<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 MARCH 31, 1998
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
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 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 .
The number of shares the common stock outstanding at May 5, 1998 was
23,103,200.
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COMMODORE APPLIED TECHNOLOGIES, INC.
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
PAGE NO.
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<S> <C> <C>
PART I. FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheet -
March 31, 1998 and December 31, 1997 . . . . . . . . . . . . . . . . . . . . 3
Condensed Consolidated Statement of Operations -
Three months ended March 31, 1998 and
March 31, 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Condensed Consolidated Statement of Cash Flows Three months
ended March 31, 1998 and
March 31, 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Notes to Condensed Consolidated Financial Statements . . . . . . . . . . . . . . . . 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . 10
PART II . OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Item 4. Submission of Matters to a vote of Security Holders.. . . . . . . . . . . . . . . . . 14
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
2
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PART I - FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
COMMODORE APPLIED TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
ASSETS 1998 1997
---- ----
(unaudited)
Current Assets:
<S> <C> <C>
Cash and cash equivalents $ 13,350 $ 13,151
Accounts receivable, net 3,795 3,064
Notes and advances to related parties 99 866
Inventory 626 360
Restricted cash and certificates of deposit 230 260
Prepaid assets and other current receivables 369 403
--------- ----------
Total Current Assets 18,469 18,104
Other receivables 4 18
Investments and advances 537 554
Property and equipment, net 2,636 2,498
Other assets
Patents and completed technology, net of
accumulated amortization of $296 and
$238, respectively 1,144 1,150
Goodwill, net of accumulated amortization
of $384 and $320, respectively 7,289 7,353
Other 14 19
--------- ----------
Total Assets $ 30,093 $ 29,696
========= ==========
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE> 4
COMMODORE APPLIED TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
LIABILITIES AND 1998 1997
STOCKHOLDERS' EQUITY ---- ----
(unaudited)
Current Liabilities:
<S> <C> <C>
Accounts payable $ 2,027 $ 1,930
Due to related parties -- 55
Current portion of long term debt 21 27
Line of credit 1,348 1,199
Other accrued liabilities 3,099 3,723
---------- ----------
Total Current Liabilities 6,495 6,934
Long term debt 11 19
Notes payable to related parties 5,269 3,568
---------- ----------
Total Liabilities 11,775 10,521
Minority interest in subsidiary 6,670 6,645
Commitments and contingencies -- --
Redeemable Preferred Stock
Series A Preferred Stock, par value $0.001 per share, 7% cumulative
dividends 80,000 shares authorized, 0 and 9,600 outstanding
respectively, $986 redemption amount at December 31, 1997 -- 876
Stockholders' Equity
Common stock, par value $0.001 per share, 75,000,000 shares authorized,
53,103,200 and 22,766,334 issued and outstanding, respectively 23 23
Additional paid-in capital 44,930 41,541
Accumulated deficit (33,305) (29,910)
---------- ----------
Total Stockholders' Equity 11,648 11,654
----------
----------
Total Liabilities and Stockholders' Equity $ 30,093 $ 29,696
========== ==========
</TABLE>
See notes to condensed consolidated financial statements.
