,450
------------- ------------
Total Current Liabilities 7,347 6,855
Long term debt, net of current portion 6,193 5,426
------------- ------------
Total Liabilities 13,540 12,281
Commitments and contingencies
Stockholders' Deficit
Convertible preferred stock, Series H & J
Par value $0.001 per share,
liquidation value of $6,353 as
of September 30, 2006 and December 31,
2005, 3% cumulative dividends for
Series H, 10% cumulative dividend for
Series J, 1,550,000 shares authorized,
1,188,302 shares issued and outstanding. 1 1
Common stock, par value $0.001 per share,
300,000,000 shares authorized,
8,168,217 And 7,948,217 shares issued
and outstanding, respectively. 8 8
Additional paid-in capital 69,399 69,680
Accumulated deficit (80,258) (79,290)
------------- ------------
(10,850) (9,601)
Treasury stock, 171,875 shares
(263) (263)
------------- ------------
Total Stockholders' Deficit (11,113) (9,864)
------------- ------------
Total Liabilities and Stockholders'
Deficit $ 2,427 $ 2,417
============= ============
See notes to condensed consolidated financial statements.
3
COMMODORE APPLIED TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited - Dollars in Thousands, except per share data)
Three months ended Nine months ended
September 30, September 30, September 30, September 30,
2006 2005 2006 2005
------------- ------------- ------------- -------------
(restated) (restated)
Contract revenues $ 2,281 $ 3,900 $ 6,343 $ 8,259
Costs and expenses:
Cost of sales 2,106 3,034 5,865 7,073
General and administrative 345 694 1,111 1,637
Depreciation and amortization 8 21 16 33
------------- ------------- ------------- -------------
Total costs and expenses 2,459 3,749 6,992 8,743
------------- ------------- ------------- -------------
Income (loss) from operations (178) 151 (649) (484)
------------- ------------- ------------- -------------
Other income (expense):
Gain on settlement of note
payable and accrued interest 7 -- 158 --
Interest expense (167) (432) (477) (1,009)
Net gain (loss) on embedded
derivative liability -- 44 -- (544)
------------- ------------- ------------- -------------
Net other expense (160) (388) (319) (1,553)
------------- ------------- ------------- -------------
Income (loss) before income taxes (338) (237) (968) (2,037)
Income taxes -- -- -- --
------------- ------------- ------------- -------------
Net loss (338) (237) (968) (2,037)
Deemed dividends and dividends
accrued to preferred
stockholders (103) (3,805) (309) (3,963)
------------- ------------- ------------- -------------
Net loss applicable to common
shareholders $ (441) $ (4,042) $ (1,277) $ (6,000)
============= ============= ============= =============
Loss per share - basic and
diluted $ (0.06) $ (0.53) $ (0.16) $ (0.84)
============= ============= ============= =============
Number of weighted average shares
outstanding (000's) 7,836 7,647 7,796 7,118
============= ============= ============= =============
See notes to condensed consolidated financial statements.
4
COMMODORE APPLIED TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - Dollars in Thousands, except per share data)
Nine months ended
September 30, September 30,
2006 2005
------------ -------------
(restated)
Cash flows from operating activities:
Net loss $ (968) $ (2,037)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 16 33
Issuance of common stock for services 28 --
Loss on disposal of equipment 4 --
Amortization of debt discount - 500
Derivative loss - 544
Gain on settlement of note payable
and accrued interest (158) -
Changes in assets and liabilities:
Accounts receivable, net 32 (3,684)
Prepaid assets and other
current assets (1) (9)
Accounts payable (180) 695
Other liabilities 518 2,780
------------ -------------
Net cash used in operating
activities (709) (1,178)
------------ -------------
Cash flows from investing activities:
Purchase of equipment - (105)
------------ -------------
Cash flows from financing activities:
Advances from (to) related parties, net (1) --
Increase in (repayment of) line of credit 203 317
Payment of notes and loans payable (199) --
Proceeds from sale or exchange of
common stock -- 100
Increase in notes and loans payable 767 1,024
------------ -------------
Net cash provided by financing
activities 770 1,441
Increase in cash 61 158
Cash, beginning of period 65 15
------------ -------------
Cash, end of period $ 126 $ 173
============ ============
See notes to condensed consolidated financial statements.
5
COMMODORE APPLIED TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note A - Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
for Commodore Applied Technologies, Inc. and subsidiaries (the "Company" or
"Applied") have been prepared in accordance with U.S. generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. The financial
statement information was derived from unaudited financial statements unless
indicated otherwise. Accordingly, they do not include all of the information and
footnotes required by U.S. 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 have been
included. Operating results for the nine month period ended September 30, 2006
are not necessarily indicative of the results that may be expected for the year
ending December 31, 2006.
The accompanying unaudited condensed consolidated financial statements
should be read in conjunction with the Company's audited financial statements
included in the Company's annual report on Form 10-K for the year ended December
31, 2005.
Certain prior-year amounts have been reclassified to conform to the
current year presentation.
The accompanying financial statements have been prepared under the
assumption that Applied will continue as a going concern. Such assumption
contemplates the realization of assets and the satisfaction of liabilities in
the normal course of business. For the nine months ended September 30, 2006, and
for the years ended December 31, 2005, 2004, and 2003, Applied incurred losses
of $968,000, $2,714,000, $2,404,000, and $2,957,000, respectively. The Company
has also experienced net cash outflows from operating activities of
($1,337,000), ($1,532,000), and ($955,000), for the years ended December 31,
2005, 2004 and 2003, respectively. These factors raise substantial doubt about
Applied's ability to continue as a going concern. The financial statements do
not include any adjustments that might be necessary should Applied be unable to
continue as a going concern. Applied's continuation as a going concern is
dependent upon its ability to generate sufficient cash flow to meet its
obligations on a timely basis, to obtain additional financing as may be
required, and ultimately to attain profitability. Potential sources of cash
include new contracts, external debt, the sale of new shares of Company stock or
alternative methods such as mergers or sale transactions. No assurances can be
given, however, that Applied will be able to obtain any of these potential
sources of cash.
