<PAGE> 1
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 June 30, 1996
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 10155
NEW YORK, NEW YORK (Zip Code)
(Address of Principal Executive Offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (212) 308-5800
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 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
----- -----
The number of shares of common stock outstanding at August 12, 1996 was
20,750,000.
<PAGE> 2
COMMODORE APPLIED TECHNOLOGIES, INC.
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I. FINANCIAL INFORMATION ....................................... 3
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets -
June 30, 1996 and December 31, 1995 ....................... 3
Condensed Consolidated Statement of Operations -
Three months ended June 30, 1996 and 1995
Six months ended June 30, 1996 and 1995
Cumulative Amount Since Inception January 1, 1994.......... 5
Condensed Consolidated Statement of Cash Flows -
Six months ended June 30, 1996 and June 30, 1995
Cumulative Amount Since Inception January 1, 1994.......... 6
Notes to Condensed Consolidated Financial Statements......... 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................ 8
PART II. OTHER INFORMATION ........................................... 10
SIGNATURES ............................................................... 11
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
COMMODORE APPLIED TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(000'S OMITTED)
JUNE 30, DECEMBER 31,
1996 1995
---------- -----------
ASSETS (UNAUDITED) (UNAUDITED)
<S> <C> <C>
Cash $ 76 $ 4
Subscription receivable 30,617 0
Prepaid registration costs 237
Accounts receivable 14 0
------- -------
TOTAL CURRENT ASSETS 30,944 4
Property and equipment (net of
accumulated depreciation) 925 900
Other assets 223 187
------- -------
TOTAL ASSETS $32,092 $ 1,091
======= =======
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE> 4
COMMODORE APPLIED TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS -- (CONT'D)
<TABLE>
<CAPTION>
(000'S OMITTED)
JUNE 30, DECEMBER 31,
1996 1995
----------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities $ 519 $ 279
Due to Commodore Environmental Services 6,065 8,925
Due to related parties 429 429
-------- --------
TOTAL CURRENT LIABILITIES 7,013 9,633
Line of credit 2,000 0
Minority interest in preferred stock 19 0
Stockholders' Equity (Deficit):
Preferred stock, (Commodore Labs), series
"B", $1 par value 10% noncumulative
600,000 shares authorized; 19,372 shares
issued and outstanding 19
Common stock, (Commodore Labs), par value
$.01 per share, 1,000,000 authorized;
147,012 shares issued and outstanding 1
Preferred stock, $.001 par value 5,000,000
shares authorized, and no shares issued
Common stock, $.001 par value, 50,000,000
shares authorized; 20,750,000 issued and
outstanding 21
Additional paid in capital 33,607 10
Retained earnings (deficit) (10,568) (8,572)
-------- --------
TOTAL STOCKHOLDERS' EQUITY
(DEFICIT) 23,060 (8,542)
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT) $ 32,092 $ 1,091
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE> 5
COMMODORE APPLIED TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
CUMULATIVE
(000'S OMITTED) AMOUNT
THREE MONTHS SIX MONTHS SINCE
ENDED JUNE 30, ENDED JUNE 30, INCEPTION
1996 1995 1996 1995 JAN 1,1994
-------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
REVENUES
Income from soil
remediation $ 14 $ $ 14 $ $ 14
-------- -------- -------- -------- --------
EXPENSES
Research and development 586 397 954 794 3,150
Write off of in process
technology 2,424
General and administrative 326 356 691 715 3,832
-------- -------- -------- -------- --------
OPERATING (LOSS) (898) (753) (1,631) (1,509) (9,392)
Other income (expense)
Interest income 2 4 16
Interest expense (177) (73) (369) (132) (1,192)
-------- -------- -------- -------- --------
NET LOSS $ (1,073) $ (828) $ (1,996) $ (1,641) $(10,568)
======== ======== ======== ======== ========
NET (LOSS) PER SHARE
(Based on weighted
average shares of
15,165,000 and
15,082,000 in 1996
and 15,000,000 and
15,000,000 in 1995) $ (.07) $ (.06) $ (.13) $ (.11)
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE> 6
COMMODORE APPLIED TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
(000'S OMITTED) CUMULATIVE
SIX MONTHS ENDED AMOUNTS
JUNE 30, SINCE
------------------------ INCEPTION
1996 1995 JAN 1,1994