4
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CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED - DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, MARCH 31,
1998 1997
---- ----
<S> <C> <C>
Contract revenues $ 4,214 $ 5,027
Costs and expenses:
Cost of sales 4,116 4,622
Research and development 527 606
General and administrative 2,142 2,260
Depreciation and amortization 295 243
---------- -----------
Total costs and expenses 7,080 7,731
---------- -----------
Loss from operations (2,866) (2,704)
---------- -----------
Other income (expense):
Interest income 163 105
Interest expense (244) (174)
---------- -----------
Net other income (expense) (81) (69)
---------- -----------
Loss before income taxes and affiliate losses (2,947) (2,773)
Income taxes -- --
---------- -----------
Loss before affiliate losses (2,947) (2,773)
Equity in losses of unconsolidated subsidiaries (448) (426)
---------- -----------
Net loss $ (3,395) $ (3,199)
========== ===========
Loss per share $ (.15) $ (.15)
========== ===========
Number of weighted average shares outstanding (in thousands) 22,950 21,650
========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE> 6
COMMODORE APPLIED TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED - DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, MARCH 31,
1998 1997
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net loss $ (3,395) $ (3,199)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 294 243
Undistributed losses of unconsolidated subsidiary 448 426
Non-cash interest expense 89 --
Changes in assets and liabilities, net of acquisitions:
Accounts receivable (731) 3,433
Prepaid assets 34 (445)
Inventory (266) --
Other assets 5 (141)
Accounts payable 97 (51)
Payables to related parties (55) 357
Other liabilities (624) (29)
--------- ----------
Net cash provided/(used) in operating activities (4,104) 594
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment (325) (309)
Acquisition of patents (37) (56)
Temporary investments sold -- 1,124
Advances to related parties 1,606 (133)
Decrease (increase) in restricted cash 30 (1,484)
Other investments (431) (994)
Other receivables 14 63
--------- ----------
Net cash provided/(used) in investing activities 857 (1,789)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowing from principal stockholder 3,450 175
Increase in (repayment of) line of credit 149 (1,297)
Proceeds from subsidiary's sale of stock 25 --
Decrease in notes and loans payable (14) (1)
Preferred stock dividend paid (14) --
Preferred stock dividend paid by subsidiary (150) --
--------- ----------
Net cash provided/(used) in financing activities 3,446 (1,123)
Increase (decrease) in cash 199 (2,318)
Cash, beginning of period 13,151 4,617
--------- ----------
Cash, end of period $ 13,350 $ 2,299
========= ==========
</TABLE>
See notes to condensed consolidated financial statements.
6
<PAGE> 7
COMMODORE APPLIED TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
MARCH 31, 1998
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 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 March 31, 1998 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 1998.
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, 1997.
Certain prior-year amounts have been reclassified to conform with the
current year presentation.
On March 29, 1996, Commodore Environmental Services, Inc.
("Commodore"), the Company's sole shareholder at that date, in exchange for the
issuance of 15,000,000 shares of the Company's common stock, capitalized the
Company.
To finance the working capital needs of Applied and to provide
resources to invest in its environmental markets, Commodore raised a net amount
equal to approximately $5,450 from a private placement of shares of Applied
common stock, par value $0.001 per share (the "Applied Common Stock"), held by
Commodore and warrants to purchase Applied Common Stock held by Commodore in
February 1998 (the "February 1998 Private Placement"), which proceeds Commodore
loaned to Applied in February 1998. Commodore also raised approximately $7,800
from private placements of preferred stock convertible into, and warrants
exercisable for, Applied Common Stock held by Commodore in May and August 1997
(the "1997 Private placement"), of which proceeds Commodore loaned $4,000 to
Applied in September 1997. Prior to the February 1998 Private Placement,
Commodore held a controlling equity interest in Applied and its operating
subsidiaries. As a result of the 1997 Private Placement and the February 1998
Private Placement, Commodore's ownership interest in Applied decreased to
approximately 43% as of March 31, 1998.
7
<PAGE> 8
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 $461 at December 31,
1997 and $490 at March 31, 1998.
The consolidated financial statements include the accounts of the
Company and its majority-owned subsidiaries. All significant intercompany
balances and transactions have been eliminated. The investment in
Teledyne-Commodore, LLC, a 50% owned joint venture with Teledyne Environmental,
Inc., has been accounted for under the equity method as the Company does not
have a controlling interest in the venture.
Note B - Redeemable Preferred Stock
Series A Preferred Stock
In August 1997, Applied sold 18,000 shares of its Series A Preferred
Stock for an aggregate purchase price of $1,800. The Series A Preferred Stock
has a liquidation preference of $100 per share plus accumulated and unpaid
dividends (the "Liquidation Preference") and pays a 7% annual cumulative
dividend. The Series A Preferred Stock is convertible by investors into that
number of shares of Common Stock equal to the Liquidation Preference divided by
the Conversion Price. The Conversion Price is defined as the amount equal to the
lesser of (i) $4.64, representing 100% of the average of the closing sales
prices of the Common Stock for the five consecutive trading days preceding the
issuance date of the Series A Preferred Stock, or (ii) 88% of the average of the
closing sales price of the Common Stock for the five consecutive trading days
immediately prior to the date of conversion (beneficial conversion feature). The
Conversion Price is subject to certain floors based upon the trading price of
Applied Common Stock.