6
Note B - Restatement of financial statements
The Company's previously issued condensed consolidated financial
statements as of and for the three and nine months ended September 30, 2005,
have been restated to record the embedded derivatives from the embedded
conversion option of the Convertible Secured Note and the Series I Convertible
Preferred Stock, entered into on April 11, 2005, as a deemed dividend and as a
debt discount, respectively, instead of as an other loss. As a result of this
restatement the Company recorded a deemed dividend of $3,701 and a debt discount
of $4,361, and $273 and $500 of the debt discount was amortized into interest
expense during the three and nine months ended September 30, 2005, respectively.
Net income (loss) was reduced by $273 and $7,562 for the three and nine months,
respectively, due to these restatements. A change in the valuation of the
embedded derivative was recorded in the amount of a gain of $44 and a loss of
($544) for the three and nine months ended September 30, 2005, respectively.
The following table summarizes the effect of the restatement and
reclassification adjustments on the financial statements as of and for the three
and nine months ended September 30, 2005.
Three Months Ended Nine Months Ended
----------------------------- -----------------------------
September 30, September 30, September 30, September 30,
2005 2005 2005 2005
------------- -------------- ------------- -------------
(Restated) (Previously (Restated) (Previously
Reported) Reported)
Contract Revenues $ 3,900 $ 3,900 $ 8,259 $ 8,259
Total cost and expenses $ 3,749 $ 3,749 $ 8,743 $ 8,742
------------ ------------- ------------- -------------
Income (loss) From Operations $ 151 $ 151 $ (484) $ (483)
Other expense:
Interest Expense $ (432) $ (159) $ (1,009) $ (509)
Net gain (loss) on embedded
derivative liability $ 44 $ 44 $ (544) $ (8,607)
------------ ------------- ------------- -------------
Net gain (loss) $ (237) $ 36 $ (2,037) $ (9,599)
Deemed dividends and dividends
accrued to preferred stockholders $ (3,805) $ (104) $ (3,963) $ (262)
Net loss applicable to common ------------ ------------- ------------- -------------
shareholders $ (4,042) $ (68) $ (6,000) $ (9,861)
7
Note C - Summary of Significant Accounting Policies
Allowance for Anticipated Losses on Contracts
Anticipated losses on contracts are provided for by a charge to income
during the period such losses are identified. Changes in job performance, job
conditions, estimated profitability (including those arising from contract
penalty provisions) and final contract settlements may result in revisions to
cost and income and are recognized in the period in which the revisions are
determined. Allowances for anticipated losses totaled $376,000 at September 30,
2006 and December 31, 2005. These allowances are included in other accrued
liabilities in the accompanying financial statements.
Consolidation
The condensed consolidated financial statements include the accounts of
the Company and its majority-owned subsidiaries. All significant intercompany
balances and transactions have been eliminated. The preparation of consolidated
financial statements in conformity with U.S. generally accepted accounting
principles requires management to make 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 and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Stock Based Compensation
The Company has established the 1998 Stock Option Plan, as amended (the
"1998 Plan"), and performance based stock options to executives outside of the
1998 Plan granted in 2003, for the award of stock options and stock bonuses to
employees, executive officers, members of the Board of Directors and outside
consultants. The Compensation Committee of the Board of Directors has the
ability to determine the terms of the option, the exercise price, the number of
shares subject to each option, and the exercisability of the options.
Under the terms of the 1998 Plan, options generally expire 10 years
from the date of grant or within 90 days of termination. Options granted under
these plans generally vest at 25 percent after the completion of one year of
service and then 1/36 per month for the remaining three years and would be fully
vested at the end of four years. Pursuant to the terms of their grant
agreements, certain of the options granted under these plans may be subject to
accelerated vesting upon a change in control of the Company.
Under the terms of the performance based stock options to executives
outside of the 1998 Plan granted in 2003, options generally expire 5 years from
the date of grant or within 90 days of termination. Options granted under these
plans generally vest at grant date.
Prior to December 31, 2005, as permitted under Statement of Financial
Accounting Standards ("SFAS") No. 123, the Company accounted for its stock
option plans following the recognition and measurement principles of Accounting
Principles Board ("APB") Opinion No. 25, "Accounting for Stock issued to
Employees," and related interpretations. Accordingly, no stock-based
8
compensation expense had been reflected in the Company's statements of
operations as all options granted had an exercise price equal to or greater than
the market value of the underlying common stock on the date of grant and the
related number of shares granted was fixed at that point in time.
In December 2004, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 123(R), "Share Based Payment." This statement revised SFAS No.
123 by eliminating the option to account for employee stock options under APB
No. 25 and requires companies to recognize the cost of employee services
received in exchange for awards of equity instruments based on the grant date
fair value of those awards.
Effective January 1, 2006, the Company adopted the fair value
recognition provisions of SFAS No. 123(R) using the modified prospective
application method. Under this transition method, the Company would have
recorded compensation expense on a straight-line basis for the three and nine
month periods ended September 30, 2006, for: (a) the vesting of options granted
prior to January 1, 2006 (based on the grant date fair value estimated in
accordance with the original provisions of SFAS No. 123, and previously
presented in the pro-forma footnote disclosures), and (b) stock-based awards
granted subsequent to January 1, 2006 (based on the grant date fair value
estimated in accordance with the provisions of SFAS No. 123(R)). In accordance
with the modified prospective application method, results for the three and nine
months ended September 30, 2005 have not been restated.
