UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
XX QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
AND EXCHANGE ACT OF 1934 For the quarterly period ended March 31,
2000
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
Commission File Number 0-22291
COMMODORE SEPARATION TECHNOLOGIES, INC.
--------------------------------------
(Exact name of Registrant as specified in its charter)
DELAWARE 11-3299195
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(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
3240 Town Point Drive, Suite 200
Kennesaw, Georgia 30144
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (770) 422-1518
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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
Number of shares of common stock outstanding at April 7, 2000 (latest
practicable date):
Issued and Outstanding: 11,583,575
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COMMODORE SEPARATION TECHNOLOGIES,INC
FORM 10-Q
INDEX
PAGE
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PART I. FINANCIAL INFORMATION
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Item 1. Financial Statements (Unaudited)
Condensed Balance Sheets -
March 31, 2000 and December 31, 1999............... 4
Condensed Statement of Operations -
Three months ended March 31, 2000 and 1999......... 5
Condensed Statement of Cash Flows -
Three months ended March 31, 2000 and
March 31, 1999..................................... 6
Notes to Condensed Financial Statements.............. 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............. 8
PART II. OTHER INFORMATION ................................... 13
- -------- -----------------
SIGNATURES ....................................................... 14
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1: Financial Statements
COMMODORE SEPARATION TECHNOLOGIES, INC.
CONDENSED BALANCE SHEETS
(Dollars in Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
------------ ------------
(unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 3 $ 16
Restricted cash 220 220
Accounts receivable, net 10 10
Inventory, net 519 519
Prepaid assets and other current assets - -
------------ ------------
TOTAL CURRENT ASSETS 752 765
Property and equipment ,net 852 963
Intangible assets, net 184 180
------------ ------------
TOTAL ASSETS $ 1,788 $ 1,908
============ ============
</TABLE>
3
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COMMODORE SEPARATION TECHNOLOGIES INC.
CONDENSED BALANCE SHEETS
(Dollars in Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
------------ ------------
(unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 307 $ 352
Accrued expenses 108 78
Unearned revenue 263 263
Due to related parties 1,153 896
------------ ------------
TOTAL CURRENT LIABILITIES 1,831 1,589
Accrued dividends 1,070 916
------------ ------------
TOTAL LIABILITIES 2,901 2,505
Commitments and contingencies - -
Stockholders' Equity:
Preferred stock, Series A, $.001 par
value, authorized 750,000, issued and
outstanding 598,000 and 600,000 1 1
Preferred stock, Series B, $.001 par
value, authorized 4,000, issued and
outstanding 3,570 - -
Common stock, par value $.01 per share
authorized 50,000,000 and shares
issued and outstanding 11,520,908 and
11,515,575 11 11
Additional paid in capital 10,650 10,804
(Deficit) (11,775) (11,413)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY (1,113) (597)
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,788 $ 1,908
============ ============
</TABLE>
See notes to condensed financial statements.
4
<PAGE>
COMMODORE SEPARATION TECHNOLOGIES, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Three months ended
March 31,
2000 1999
------------ ------------
(unaudited)
<S> <C> <C>
REVENUES
Contract revenues $ 8 $ 264
COSTS AND EXPENSES
Cost of sales 40 319
Research and development 65 90
General and administrative 146 149
Depreciation and amortization 114 129
Sales and marketing expense 5 4
------------ ------------
370 691
------------ ------------
(362) (427)
Interest income 8
------------ ------------
NET LOSS $ ( 362) $ (419)
============ ============
NET LOSS PER SHARE (Based on
weighted average shares of
11,516,000)* $ (.03) $ (.04)
</TABLE>
* Common stock equivalents are not included in the net loss per share
calculation since they are antidilutive.
See notes to condensed financial statements.