After cash transaction costs of $132, Applied received net proceeds of
$1,668 from the sale of the Series A Preferred Stock. Of this total, $25 was
allocated to paid-in capital related to warrants issued to the placement agent
in connection with the transaction and $216 was allocated to paid-in capital
related to the beneficial conversion feature. The remaining $1,427 was recorded
as mandatorily redeemable preferred stock. The $216 beneficial conversion
feature was charged to income available to common shareholders over the earliest
possible conversion period of five months.
In December 1997, stockholders owning 8,400 shares of the Series A
Preferred Stock elected to convert their shares to Common Stock based upon
conversion prices ranging from $2.00 to $2.29 per share. The 1997 conversions
resulted in the issuance of 416,000 new shares of Common Stock valued at $790,
the carrying value of the underlying Preferred Stock at the time of conversion.
In the first quarter of 1998, Stockholders owning 9,600 shares of the
Series A Preferred Stock elected to convert their shares to Common Stock based
upon conversion prices ranging from $2.52 to $3.00. The 1998 conversion resulted
in the issuance of 336,866 new shares of common stock valued at $890, the
carrying value of the underlying Preferred Stock at the time of conversion.
8
<PAGE> 9
Note C - Significant Transactions
Intercompany Convertible Note
In September 1997, Commodore provided a $4,000, 8% convertible
unsecured loan to Applied. Unless converted into Common Stock, the interest in
the convertible loan is payable quarterly and the unpaid principal amount is
payable on August 31, 2002. Commodore has the right to convert the loan into
shares of Common Stock at a conversion price of $3.89 per share, a 16% discount
from the market price at the date of closing (beneficial conversion feature),
subject to adjustment based on a number of factors. In connection with the
$4,000 loan, Applied issued Commodore a five-year warrant to purchase 1,000,000
shares of Common Stock at an exercise price of $5.03 per share, 109% of the
market price on the date of closing.
Related Party Note Receivable
During 1996, Applied advanced an aggregate amount of $1.5 million to
Lanxide Performance Materials, Inc. ("LPM"), a wholly-owned subsidiary of
Lanxide Corp. Lanxide is related to Commodore by substantial common ownership.
The promissory notes became due on February 28, 1998. At December 31, 1997 a
$814 reserve against this receivable exists, reducing the net receivable to its
estimated fair value. In March 1998, Applied realized this receivable by
exchanging it for equivalent amounts due under the Intercompany Convertible Note
(see above).
In connection with this transaction, Applied issued Commodore a warrant
to purchase 514,000 shares of Applied Stock. The estimated value of the warrant,
$340 has been recorded as a charge against the $814 reserve.
Intercompany Note
In February, 1998, Commodore provided a $5,450 unsecured loan to
Applied, evidenced by Applied's 8% non-convertible note (the "Intercompany
Note"). Pursuant to the terms of the Intercompany Note, interest on the unpaid
principal balance of the Intercompany Note is payable at the rate of 8% per
annum semiannually in cash. The unpaid principal amount of the Intercompany Note
is due and payable, together with accrued and unpaid interest, on the earlier to
occur of (a) December 31, 1999, or (b) consummation of any public offering or
private placement of securities of Applied with net proceeds aggregating in
excess of $6.0 million, other than in respect of working capital and general
corporate purposes and not for the satisfaction for any portion of Applied debt
or to redeem any Applied equity or equity-equivalent securities.