There were no options granted in the three and nine month periods ended
September 30, 2006, and all options granted prior to January 1, 2006 were fully
vested prior to January 1, 2006. As such, there was no compensation expense
recorded for options during the three and nine month periods ended September 30,
2006. Also, there were no options granted to employees in the three and nine
month periods ended September 30, 2005.
Note D - Supplemental cash flow information
During the three and nine month periods ended September 30, 2006, no
shares of Series J Preferred Stock were converted into shares of the Company's
common stock. During the three and nine month periods ended September 30, 2006,
the Company paid no dividends on the Series J Preferred Stock. The Company
accrued dividends on Preferred Stock Series J for the three and nine-month
periods ended September 30, 2006, of $97,075 and $291,226 respectively, which
are included in Other Accrued Liabilities.
During the three and nine month periods ended September 30, 2006, no
shares of Preferred Stock Series H were converted into shares of the Company's
common stock. The Company accrued dividends on Preferred Stock Series H for the
three and nine-month periods ended September 30, 2006, of $6,000 and $18,000,
respectively, which are included in Other Accrued Liabilities.
During the three and nine month periods ended September 30, 2006 the
Company paid no accrued dividends on the accrued balance on the Series I
Preferred Stock. The balance of dividends accrued on the Series I Preferred
Stock as of December 31, 2005 and September 30, 2006 is $183,697, which is
included in Other Accrued Liabilities.
9
Note E - Other Accrued Liabilities
Other accrued liabilities consist of the following:
September 30, December 31,
2006 2005
------------- ------------
(unaudited) (audited)
Compensation and employee benefits $ 2,114 $ 1,987
Accrued Interest 1,075 694
Dividends Payable 670 361
Subcontractors 650 724
Loss Reserve 376 376
Related parties advances 185 185
Other 110 123
-----------------------------
$ 5,180 $ 4,450
=============================
Note F - Segment Information
The Company has identified two reportable segments in which it
operates, based on the guidelines set forth in SFAS No. 131. These two segments
are as follows: (i) Commodore Advanced Sciences, Inc., which primarily provides
various engineering, legal, sampling, and public relations services to
Government agencies on a cost plus basis; and (ii) Commodore Solutions, Inc.,
which is commercializing technologies to treat mixed and hazardous waste.
10
Applied evaluates segment performance based on the segment's net income
(loss). Applied's foreign and export sales and assets located outside of the
United States are not significant. Summarized financial information concerning
Applied's reportable segments is shown in the following tables.
Nine Months Ended September 30, 2006
(Dollars in Thousands)
--------------------------------------------------------------------------------
Corporate
Overhead
Total ASI Solution and Other
Contract revenues $ 6,343 $ 6,343 $ -- $ --
Costs and expenses
Cost of sales 5,865 5,865 -- --
General and administrative 1,111 250 4 857
Depreciation and amortization 16 16 -- --
--------- --------- ---------- -----------
Total costs and expenses 6,992 6,131 4 857
--------- --------- ---------- -----------
Income (loss) from operations (649) 212 (4) (857)
Gain on settlement of
note payable and
accrued interest 158 54 -- 104
Interest expense (477) -- -- (477)
--------- --------- ---------- -----------
Income (Loss) before income taxes (968) 266 (4) (1,230)
Income taxes -- -- -- --
--------- --------- ---------- -----------
Net Income (Loss) $ (968) $ 266 $ (4) $ (1,230)
========= ========= ========== ===========
Total assets $ 2,427 $ 2,427 $ -- $ --
Expenditures for long-lived assets $ -- $ -- $ -- $ --
11
Three Months Ended September 30, 2006
(Dollars in Thousands)
--------------------------------------------------------------------------------
Corporate
Overhead
Total ASI Solution and Other
Contract revenues $ 2,281 $ 2,281 $ -- $ --
Costs and expenses
Cost of sales 2,106 2,106 -- --
General and administrative 345 45 -- 300
Depreciation and amortization 8 8 -- --
--------- --------- ---------- -----------
Total costs and expenses 2,459 2,159 -- 300
--------- --------- ---------- -----------
Income (Loss) from operations (178) 122 -- (300)
Gain on settlement
of payable and accrued interest 7 -- -- 7
Interest expense (167) -- -- (167)
--------- --------- ---------- -----------
Income (Loss) before income taxes (338) 122 -- (460)
Income taxes -- -- -- --
--------- --------- ---------- -----------
Net Income (Loss) $ (338) $ 122 $ -- $ (460)
========= ========= ========== ===========
Total assets $ 2,427 $ 2,427 $ -- $ --
Expenditures for long-lived assets $ -- $ -- $ -- $ --
12
Nine Months Ended September 30, 2005
(Dollars in Thousands)
--------------------------------------------------------------------------------
Corporate
Overhead
Total ASI Solution and Other
Contract revenues $ 8,259 $ 8,173 $ 86 $ --
Costs and expenses
Cost of sales 7,073 7,019 54 --
General and administrative 1,637 603 16 1,018
Depreciation and amortization 33 33 -- --
--------- --------- ---------- -----------
Total costs and expenses 8,743 7,655 70 1,018
--------- --------- ---------- -----------
Income (loss) from operations (484) 518 16 (1,018)
Interest expense (1,009) (5) -- (1,004)
Net gain (loss) on
embedded derivative (544) -- -- (544)
--------- --------- ---------- -----------
Income (loss) before income taxes (2,037) 513 16 (2,566)
Income taxes -- -- -- --
--------- --------- ---------- -----------
Net income (loss) $ (2,037) $ 513 $ 16 $ (2,566)
========= ========= ========== ===========
Total assets $ 3,525 $ 3,433 $ 86 $ 6
Expenditures for long-lived assets $ 105 $ 101 $ -- $ 4
13
Three Months Ended September 30, 2005
(Dollars in Thousands)
--------------------------------------------------------------------------------
Corporate
Overhead