5
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COMMODORE SEPARATION TECHNOLOGIES, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Three months ended
March 31,
2000 1999
------------ ------------
(unaudited)
<S> <C> <C>
OPERATING ACTIVITIES
Net (loss) $ (362) $ (419)
Adjustments to reconcile net (loss) to net
cash provided by operating activities:
Depreciation and amortization 114 129
Issuance of common stock
Changes in assets and liabilities:
Accounts payable (45) 92
Accrued liabilities 30 (40)
Unearned revenue (187)
Inventory 267
Accounts receivable (15)
Receivables from related party
Other assets 1
------------ ------------
NET CASH USED IN OPERATING ACTIVITIES (263) (172)
------------ ------------
INVESTING ACTIVITIES
Purchase and construction of equipment - -
Acquisition of intangible assets (7) (7)
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES (7) (7)
------------ ------------
FINANCING ACTIVITIES
Borrowings from stockholder 257 -
Decrease in capital lease obligation (2)
------------ ------------
NET CASH USED IN FINANCING ACTIVITIES 257 (2)
------------ ------------
INCREASE (DECREASE) IN CASH (13) (181)
Cash at beginning of period 16 209
------------ ------------
CASH AT END OF PERIOD $ 3 $ 28
============ ============
</TABLE>
See notes to condensed financial statements.
6
<PAGE>
COMMODORE SEPARATION TECHNOLOGIES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 2000
Note A - Basis of Presentation
The accompanying unaudited condensed financial statements for Commodore
Separation Technologies, Inc. (the "Company") 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, 2000 are
not necessarily indicative of the results that may be expected for the year
ended December 31, 2000.
The accompanying unaudited condensed consolidated financial statements
should be read in conjunction with the Company's audited financial statements
included in the Company's 10-K annual report dated December 31, 1999.
The Company was incorporated on November 15, 1995, under the laws of the
State of Delaware. The Company is a process technology company which has
developed and continue commercializing its separation technology and recovery
system, known as SLiM (TM). The Company believes SLiM (TM) is capable of
effectively separating and extracting solubilized materials. The Company has
been awarded its first commercial contracts in November 1997 and February 1998
and has commenced operations on one contract in March 1999 and plans to commence
operations on the second contract in May 2000.
On September 29, 1998, Commodore Applied Technologies, Inc. ("Applied")
transferred its 87% ownership in the Company to Commodore Environmental Services
LLC ("LLC"), a wholly-owned subsidiary of Commodore Environmental Services, Inc.
("Environmental") in connection with a debt restructuring agreement between
Applied and Environmental.
B - Contingencies
The Company has no outstanding matters of litigation as of April 7, 2000.
7
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ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operation
----------------------------------
General
- -------
The Company organized in November 1995, has since its inception developed a
strategic operating plan, hired personnel to implement its operating plan,
engineered and built commercial scale supported liquid membrane processing
units, conducted on-site demonstrations for potential customers and commenced
operations at its first installations.
The Company is beginning to develop an operating history, but operations
have been limited to the commencement of its first commercial contracts. Until
the operating history matures, the Company is subject to all of the business
risks associated with a new enterprise, such as the risks of unforeseen capital
requirements, market acceptance, and competitive disadvantages against larger
and more established companies. During the period from November 15, 1995 (date
of inception) to March 31, 2000, the Company has incurred a net loss of
$11,767,000 and anticipates that it may continue to incur significant losses for
the foreseeable future. There is no assurance as to whether or when the Company
will generate material revenues or profits.
Results from Operations
- -----------------------
Revenues were $8,000 for the three months ended March 31, 2000 compared to
$264,000 for the three months ended March 31, 1999. Such revenues for 1999 were
primarily due to the Company's commencement of operations at the Port of
Baltimore Hawkins Point project. Revenue under such contract was recorded as the
contract has commenced operations.
For the three months ended March 31, 2000, the Company had incurred $38,000
in cost of sales relating to the Port of Baltimore Contracts. For the three
months ended March 31, 1999, the Company had incurred $319,000 primarily
relating to cost of sales relating to the Port of Baltimore contracts. These
costs include labor, fringes, subcontractor costs, travel costs, material
purchases and cost of equipment sold to the customer.
