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 0-10054
COMMODORE ENVIRONMENTAL SERVICES, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 87-0275043
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Nmber)
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
Number of shares of common stock outstanding at April 30, 2000 (latest
practicable date):
Issued and Outstanding: 62,796,477
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1: Financial Statements
--------------------
COMMODORE ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
---------- ------------
(unaudited)
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 3 $ 30
Accounts receivable, net 10 10
Restricted cash and certificates of deposits 270 270
Due from related parties 155 -
Inventory 519 519
------- -------
TOTAL CURRENT ASSETS 957 829
Other receivables 100 321
Investments and advances 2,442 3,085
Property and equipment ,net 624 736
Patents and completed technology 150 145
Other assets 18 18
------- -------
TOTAL ASSETS $ 4,291 $ 5,134
======= =======
</TABLE>
<PAGE>
COMMODORE ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
---------- ------------
(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current Liabilities:
Accounts payable $ 487 $ 531
Due to related parties 1,957 2,911
Unearned revenue 263 263
Other accrued liabilities 1,209 1,180
Bond payable 4,000 4,000
-------- -------
TOTAL CURRENT LIABILITIES 7,916 8,885
Net liabilities of discontinued operations - 29
Promissory note to related party 2,250 2,250
-------- -------
TOTAL LIABILITIES 10,166 11,164
Minority interest - 319
Stockholders' Equity (Deficit):
Preferred stock, par value $.01 per share
authorized 10,000,000, issued and
outstanding 3,912,202 39 39
Common stock, par value $.01 per share
authorized 100,000,000 and shares
issued and outstanding 62,796,477 628 628
Additional paid in capital 46,677 46,710
Accumulated deficit (53,194) (53,701)
-------- -------
(5,850) (6,324)
Less cost of 506,329 shares of common stock
held in treasury (25) (25)
-------- -------
TOTAL STOCKHOLDERS' DEFICIT (5,875) (6,349)
-------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,291 $ 5,134
======== =======
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
COMMODORE ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Three months ended
March 31,
---------------------
2000 1999
--------- --------
(unaudited)
REVENUES
<S> <C> <C>
Contract revenues $ 8 $ 264
COSTS AND EXPENSES
Cost of sales 40 319
Research and development 64 90
General and administrative 546 423
Depreciation and amortization 114 130
--------- --------
Total costs and expenses 764 962
--------- --------
LOSS FROM OPERATIONS (756) (698)
--------- --------
Interest income - 10
Other income 46 -
Interest expense (130) (130)
Equity in losses from unconsolidated
subsidiary (406) (308)
Minority interest 319 419
--------- --------
INCOME (LOSS) FROM CONTINUING OPERATIONS (927) (707)
Gain from disposition of discontinued
operations 1,569 -
Loss from discontinued operations (135) (192)
--------- --------
Net gain (loss) from discontinued operations 1,434 (192)
--------- --------
NET INCOME (LOSS) $ 507 $ (899)
========= ========
NET INCOME (LOSS) PER SHARE - BASIC
(Based on weighted average shares in 2000
and 1999 of 62,290,000)
Continuing operations $ (.01) $ (.01)
Discontinued operations .02 -
--------- --------
Total $ .01 $ (.01)
NET INCOME (LOSS) PER SHARE _ DILUTED
(Based on weighted average shares in 2000
and 1999 of 68,005,000 and 62,290,000)
Continuing operations $ (.01) $ (.01)
Discontinued operations .02 -
--------- --------
Total $ .01 $ (.01)
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
COMMODORE ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Three months ended
March 31,
---------------------
2000 1999
--------- --------
(unaudited)
OPERATING ACTIVITIES
<S> <C> <C>
Net income (loss) $ 507 $ (899)
Loss from discontinued operations 135 192
Gain from disposition of discontinued operations (1,569) -
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Depreciation and amortization 114 130
Undistributed losses of unconsolidated
subsidiary 406 308
Provision for losses on investments 106 -
Minority interest (319) (419)
Decrease (Increase) in:
Accounts receivable - (3)
Inventories - 267
Prepaid and other current assets - 1
Increase (decrease) in:
Unearned revenue - (187)
Accounts payable and accrued liabilities (15) 105
--------- --------
Net cash used in continuing operations (635) (505)
Net cash used in discontinued operations (184) (192)
--------- --------
NET CASH USED IN OPERATING ACTIVITIES (819) (697)
--------- --------
INVESTING ACTIVITIES
Payments received on receivables 221 -
Proceeds from sale of oil and gas lease 98 -
Purchase of patents (7) (7)