Total ASI Solution and Other
Contract revenues $ 3,900 $ 3,900 $ 3,900 $ --
Costs and expenses
Cost of sales 3,034 3,034 -- --
General and administrative 694 373 -- 321
Depreciation and amortization 21 21 -- --
--------- --------- ---------- -----------
Total costs and expenses 3,749 3,428 0 321
--------- --------- ---------- -----------
Income (loss) from operations 151 472 0 (321)
Interest expense (432) (5) -- (427)
Net gain (loss) on embedded
derivative 44 -- -- 44
--------- --------- ---------- -----------
Loss before income taxes (237) 467 0 (704)
Income taxes -- -- -- --
--------- --------- ---------- -----------
Net income (loss) $ (237 $ 467 $ 0 $ (704)
========= ========= ========== ===========
Total assets $ 3,525 $ 3,433 $ 86 $ 6
Expenditures for long-lived assets $ 33 $ 31 $ -- $ 2
14
Note G - Net loss per common share
Basic net loss per common share ("Basic EPS") excludes dilution and is
computed by dividing net loss available to common shareholders by the weighted
average number of common shares outstanding during the period. Diluted net loss
per common share ("Diluted EPS") reflects the potential dilution that could
occur if stock options or other contracts to issue common stock were exercised
or converted into common stock. The computation of Diluted EPS does not assume
exercise or conversion of securities that would have an anti-dilutive effect on
net loss per common share.
Options and warrants to purchase 5,967,755 and 6,079,463 shares of common stock
and preferred stock convertible into 34,378,313 and 25,641,808 shares of common
stock as of September 30, 2006 and 2005, respectively, were not included in the
computation of Diluted EPS. The inclusion of the options, warrants and
convertible preferred stock would have been anti-dilutive, thereby decreasing
net loss per common share.
Note H - Contingencies
Applied has matters of litigation arising in the ordinary course of
business which, in the opinion of management, will not have a material adverse
effect on its financial condition or results of operations.
Note I - Subsequent Events
On October 26, 2006, Mr. James M. DeAngelis submitted a letter of
resignation as Chief Financial Officer, Chief Administration Officer and
Treasurer of the Company effective as of December 31, 2006. Mr. DeAngelis will
continue to serve the Company as a Director and as Senior Vice President,
Strategic Development for the Company in 2007, primarily focused on the investor
relations programs for the Company.
On November 1, 2006, the Company entered into an employment agreement
with Ted R. Sharp to serve the Company as Chief Financial Officer, effective
January 1, 2007. To provide for a period of transition from the current Chief
Financial Officer, James M. DeAngelis, who will resign that position effective
January 1, 2007, Mr. Sharp began his employment on November 1 and will assume
full responsibility for the position on the effective date.
15
ITEM 2. Management's Discussion and Analysis of Financial Condition
-----------------------------------------------------------
and Results of Operations
-------------------------
Overview
The Company is engaged in providing a range of environmental services to the
public and private sectors related to (i) remediating contamination in soils,
liquids and other materials and disposing of or reusing certain waste
by-products by utilizing Solvated Electron Technology ("SET"); and (ii)
providing services related to environmental management for on-site and off-site
identification, investigation, remediation and management of hazardous, mixed
and radioactive waste.
The Company owns technologies related to the separation and destruction
of mixed waste, polychlorinated biphenyls (PCBs) and chlorofluorocarbons (CFCs).
The Company is currently working on the commercialization of these technologies
through development efforts, licensing arrangements and joint ventures. Through
Advanced Sciences, formerly Advanced Sciences, Inc., a subsidiary acquired on
October 1, 1996, the Company has contracts with various government agencies and
private companies in the U.S. As some government contracts are funded in
one-year increments, there is a possibility for cut-backs, and such a reduction
would materially affect the operations. However, management believes Advanced
Sciences' existing client relationships will allow the Company to obtain new
contracts in the future.
The Company has identified two reportable segments in which it
operates, based on the guidelines set forth in the Financial Accounting
Standards Board's Statement of Financial Accounting Standards No. 131. These two
segments are as follows: Commodore Advanced Sciences, Inc. ("Advanced
Sciences"), which primarily provides various engineering, legal, sampling, and
public relations services to government agencies on a cost plus basis; and
Commodore Solutions, Inc. ("Solutions"), which is commercializing technologies
to treat mixed and hazardous waste.
The Company currently requires additional cash to sustain existing
operations and to meet current obligations and ongoing capital requirements. The
Company's current monthly operating expenses exceed cash revenues by
approximately $80,000 at September 30, 2006. Currently, the Company is
addressing this cash shortfall through loans from The Shaar Fund, Ltd., but The
Shaar Fund, Ltd. is under no obligation to continue to make such advances to the
Company. If this lender decided to discontinue advances, the Company would not
be able to meet its current obligations. In addition, the Company owes $564,429
in loans that are currently due or are payable on demand as of August 21, 2006.
Although the lenders on these loans have not yet called the loans, the Company
does not currently have the ability to pay these loans absent additional
financing.
The Company's report of independent registered public accounting firm
on its fiscal 2003, 2004 and 2005 financial statements contains a "going
concern" qualification in which they express substantial doubt about the
Company's ability to continue in business.