In connection with the loan, Applied amended a seven-year warrant to
purchase 7,500,000 shares of Applied Common Stock issued to Commodore on
December 2, 1996 to, among other things, reduce the exercise price of the
warrant from $15.00 per share to $10.00 per share. In addition, Applied issued
to Commodore an additional six-year warrant to purchase 1,500,000 shares of
Applied Common Stock at an exercise price of $10.00 per share.
9
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION
General
The Company, formerly a majority-owned subsidiary of Commodore
Environmental Services, Inc. ("Commodore"), is engaged in the destruction and
neutralization of hazardous waste and the separation of hazardous waste from
other materials. The Company owns technologies related to the separation and
destruction of polychlorinated biphenyls (PCBs) and chlorofluorocarbons (CFCs).
The Company is currently working on the commercialization of these
technologies through various acquisitions, licensing agreements and joint
ventures. Through Commodore Advanced Sciences, Inc. ("ASI"), a subsidiary
acquired on October 1, 1996, the Company has contracts with various government
agencies and private companies in the United States and abroad. As some
government contracts are funded in one year increments, there is a possibility
for cutbacks. As these contracts constitute a major portion of the subsidiary's
revenues, such a reduction would materially affect the operations. However,
management believes the subsidiary's existing client relationships will allow
the Company to obtain new contracts in the future.
RESULTS OF OPERATIONS
Three Months Ended March 31, 1998 Compared to Three Months Ended March 31, 1997
Revenues were $4,214 for the three months ended March 31, 1998,
compared to $5,027 for the three months ended March 31, 1997. Such revenues were
primarily from the Company's ASI subsidiary, and consisted of engineering and
scientific services performed for the United States government under a variety
of contracts, most of which provide for reimbursement of cost plus fixed fees.
Revenue under cost-reimbursement contracts is recorded under the percentage of
completion method as costs incurred and include estimated fees in the proportion
that costs to date bear to total estimated costs. The Company has seen some
reduction in annual sales volume since the middle of 1997 when ASI's major
customer was forced to separately bid some professional services that were
originally subcontracted through ASI. This occurred because the dollar volume of
work had grown past the level where it could be subcontracted. Subcontract
revenue has a very low margin. Cost of sales decreased from $4,622 to $4,116 for
the same period. This decrease is consistent with the decrease in revenue.
For the three months ended March 31, 1998, the Company incurred
research and development costs of $527 as compared to $606 for the three months
ended March 31, 1997. In 1998, some personnel previously charged to research and
development were reassigned to the Company project in Weldon Spring. Research
and development costs include salaries, wages, and other related costs of
personnel engaged in research and development activities, contract services and
materials, test equipment and rent for facilities involved in research and
development activities. Research and development costs are expensed when
incurred, except that those costs related to the design or construction of an
asset having an economic useful life are capitalized, and then depreciated over
the estimated useful life of the asset.
General and administrative expenses for the three months ended March
31, 1998 were $2,142 as compared to $2,260 for the three months ended March 31,
1997.
10
<PAGE> 11
Interest income was $163 for the three months ended March 31, 1998, as
compared to $105 for the three months ended March 31, 1997. The increase
resulted from the investment of the proceeds of the Company and its subsidiary's
initial public offerings and proceeds from the intercompany loans.
Interest expense for the three months ended March 31, 1998 was $244 as
compared to $174 for the three months ended March 31, 1997. Interest changes in
1998 result from indebtedness to Commodore for advances made to the Company.
Equity in losses of unconsolidated subsidiary for the three months
ended March 31, 1998 was $448 as compared to $426 for the three months ended
March 31, 1997. The Company's Teledyne-Commodore, LLC joint venture commenced
operations in October 1996.
LIQUITY AND CAPITAL RESOURCES
From its inception through the second quarter of 1996, the Company's
operations were financed principally by loans and investments from its
stockholders. On June 28, 1996, the Company successfully completed an initial
public offering of its Common Stock and warrants from which it received net
proceeds of approximately $30,551.
In August 1997, the Company completed the August 1997 Private Placement
from which it received net proceeds of approximately $1.6 million. In connection
with the sale, the Company incurred cash transaction costs of approximately $117
and issued warrants, expiring on August 15, 2002, to the placement agent.