--------- --------- ----------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net (loss) $ (1,996) $ (1,641) $(10,568)
Adjustments to reconcile net (loss) to
net cash used in operating activities:
Depreciation and amortization 43 22 111
Provision for bad debt 100
Write off of in process technology 2,424
Increase in receivables (14) (28)
Increase in prepaid registration costs (237) (237)
Increase (decrease) in accounts payable
and accrued liabilities 240 (141) 413
-------- -------- --------
NET CASH USED IN OPERATING ACTIVITIES (1,964) (1,760) (7,785)
-------- -------- --------
INVESTING ACTIVITIES
Purchase of equipment (68) (132) (999)
Increase in other assets (36) (54) (215)
-------- -------- --------
NET CASH USED IN INVESTING
ACTIVITIES (104) (186) (1,214)
-------- -------- --------
FINANCING ACTIVITIES
Increase in line of credit 2,000 2,000
Borrowings from principal shareholder 140 2,007 7,025
-------- -------- --------
NET CASH PROVIDED FROM FINANCING
ACTIVITIES 2,140 2,007 9,025
-------- -------- --------
INCREASE IN CASH 72 61 26
Cash at beginning of period 4 0 50
-------- -------- --------
CASH AT END OF PERIOD $ 76 $ 61 $ 76
======== ======== ========
</TABLE>
See notes to condensed consolidated financial statements.
6
<PAGE> 7
COMMODORE APPLIED TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1996
Note A - Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with 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 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 three month period ended June 30, 1996 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 1996.
The accompanying unaudited condensed consolidated financial statements
should be read in conjunction with the Company's audited financial statements
included in the Company's Registration Statement #333-4396 dated June 28, 1996.
Note B - Subscription receivable
On June 28, 1996, the Company successfully completed an initial public
offering of 5,750,000 shares of common stock (including the underwriter's
over-allotment) and 5,750,000 redeemable common stock purchase warrants from
which it received net proceeds, after giving effect to the underwriting discount
and non-accountable expenses, of approximately $31,217,000. The offering
proceeds were received by the Company in July 1996. In addition, the Company
incurred approximately $600,000 in transaction costs in connection with the
offering, which reduced the gross proceeds.
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
General
Commodore Applied Technologies, Inc. (the "Company") is a development stage
company that has not generated material revenues or any profits to date. The
Company has developed a patented non- thermal, portable and scalable process
known as AGENT 313 (TM) for treating and decontaminating soils and other
materials and surfaces containing polychlorinated biphenyls, pesticides, dioxins
and other toxic contaminants to an extent sufficient to satisfy current federal
environmental guidelines. It has been proven that AGENT 313 can also neutralize
chemical warfare agents.
Results from Operations
THREE AND SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO THREE AND SIX MONTHS ENDED
JUNE 30, 1995
Gross revenues for the three months ended and six months ended June 30,
1996 were $14,000 as compared to no revenues for the three months and six months
ended June 30, 1995. The Company commenced a feasibility study for a customer
late in the second quarter of 1996, which accounted for 100% of the revenues.
For the three months ended June 30, 1996, the Company incurred $586,000 of
research and development costs as compared to research and development costs of
$397,000 for the three months ended June 30, 1995. For the six month period
ended June 30, 1996, the Company incurred $954,000 of research and development
expenses as compared to $794,000 for the six month period ended June 30, 1995.
The 48% increase for the quarter in research and development costs is due to
additional projects and the furthering of existing work in the development of
technologies in the destruction of hazardous materials.
General and administrative expenses for the three months ended June 30, 1996
were $326,000 as compared to $356,000 for the three months ended June 30, 1995,
an 8% decrease, and general and administrative expenses for the six month period
ended June 30, 1996 were $691,000, as compared to $715,000 for the six month
period ended June 30, 1995, a 3% decrease. These amounts are comparable.