16
CRITICAL ACCOUNTING POLICIES
We prepare our financial statements in conformity with U.S. generally
accepted accounting principles. As such, we are required to make certain
estimates, judgments and assumptions that we believe are reasonable based upon
the information available. These estimates and assumptions affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the periods presented.
Our accounting policies that are the most important to the portrayal of
our financial condition and results, and which require the highest degree of
management judgment relate to the reserves for doubtful accounts receivable and
the valuation of stock and options issued for services.
Reserves for Doubtful Accounts
Management estimates the amount of required reserves for the potential
non-collectibility of accounts receivable based upon the customer's financial
condition, age of the customer's receivables, changes in payment histories, and
consideration of other relevant factors. Because the reserve for doubtful
accounts is an estimate of events that have not yet occurred, we could incur
additional charges or benefits in the future to reflect differences between
estimated and actual collections.
Valuation of stock and options
We value and account for the issuance of equity instruments to
employees and non-employees to acquire goods and services based on the fair
value of the goods and services or the fair value of the equity instrument at
the time of issuance, whichever is more reliably measurable. The fair value of
stock issued for goods or services is determined based on the quoted market
price on the date the commitment to issue the stock has occurred. The fair value
of stock options or warrants granted to employees and non-employees for goods or
services is calculated on the date of grant using the Black-Scholes options
pricing model.
Revenue Recognition
Substantially all the Company's current revenues consist of engineering
and scientific services performed for the U.S. Government and prime contractors
that serve the U.S. Government under a variety of contracts, most of which
provide for unit prices. Revenue under unit price contracts are recorded when
the services are provided.
Most of the Company's historical contracts provided for reimbursement
of costs plus fixed fees. Direct and indirect contract costs incurred in
reimbursement plus cost contracts are subject to audit by the Defense Contract
Audit Agency ("DCAA"). Management does not expect these audits to materially
affect the financial statements and has established appropriate allowances to
cover potential audit disallowances. Contract revenues have been recorded in
amounts which are expected to be realized upon final settlement. The DCAA has
audited the Company's contracts through 1999. An allowance for doubtful accounts
and potential disallowances has been established based upon the portion of
billed and unbilled receivables that management believes may be uncollectible.
17
RESULTS OF OPERATIONS
Three and Nine Months Ended September 30, 2006 Compared to Three and Nine Months
Ended September 30, 2005
Revenues were $2,281,000 and $6,343,000 for the three and nine months
ended September 30, 2006 compared to $3,900,000 and $8,259,000 for the three and
nine months ended September 30, 2005. Such revenues were primarily from the
Company's subsidiary ASI.
In the case of Advanced Sciences, revenues were $2,281,000 and
$6,343,000, respectively, for the three and nine months ended September 30, 2006
as compared with $3,900,000 and $8,173,000, respectively, for the three and nine
months ended September 30, 2005. The decrease in revenues can be attributed to a
reduction in the overall value of the open environmental sampling and data
integration contract ("EDAM") work orders and overall, less work being performed
by Advanced Sciences during this period. The revenues from Advanced Sciences
consisted of engineering and scientific services performed for the United States
government under a variety of contracts, most of which provide for reimbursement
on a fixed rate and a lump sum basis. Revenue under these contracts is recorded
as tasks under various work orders are completed and the client approved invoice
is submitted for payment. Advanced Sciences has three major customers, each of
which represents more than 10% of total revenue. The combined revenue for these
three customers was $2,281,000 and $6,343,000 respectively, (100% of total
revenues) for the three and nine months ended September 30, 2006. Cost of sales
was $2,106,000 and $5,865,000, respectively, for the three and nine months ended
September 30, 2006 compared to $3,034,000 and $7,019,000, respectively, for the
three and nine months ended September 30, 2005. The decrease in cost of sales
can be attributed to a decrease in variable costs caused by the reduction in the
overall value of open EDAM contract work orders and overall, less work being
performed by Advanced Sciences during this period.
The Company has experienced a decrease in revenues of $1,619,000 and
$1,916,000 for the three and nine month periods ended September 30, 2006,
respectively, compared to the three and nine month periods ended September 30,
2005, respectively. The decrease in revenues can be attributed to a reduction in
the overall value of the open EDAM contract work orders and overall, less work
being performed by Advanced Sciences during this period. The Company was
recently awarded a two-year extension to the EDAM contract. The EDAM extension
will run from October 1, 2006 through September 30, 2008. There will be no
laboratory management or data management services as in first two years of the
EDAM contract, which had a small contribution margin to the Company, because the
Company's client, Bechtel Jacobs, LLC has decided to self perform this work
scope during the two-year extension of the EDAM contract.
In the case of Solutions, revenues were $0 and $0, respectively, for
the three and nine months ended September 30, 2006 as compared with $0 and
$86,000, respectively, for three and nine months ended September 30, 2005.
Solution had no customers during the three and nine-month periods ended
September 30, 2006. Revenues, when recognized, are primarily from remediation
services performed for engineering and waste treatment companies in the U.S.
under a variety of contracts. Cost of sales was $0 and $0, respectively, for the
18
three and nine months ended September 30, 2006 as compared to $0 and $54,000,
respectively, for the three and nine months ended September 30, 2005. The cost
of sales, when incurred, is attributable to sales and marketing expenses for the
SET technology. Anticipated losses on engagements, if any, will be provided for
by a charge to income during the period such losses are first identified.
General and administrative expenses for continuing operations for the
three and nine months ended September 30, 2006 were $345,000 and $1,111,000
respectively, as compared to $694,000 and $1,637,000, respectively, for the
three and nine months ended September 30, 2005. The decrease in general and
administrative expense of $349,000 and $526,000, respectively, for the three and
nine month periods ended September 30, 2006 as compared to the same periods in
the prior year is primarily related to less travel and expense account related
items at the corporate level in addition to less use of consultants and
professional services at the corporate level.