--------- --------
Net cash from (used in) investing
activities - continuing 312 (7)
Net cash from investing activities - discontinued 1,589 -
--------- --------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES 1,901 (7)
--------- --------
FINANCING ACTIVITIES
Advances from related party - 85
Payments to related parties, net (1,109) (17)
--------- --------
Net cash from (used in) financing
activities - continuing (1,109) 68
Net cash from (used in) financing
activities - discontinued - -
--------- --------
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES (1,109) 68
--------- --------
DECREASE IN CASH (27) (636)
Cash at beginning of period 30 714
--------- --------
CASH AT END OF PERIOD $ 3 $ 78
========= ========
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE>
COMMODORE ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 2000
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 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
B - Contingencies
The Company has matters of litigation arising in the ordinary course of
its business which in the opinion of management will not have a material adverse
effect on the financial condition or results of operations of the Company.
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operation
General
- -------
The current principal business of the Company is to invest in environmental
technology companies which consist of its 49% owned affiliate
6
<PAGE>
Commodore Applied Technologies, Inc. ("Applied"), which has developed
technologies for the destruction and neutralization of hazardous waste and the
separation of hazardous waste from other materials and its 87% owned affiliate
Commodore Separation Technologies, Inc., ("Separation"), whose principal
business is to separate and extract various solubilized materials from liquid
streams which is currently in the development stage and intends to commercialize
its separation and recovery system.
In March 1998, the Company, through its wholly-owned subsidiary Commodore
Polymer Technologies, Inc., ("Polymer Technologies"), purchased the business
(consisting of customer, supplier and industry relationships) related to the
ceramic polymer known as CERASET (the "CERASET Business")
Polymer Technologies was incorporated in Delaware on March 3, 1998, has
commenced operations and from 1998 to March 6, 2000, has generated approximately
$80,000 in aggregate revenues. Due to the limited success in expanding its
sales, the Company believed that the CERASET License, CERASET Business and
CERASET Trademark have a nominal value and was written down to $100,000 as of
December 31, 1998. In March 2000, the Company sold Polymer Technologies to the
Blum Technology Trust (an entity with common majority ownership) for $1,588,902.
The consideration was determined to be a good faith negotiation among the
parties to the transfer of the Polymer stock taking into consideration Polymer's
net book value of approximately $20,000.
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, through its Separation subsidiary.
For the three months ended March 31, 2000, the Company had incurred $40,000
of expenses, 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, 1999, the Company had incurred $319,000 of
costs which primarily related to the Port of Baltimore contracts.
For the three months ended March 31, 2000, the Company incurred research
and development costs of $64,000, 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, contract services and materials, test equipment and rent for
7
<PAGE>
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 $546,000 as compared to $423,000 for the three months ended March 31,
1999. The increase is primarily due to professional fees and printing costs
associated with public reporting requirements.
Depreciation and amortization decreased from $130,000 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 assets of the Company's consolidated
subsidiary becoming fully depreciated.
Other income was $46,000 for the three months ended March 31, 2000 as
compared to $0 for the three months ended March 31, 1999. Other income relates
to the collection of an outstanding receivable, which had been written off in a
previous period. The amount collected was in excess of the carrying value of the
receivable.
Minority interest reflects the portion of the consolidated results of the
Company which relate to minority shareholders of Separation. The Company
recorded minority interest income of $319,000 and $419,000 for the three months
ended March 31, 2000 and March 31, 1999, respectively.
Equity in losses from unconsolidated subsidiary for the three months ended
March 31, 2000 was $406,000 as compared to $308,000 for the three months ended
March 31, 1999. The losses relate to the operations of Applied.