Interest expense was $177,000 for the second quarter of 1996 as compared to
$73,000 for the second quarter of 1995, an increase of $104,000 and interest
expense was $367,000 for the six month period ended June 30, 1996 as compared to
$132,000 for the six month period ended June 30, 1995, an increase of $235,000.
The increases are due to increased borrowings from the principal stockholder to
finance the research activities of the Company. In addition, the Company
obtained a line of credit from a lending institution which was drawn down
throughout the second quarter of 1996.
8
<PAGE> 9
The Company had a net loss of $1,073,000 for the three month period ended
June 30, 1996 as compared to a net loss of $828,000 for the three month period
ended June 30, 1995. The Company had a net loss of $1,996,000 for the six month
period ended June 30, 1996 as compared to a net loss of $1,641,000 for the six
month period ended June 30, 1995. The fluctuation in results have been described
above.
Liquidity and Capital Resources
The Company has financed its operations to date principally from borrowings
and investments from its stockholders. For the six months ended June 30, 1996,
the Company purchased $68,000 and incurred patent filing and maintenance costs
of $36,000. At June 30, 1996, the Company had fully drawn down on its line of
credit of $2,000,000 provided by a commercial bank in April 1996. In addition,
the Company owed its principal shareholder $5,925,426 and an additional $140,000
in interest charges for the quarter.
On June 28, 1996, the Company successfully completed an initial public
offering of its equity securities from which it received net proceeds of
approximately $30,617,000. The net proceeds from the offering after giving
effect to the underwriting discount and non-accountable expenses was
approximately $31,217,000. In addition, the Company incurred approximately
$600,000 in transaction costs which reduce the net proceeds. The Company has
allocated approximately $12,000,000 of net proceeds for the funding of proposed
collaborative joint ventures. In addition, $2,000,000 of net proceeds has been
allocated for the leasing of a facility for testing, additional research and
development, equipment demonstration and assembly, and executive and
administrative offices, The Company anticipates continuing its research and
development activities of its various technologies through the remainder of
1996.
In July 1996, the Company repaid the outstanding line of credit of
$2,000,000 provided by the commercial bank. In addition, the Company repaid a
$5,925,426 promissory note to its principal shareholder and the $140,000 in
interest charges related to that debt. The Company also set aside $1,000,000
cash collateral which is required to support a loan made by a commercial bank to
the Company's principal stockholder in December 1993. For the six months ended
June 30, 1996, the Company has incurred a loss of $1,996,000. At June 30, 1996,
the Company has working capital of $23,931,000.
In August 1996, The Company (through one of its wholly owned subsidiaries)
signed a joint venture agreement with a subsidiary of Teledyne Inc. to form a
Limited Liability Company ("LLC") a mutually owned joint venture formed to
pursue chemical demilitarization on a worldwide basis. Pursuant to this
agreement, the Company is required to fund the LLC $2,000,000 over the next six
months.
9
<PAGE> 10
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER EVENTS
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - none
(b) Reports on Form 8-K - none
10
<PAGE> 11
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: August 12, 1996 COMMODORE APPLIED TECHNOLOGIES, INC.
(Registrant)
By /s/ Andrew P. Oddi
-------------------------------------
Andrew P. Oddi - Vice President of
Finance, Chief Financial Officer and
Secretary
(as both a duly authorized officer of
the registrant and the principal
financial officer or chief accounting
officer of the registrant)
11
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 76
<SECURITIES> 0
<RECEIVABLES> 30,631
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 30,944
<PP&E> 1,053
<DEPRECIATION> (128)
<TOTAL-ASSETS> 32,092
<CURRENT-LIABILITIES> 7,013
<BONDS> 2,000
0
0
<COMMON> 21
<OTHER-SE> 23,039
<TOTAL-LIABILITY-AND-EQUITY> 32,092
<SALES> 0
<TOTAL-REVENUES> 14
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,645
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 369
<INCOME-PRETAX> (1,996)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,996)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,996)
<EPS-PRIMARY> (.13)
<EPS-DILUTED> (.13)
</TABLE>