In the case of Advanced Sciences, general and administrative costs for
the three and nine-month periods ended September 30, 2006 were $45,000 and
$250,000, respectively, compared to $373,000 and $603,000, respectively, for the
three and nine months ended September 30, 2005. This decrease is primarily due
to less administrative costs associated with the EDAM contract in Oak Ridge, TN.
Solution incurred general and administrative costs of $0 and $4, respectively,
for the three and nine-month periods ended September 30, 2006 as compared to $0
and $16,000, respectively, for the three and nine-month periods ended September
30, 2005. This decrease was primarily due to the reassignment of a Solution's
employee to CASI field work on the EDAM contract in Oak Ridge, TN.
Interest expense for the three and nine months ended September 30, 2006
was $167,000 and $477,000, respectively, as compared to $432,000 and $1,009,000,
respectively, for the three and nine month periods ended September 30, 2005. The
decrease in interest expense of $265,000 and $532,000, respectively, for the
three and nine month periods ended September 30, 2006 as compared to the same
periods in the prior year is primarily related to the interest expense related
to amortizing the debt discount related to the embedded derivative recognized in
2005.
OFF-BALANCE SHEET ARRANGEMENTS
There are no off-balance sheet arrangements, such as financing or
variable interest entities, that either have, or are reasonably likely to have,
a current or future material effect on financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2006 and December 31, 2005 Advanced Sciences had a
$344,000 and $141,000 outstanding balance, respectively, on its revolving line
of credit.
The Company currently requires additional cash to sustain existing
operations and to meet current obligations and ongoing capital requirements. The
Company's current monthly operating expenses exceed cash revenues by
approximately $80,000 at September 30, 2006. Currently, the Company is
addressing this cash shortfall though loans from The Shaar Fund, Ltd., but The
Shaar Fund, Ltd. is under no obligation to continue to make such advances to the
Company. If this lender decided to discontinue advances, the Company would not
be able to meet its current obligations. In addition, the Company owes $564,429
19
in loans that are currently due or are payable on demand as of August 21, 2006.
Although the lenders on these loans have not yet called the loans, the Company
does not currently have the ability to pay these loans absent additional
financing.
The report of our independent registered public accounting firm on our
fiscal 2003, 2004 and 2005 consolidated financial statements contains a "going
concern" qualification in which they express substantial doubt about our ability
to continue in business. The Company currently requires additional cash to
sustain existing operations and to meet current obligations and ongoing capital
requirements.
For the three and nine month periods ended September 30, 2006, the
Company incurred a net loss of $338,000 and $968,000, respectively, as compared
to a net loss of $237,000 and $2,037,000, respectively, for the three and nine
month periods ended September 30, 2005. For the nine months ended September 30,
2006, and for the years ended December 31, 2005, 2004, and 2003, Applied
incurred losses of $968,000; $2,714,000, $2,404,000; and $2,957,000,
respectively. The Company has also experienced net cash outflows from operating
activities of ($1,337,000), ($1,532,000), and ($955,000), for the years ended
December 31, 2005, 2004 and 2003, respectively.
For the three and nine month periods ended September 30, 2006, the
Company issued no stock with respect to accrued dividends pertaining to the
Series I Preferred. For the three and nine month periods ended September 30,
2006, the Company converted no shares of Series J Preferred into shares of the
Company's common stock and issued no stock with respect to accrued dividends
pertaining to the Series J Preferred. For the three and nine month periods ended
September 30, 2006, the Company converted no shares of Series H Preferred and
issued no stock with respect to accrued dividends pertaining to the Series H
Preferred.
The Company recently settled a note payable that was due and payable in
the principal amount of $254,000 to a vendor for services provided from an
earlier period in the three month period ended March 31, 2006. The settlement
resulted in the recording of a short term note payable, 0% interest, in the
principal amount of $200,000 to the vendor. The Company has made three of four
payments of $50,000 each on this short term Note payable at September 30, 2006.
The settlement of this note payable to the vendor had the effect of recognizing
the reduction of a historical recorded note payable by $54,000 (other income to
Advanced Sciences) and the reduction of historical accrued interest payable by
$97,000 (other income to Applied) which was recognized in the nine month period
ended September 30, 2006. These income amounts are included in Other Income and
have not arisen from the Company's normal base of operations.
Certain prior-year amounts have been reclassified to conform to the
current year presentation.
For the three and nine month period ended September 30, 2006, no shares
of the Company's Series J Preferred were converted into shares of the Company's
common stock. For the three and nine month period ended September 30, 2006, the
Company accrued all dividends payable on the Series J Preferred Stock.
For the Year ended December 31, 2005, the Company issued 439,206 shares
of the Company's common stock upon conversion of 7,000 shares of Series I
Preferred by the holders thereof. For the three and nine month periods ended
20
September 30, 2006, the Company issued no stock with respect to accrued
dividends pertaining to the Series I Preferred. The Company accrued dividends on
the Series I Preferred for the three and nine month periods ended September 30,
2006, of $183,696, which is included in Other Accrued Liabilities.
For the three and nine month periods ended September 30, 2006, the
Company converted no shares of Series H Preferred and issued no stock with
respect to accrued dividends pertaining to the Series H Preferred. For the three
and nine month periods ended September 30, 2006, the Company paid no dividends
on the Series H Preferred Stock. The Company accrued dividends on Series H
Preferred for the three and nine month period ended September 30, 2006 of $6,000
and $18,000, which is included in Other Accrued Liabilities.