For the three months ended March 31, 2000, the Company incurred research and
development costs of $65,000, as compared to $90,000 for the three months ended
March 31, 1999. Research and development costs include salaries, wages, and
other related costs of personnel engaged in research and development activities,
8
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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 those costs related to the design or construction
of an asset having an economic useful life, which are capitalized, and then
depreciated over the estimated useful life of the asset. Research and
development decreased for the three months ended March 31, 2000 as compared to
the three months ended March 31, 1999 primarily due to cutbacks in order to
preserve capital.
General and administrative expenses for the three months ended March 31,
2000 were $146,000 as compared to $148,000 for the three months ended March 31,
1999. The results are comparable.
Depreciation and amortization decreased from $129,000 for the three months
ended March 31, 1999 to $114,000 for the three months ended March 31, 2000. This
is a direct result of some of the Company's equipment being fully depreciated in
1999.
The Company had a net loss of $362,000 for the three-month period ended
March 31, 2000 as compared to a net loss of $419,000 for the three-month period
ended March 31, 1999. The decreased net loss is attributable to the various
revenue and expense items in the individual paragraphs above.
Liquidity and Capital Resources
- -------------------------------
The Company has a working capital deficit of $1,079,000 on March 31, 2000 as
compared to a working capital deficit of $824,000 at the beginning of the year.
The decrease in working capital is primarily attributable to the net loss
incurred during the first quarter of 2000 less depreciation and amortization
expenses.
The Company continues to be dependent upon financing through outside
sources. There can be no assurance that such financing will be available or, if
available, that it will be on terms satisfactory to the Company. In the event
such external financing is not available on terms acceptable to the Company, the
Company may be able to obtain interim financing from Environmental. There can be
no assurances, however, that the Company will be able to obtain any financing
from Environmental.
Net Operating Losses
- --------------------
At March 31, 2000, the Company had tax loss carryforwards of approximately
$11,700,000. The amount of and ultimate realization of benefit from the net
operating loss for income tax purposes is dependant, in part, upon the tax laws
in effect, future earnings of the Company, and other future events, the effects
9
<PAGE>
of which cannot be determined. A change in ownership of the Company may reduce
the amount of loss allowable. These net operating carryforwards begin to expire
in 2011. A full valuation allowance has been established because of the
uncertainty about whether the Company will realize the benefit of net operating
losses.
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 objective 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, 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 factsand
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. Furthermore, 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; product demand and industry pricing; the ability
of the Company to commercialize its technology; product demand and industry
pricing; the ability of the Company to obtain patent protectionfor its
technology; developments in environmental legislation and regulation; the
ability of the Company to obtain future financing on favorable terms; and other
circumstances affecting anticipated revenue 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.
10
<PAGE>
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 proceeding.
ITEM 6. Exhibits and Reports on From 8-K
Exhibits -
27 - Financial Data Schedule
Reports on Form 8-K - None
11
<PAGE>
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.
COMMODORE SEPARATION TECHNOLOGIES, INC.
(Registrant)
By -----------------------------------
James M. DeAngelis - Vice President
(As both a duly authorized
Officer of the Registrant
and the Chief Accounting
Officer of the Registrant)
Date: April 7, 2000
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM COMMODORE
SEPARATION TECHNOLOGIES, INC. MARCH 31, 2000 FINANCIAL STATEMENTS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2001
<PERIOD-END> MAR-31-2000
<CASH> 223
<SECURITIES> 0
<RECEIVABLES> 10
<ALLOWANCES> 0
<INVENTORY> 519
<CURRENT-ASSETS> 752
<PP&E> 2,104
<DEPRECIATION> 1,252
<TOTAL-ASSETS> 1,788
<CURRENT-LIABILITIES> 1,831
<BONDS> 0
0
1
<COMMON> 11
<OTHER-SE> (1,125)
<TOTAL-LIABILITY-AND-EQUITY> 1,788
<SALES> 0
<TOTAL-REVENUES> 8
<CGS> 0
<TOTAL-COSTS> 370
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (362)
<INCOME-TAX> 0
<INCOME-CONTINUING> (362)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (362)
<EPS-BASIC> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