In October 1997, the Company completed the October 1997 Private
Placement from which it received aggregate net proceeds of approximately $2.4
million. In connection with the October 1997 Private Placement, the Company
incurred cash transaction costs of approximately $209 and issued warrants,
expiring on September 30, 2002, to the placement agent.
In September 1997, Commodore provided the Company with a $4.0 million
unsecured loan, evidenced by the Convertible Note due August 31, 2002. In
connection with the Convertible Note, the Company issued warrants to purchase
1,000,000 shares of Common Stock to Environmental valued at $660 and provided a
beneficial conversion privilege with an intrinsic value of $750 as of the date
of the transaction.
In February 1998, Commodore provided the Company with a $5,450
unsecured loan, evidenced by the Intercompany Note due on the earlier to occur
of (a) December 31, 1999, or (b) consummation of any public offering or private
placement of securities of the Company with net proceeds aggregating in excess
of $6.0 million, other than in respect of working capital financing or secured
financing of assets received by the Company in the ordinary course of business
from any bank or other lending institution, subject to certain conditions. The
Company will use the net proceeds of the loan solely for working capital and
general corporate purposes and not for the satisfaction of any portion of
Company debt or to redeem any Company equity or equity-equivalent securities.
At March 31, 1998 and December 31, 1997, the Company had a $1,348 and
$1,199 outstanding balance, respectively on a revolving line of credit due May
31, 1998. This debt will fluctuate based on new invoices and from collections on
accounts receivable balances. The Company anticipates refinancing the revolving
line of credit in the second quarter of 1998. In addition, the Company plans to
pursue various options to finance its anticipated capital expenditures for 1998.
11
<PAGE> 12
For the three months ended March 31, 1998 the Company incurred net loss
of $3,395. At March 31, 1998 and December 31, 1997, the Company had working
capital of $11,974 and $11,170, respectively.
In August 1996, the Company loaned $1.5 million to LPM, a wholly-owned
subsidiary of Lanxide, evidenced by the LPM Note. Lanxide is related to the
Company by significant common beneficial ownership. The LPM Note is
collateralized by the assets of LPM and guaranteed by Lanxide. The LPM Note
became due on February 28, 1998. In March 1998, the Company transferred the LPM
Note to Commodore, together with $500 in cash, as partial prepayment of the $4.0
million unsecured loan from Commodore to the Company in September 1997.
In December 1996, the Company transferred certain of its operating
assets related to its SET technology to Solution, subject to certain liabilities
related to such assets, in exchange for all of the issued and outstanding shares
of capital stock of Solution. Solution agreed to assume all of the net assets of
the Company relating to its SET technology at December 1, 1996, which assets had
an aggregate value of approximately $4.0 million at such date, and all known or
unknown contingent or unliquidated liabilities of and claims against the Company
and its subsidiaries to the extent they relate to or arise out of the
transferred assets. The Company retained, among other things, (a) all temporary
cash investments of the Company at December 1, 1996, aggregating approximately
$14.1 million, and (b) the principal executive offices and related assets of the
Company which, at the time, were located in McLean, Virginia.
In December 1996, the Company acquired (i) all of the outstanding
capital stock of Separation and (ii) all of the outstanding capital stock of CFC
Technologies from Commodore, as part of a corporate restructuring of Commodore
to consolidate all of its current environmental technology businesses with the
Company. In addition, Commodore assigned to the Company outstanding Separation
notes aggregating $976 at December 2, 1996, representing advances previously
made by Commodore to Separation, which the Company has contributed to the equity
of Separation. In consideration for the transfer of all of the outstanding
capital stock of Separation and CFC Technologies to the Company, the Company
paid Commodore $3.0 million in cash and issued to Commodore a warrant expiring
December 2, 2003 to purchase 7,500,000 shares of Company Common Stock at an
exercise price of $15.00 per share, valued at $2.4 million. Such warrant was
subsequently amended to, among other things, reduce the exercise price therof to
$10.00 per share.