For the three and nine month periods ended September 30, 2006, the
Company converted no shares of Series J Preferred and issued no stock with
respect to accrued dividends pertaining to the Series J Preferred. For the three
and nine month periods ended September 30, 2006, the Company paid no dividends
on the Series J Preferred. The Company accrued dividends on Series J Preferred
for the three and nine month period ended September 30, 2006 of $97,076 and
$291,226, which is included in Other Accrued Liabilities.
In November 2000, the Company completed $500,000 in financing in the
form of a loan (the "Weiss Group Note") from a group of four investors. The
Weiss Group Note bears interest at 12% per annum and was due and payable on
February 12, 2001. The current principal balance of the Weiss Group Note is
$252,397 and is due and payable as of September 30, 2006 and remains unpaid as
of November 14, 2006.
Mr. Blum, a director of the Company, provided cash installments in the
form of a loan to the Company through February 2004 (the "Blum Demand Note").
The Blum Demand Note bears interest at 9% per annum and is payable on demand.
The current principal balance of the Blum Demand Note is $312,032 as of
September 30, 2006 and remains unpaid as of November 14, 2006.
On September 5, 2006, The Aurelius Consulting Group ("Aurelius"),
received 220,000 shares of the Company's unregistered common stock in connection
with the execution of a one year consulting agreement between Aurelius and the
Company (the "IR Agreement") to provide investment relations services to the
Company. The 220,000 shares of restricted common stock were accepted by Aurelius
as partial payment for the first six months of the IR Agreement. An additional
120,000 shares of the Company's unregistered common stock will be due and
payable to Aurelius on or about March 5, 2007 as partial payment for the
remaining six months of the IR Agreement. The Company pays Aurelius $4,000 per
month in cash for the balance of the investment relations services to the
Company as per terms and conditions of the IR Agreement. The Company believes
that this transaction is exempt from the registration requirements of the
Securities Act under Section 4(2) thereof as a transaction not involving any
public offering of securities.
The current principal balance of the New Shaar Note is $6,193,233 as of
September 30, 2006 and remains unpaid as of November 14, 2006.
The recipient of securities in this transaction represented its
intention to acquire the securities for investment only and not with a view to,
or for sale in connection with, any distribution thereof, and appropriate
restrictive legends were affixed to the warrants and the certificates
representing the shares issued in this transaction. The Company made available
to The Shaar Fund Ltd., written information about the Company in accordance with
21
Rule 502 of the Securities Act and advised such recipient of the limitations on
resale of such securities. In addition, The Shaar Fund Ltd. was offered the
opportunity, prior to exchanging and/or purchasing any securities, to ask
questions of, and receive answers from, the Company concerning the terms and
conditions of the transaction and to obtain additional relevant information
about the Company. Based upon the facts above, the Company believed this
transaction to be exempt from the registration requirements of the Securities
Act in reliance on Section 4 (2) thereof as a transaction not involving any
public offering of securities.
The Company hopes to meet its short-term capital requirements
(including its $80,000 monthly cash shortfall) through continued loans from The
Shaar Fund, Ltd., although this lender is under no obligation to continue to
make advances to the Company. The Company intends to negotiate a forbearance
arrangement with other lenders on loans that are currently due. Ultimately, the
Company intends to reduce its cash shortfall and intends to meet its long term
capital needs through obtaining additional contracts that will generate funds
from operations and obtaining additional debt or equity financing as necessary
or engaging in merger or sale transactions. There can be no assurance that such
sources of funds will be available to the Company or that it will be able to
meet its short or long term capital requirements.
NET OPERATING LOSS CARRYFORWARDS
The Company has net operating loss carryforwards (the "NOLs") of
approximately $39,000,000 as of December 31, 2005, which expire in the years
2010 through 2025. The amount of NOLs that can be used in any one year will be
limited by the applicable tax laws that are in effect at the time such NOLs can
be utilized. The unused NOLs balances may be accumulated and used in subsequent
years. A full valuation allowance has been established to offset any benefit
from the net operating loss carryforwards. It cannot be determined when or if
the Company will be able to utilize the NOLs.
FORWARD-LOOKING STATEMENTS
Certain matters discussed in this Annual Report are "forward-looking
statements" intended to qualify for the safe harbors from liability established
by Section 27A of the Securities Act and Section 21E of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). These forward-looking statements
can generally be identified as such because the context of the statement will
include words such as the Company "believes," "anticipates," "expects" or words
of similar import. Similarly, statements that describe the Company's future
plans, objectives or goals are also forward-looking statements.
Such statements may address future events and conditions concerning,
among other things, the Company's results of operations and financial condition;
the consummation of acquisition and financing transactions and the effect
thereof on the Company's business; capital expenditures; litigation; regulatory
matters; and the Company's plans and objectives for future operations and
expansion. Any such forward-looking statements would be subject to the risks and
uncertainties that could cause actual results of operations, financial
condition, acquisitions, financing transactions, operations, expenditures,
22
expansion and other events to differ materially from those expressed or implied
in such forward-looking statements. Any such forward-looking statements would be
subject to a number of assumptions regarding, among other things, future
economic, competitive and market conditions generally. Such assumptions would be
based on facts and conditions as they exist at the time such statements are made
as well as predictions as to future facts and conditions, the accurate
prediction of which may be difficult and involve the assessment of events beyond
the Company's control.
Further, the Company's business is subject to a number of risks and
uncertainties that would affect any such forward-looking statements. These risks
and uncertainties include, but are not limited to:
o the Company's critical need for additional cash to sustain
existing operations and meet existing obligations and capital
requirements (the Company's auditor's opinion on our fiscal 2003,
2004 and 2005 financial statements contains a "going concern"
qualification in which they express doubt about the Company's
ability to continue in business, absent additional financing);
o the ability to generate profitable operations from a large scale
remediation project;
o the ability of the Company to renew its nationwide permit to treat
PCBs;
o the ability of the Company to implement its waste processing
operations, including obtaining commercial waste processing
contracts and processing waste under such contracts in a timely
and cost effective manner; the timing and award of contracts by
the U.S. Department of Energy for the cleanup of waste sites
administered by it;
o the timing and award of contracts by the U.S. Department of Energy
for the cleanup of waste sites administered by it;
o the acceptance and implementation of the Company's waste treatment
technologies in the government and commercial sectors;
o the Company's ability to obtain and perform under other large
technical support services projects; developments in environmental
legislation and regulation;
o the ability of the Company to obtain future financing on favorable
terms; and
o other circumstances affecting anticipated revenues and costs.
These risks and uncertainties could cause actual results of the Company
to differ materially from those projected or implied by such forward-looking
statements.
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
----------------------------------------------------------
Not applicable.
ITEM 4. Controls and Procedures
-----------------------
(a) Evaluation of disclosure controls and procedures
23
We maintain disclosure controls and procedures designed to ensure that
information required to be disclosed in our reports filed under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), is recorded, processed,
summarized, and reported within the required time periods, and that such
information is accumulated and communicated to our management, including our
Chief Executive Officer and Chief Financial Officer, as appropriate, to allow
for timely decisions regarding required disclosure.
As required by Rule 13a-15(b) under the Exchange Act, we conducted an
evaluation, under the supervision of our Chief Executive Officer and Chief
Financial Officer, of the effectiveness of our disclosure controls and
procedures as of September 30, 2006. Based on their evaluations as of September
30, 2006, the chief executive officer and chief financial officer of the Company
have concluded that the Company's disclosure controls and procedures (as defined
in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act) are
effective to ensure that information required to be disclosed by the Company in
reports that it files or submits under the Securities Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the
rules and forms of the SEC.
Management has taken steps to correct any material weaknesses that were
identified in Company's fiscal 2005 10K report filed April 18, 2006 ("2005
Annual Report") on form 10K for the period ended December 31, 2005 with respect
to analyzing debt and equity instruments to identify potential embedded
derivatives and any required accounting entries and disclosures pertaining to
embedded derivatives.
24
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
There have been no material legal proceedings to which the Company is a
party which have not been disclosed in previous filings with the Securities and
Exchange Commission. There are no material developments to be reported in any
previously reported legal proceedings.
ITEM 1A. Risk Factors
Investing in our securities involves a material degree of risk. In
addition to the other information set forth in this report, you should carefully
consider the risk factors discussed in Item 1A, Risk Factors in our Annual
Report on Form 10-K for the year ended December 31, 2005, which could materially
affect our business, financial condition or future results. The risks described
in our Annual Report on Form 10-K are not the only risks facingour Company.
Additional risks and uncertainties not currently known to us or that we
currently deem to be immaterial also may materially adversely affect our
business, financial condition and/or operating results.
ITEM 2. Change in Securities
Not applicable
ITEM 3. Defaults among Senior Securities
Not applicable.
ITEM 4. Submission of Matters to a Vote of Security Holders
Not applicable.
ITEM 5. Other Events
Not applicable.
25
ITEM 6. Exhibits and Reports on Form 8 - K
(a) Exhibits.
1. 31.1 - Certification Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
2. 31.2 - Certification Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
3. 32.1 - Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002
4. 32.2 - Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002
(b) Reports on Form 8-K.
1. The Company filed a Current Report on Form 8-K, dated
August 14, 2006, regarding a press release issued by the
Company announcing that its wholly owned subsidiary,
Commodore Advanced Sciences, Inc., was awarded an Advanced
Remediation Demonstration Phase 1 contract by the
Department of Energy's Environmental Management Office for
the separation of radioactive (surrogate) and RCRA heavy
metals from sludges and other waste matrices.
2. The Company filed a Current Report on Form 8-K, dated
August 23, 2006, regarding a press release issued by the
Company announcing its second quarter 2006 earnings.
3. The Company filed a Current Report on Form 8-K, dated
September 21, 2006 regarding a press release issued by the
Company announcing that it wholly owned subsidiary,
Commodore Advanced Sciences, Inc., has been awarded a two
year option extension to the environmental sampling and
data integration contract by Bechtel Jacobs Company, LLC
(BJC) of Oak Ridge, TN. The contract option extends the
contract through September 2008.
4. The Company filed a Current Report on Form 8-K, dated
October 31, 2006, announcing that on October 26, 2006, Mr.
James M. DeAngelis submitted a letter of resignation as
Chief Financial Officer, Chief Administration Officer and
Treasurer of the Company effective as of December 31, 2006.
Mr. DeAngelis will continue to serve the company as a
Director and as Senior Vice President, Strategic
Development for the Company in 2007, primarily focused on
the investor relations programs for the Company.
5. The Company filed a Current Report on Form 8-K, dated
November 02, 2006, announcing that on November 1, 2006, the
Company entered into an employment agreement with Ted R.
Sharp to serve the Company as Chief Financial Officer,
effective January 1, 2007. To provide for a period of
transition from the current Chief Financial Officer, James
M. DeAngelis, who will resign that position effective
January 1, 2007, Mr. Sharp began his employment on November
1 and will assume full responsibility for the position on
the effective date.
26
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.
Date: November 14, 2006 COMMODORE APPLIED TECHNOLOGIES, INC.
(Registrant)
By /s/ James M. DeAngelis
-------------------------
James M. DeAngelis - Senior Vice President
and Chief Financial Officer (as both a
duly authorized officer of the registrant
and the principal financial officer of the
registrant)
27