In April 1997, Separation completed an initial public offering of its
equity securities, from which it received net proceeds of approximately $11,100.
Such funds were used primarily to finance Separation's operations through 1997.
NET OPERATING LOSSES
The Company has net operating loss carry forwards which expire in the
years 2000 through 2011. The amount of net operating loss carry forward that can
be used in any one year will limited by the applicable tax laws which are in
effect at the time such carry forward can be utilized. A valuation allowance has
been established to offset any benefit from the net operating loss carry
forwards as it cannot be determined when or if the Company will be able to
utilize the net operating losses.
12
<PAGE> 13
FORWARD LOOKING STATEMENTS
The Company, or its executive officers and directors on behalf of the
Company, may from time to time make "forward-looking statements" within the
meaning of the Securities Act of 1933, as amended (the "Securities Act") and the
Securities Exchange Act of 1934, as amended (the "Exchange Act" and together
with the Securities Act, the "Acts"). The Company is filing this Quarterly
Report of From 10-Q to avail itself of the safe harbor provided in the Acts with
respect to any such (i) forward-looking statements that may be contained in the
Company's reports and other documents filed with the Securities and Exchange
Commission under sections 13 or 15(d) of the Exchange Act and (ii) oral
forward-looking statements made by the Company's executive officers and
directors on behalf of the Company to the press, potential investors, securities
analysts and others. Such forward-looking statements could involve, among other
things, statements regarding the Company's intent, belief or expectation with
respect to (i) the Company's results of operations and financial condition, (ii)
the consummation of acquisition and financing transactions and the effect
thereof on the Company's business, and (iii) 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, 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 and would be based on
facts and conditions as they exist at the time such statements are made.
Further, the Company's business is subject to a number of risks that would
affect any such forward-looking statements. These risks and uncertainties
include, but are not limited to, the ability of the Company to commercialize its
technology; foreign and domestic competition' product demand and industry
pricing' cost of compliance with environmental regulations; and management's
estimates of niche market data. These risks and uncertainties could cause actual
results of the Company to differ materially from those projected or implied by
such forward-looking statements.
13
<PAGE> 14
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 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.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8 - K
(a) Exhibits - none
(b) Reports on Form 8-K -
The Company filed a Current Report on Form 8-K, dated February
10, 1998, regarding a loan by Commodore to the Company for
$5,450,000.
14
<PAGE> 15
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: MAY 14, 1998 COMMODORE APPLIED TECHNOLOGIES, INC.
(REGISTRANT)
BY /S/ MICHAEL D. FULLWOOD
-------------------------------------------------
MICHAEL D. FULLWOOD - SENIOR VICE PRESIDENT,
CHIEF FINANCIAL AND ADMINISTRATIVE OFFICER,
SECRETARY, AND GENERAL COUNSEL (AS BOTH A DULY
AUTHORIZED OFFICER OF THE REGISTRANT AND THE
PRINCIPAL FINANCIAL OFFICER OR CHIEF
ACCOUNTING OFFICER OF THE REGISTRANT)
15
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 13,350
<SECURITIES> 0
<RECEIVABLES> 4,285
<ALLOWANCES> 490
<INVENTORY> 626
<CURRENT-ASSETS> 18,469
<PP&E> 5,325
<DEPRECIATION> 2,689
<TOTAL-ASSETS> 30,093
<CURRENT-LIABILITIES> 6,495
<BONDS> 0
0
0
<COMMON> 23
<OTHER-SE> 11,625
<TOTAL-LIABILITY-AND-EQUITY> 30,093
<SALES> 4,214
<TOTAL-REVENUES> 4,214
<CGS> 4,116
<TOTAL-COSTS> 7,080
<OTHER-EXPENSES> 448<F1>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 244<F2>
<INCOME-PRETAX> (3,395)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,395)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,395)
<EPS-PRIMARY> (.15)
<EPS-DILUTED> (.15)
<FN>
<F1>Equity in loss of unconsolidated subsidiary.
<F2>Does not include interest income of $163
</FN>
</TABLE>