On March 6, 2000, the Company sold Polymer Technologies to the Blum
Technology Trust (an entity with common majority ownership) for $1,588,902. The
consideration was determined to be a good faith negotiation among the parties to
the transfer of the Polymer stock taking into consideration Polymer's net worth
of approximately $20,000. In connection therewith, the Company recorded a gain
on disposition of discontinued operations of $1,569,000.
Loss from discontinued operations relating to Polymer Technologies amounted
to $135,000 for the three months ended March 31, 2000 as compared to $192,000
for the three months ended March 31, 1999.
The Company had net income of $507,000 for the three-month period ended
8
<PAGE>
March 31, 2000 as compared to a net loss of $899,000 for the three-month period
ended March 31, 1999. The results for the three month period ended March 31,
2000 included a gain on disposition of discontinued operations of $1,569,000.
The Company recorded a net loss from continuing operations of $927,000 for the
three months ended March 31, 2000 as compared to a net loss from continuing
operations of $707,000 for the three month period ended March 31, 1999. Results
from continuing operations are attributable to the various revenue and expense
items in the individual paragraphs above.
Liquidity and Capital Resources
- -------------------------------
The Company is currently funding the financial needs of Separation along
with its current working capital and operational requirements. For the three
months ended March 31, 2000, the Company had net income of $507,000, which
included a gain from the sale of discontinued operations of $1,569,000. At March
31, 2000, the Company had a working capital deficit of $6,959,000 as compared to
a working capital deficit of $8,056,000 at the December 31, 1999. The Company
has $4,000,000 of bonds payable due in June 2000, and is currently negotiating
terms with the lender. The Company did not declare or pay dividends on its
Series AA Preferred Stock.
The Company anticipates that it will need additional financing throughout
2000 to satisfy its current operating requirements. The Company believes that it
may be able to obtain such financing through the sale of its Applied Common
Stock in one or more private placement transactions. In addition, since the
first quarter of 1999, the Company was funded through advances made from an
entity owned by its majority shareholder. As of March 31, 2000, the majority
shareholder has advanced a net $1,261,000 to the Company. There can be no
assurance that the majority shareholder will continue to provide adequate
financing for the Company to continue as a going concern. There also can be no
assurance that the Company will be able to obtain financing from external
sources.
Net Operating Losses
- --------------------
The Company has net operating loss carryforwards which expire in the years
2000 through 2019. 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 carryforward can be utilized. A valuation allowance has been
established to offset any benefit from the net operating loss carryforwards as
it cannot be determined when or if the Company will be able to utilize the net
operating losses.
9
<PAGE>
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 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. Furthermore, the Company's business is subject to a number of risks
that would affect any such forward-looking statements. 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 2. Changes in Securities
Not applicable.
ITEM 3. Defaults upon Senior Securities
The Company did not declare or pay dividends of $63,125
due March 31, 2000 on its Series AA Preferred Stock.
ITEM 4. Submission of Matters to a Vote of Security Holders
Not applicable.
ITEM 5. Other Information
Not applicable.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits - 27 - Financial Data Schedule
(b) Reports on Form 8-K - On March 21, 2000, theCompany filed
with the Securities and Exchange Commission, the Company's
Current Report on Form 8-K, dated March 6, 2000 with respect to
the sale of the Capital Stock of Commodore Polymer
Technologies, Inc. to the Blum Technology Trust.
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 ENVIRONMENTAL SERVICES, INC.
(Registrant)
By /s/ Andrew P. Oddi
-------------------
Andrew P. Oddi - Vice President
Treasurer(As both a duly authorized
Officer of the Registrant
and the Chief Accounting
Officer of the Registrant)
Date: May 17, 2000
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM COMMODORE
ENVIRONMENTAL SERVICES, INC. AND SUBSIDIARIES FINANCIAL STATEMENTS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 3
<SECURITIES> 0
<RECEIVABLES> 10
<ALLOWANCES> 0
<INVENTORY> 519
<CURRENT-ASSETS> 957
<PP&E> 1,947
<DEPRECIATION> 1,323
<TOTAL-ASSETS> 4,291
<CURRENT-LIABILITIES> 7,916
<BONDS> 2,250
0
39
<COMMON> 628
<OTHER-SE> (6,542)
<TOTAL-LIABILITY-AND-EQUITY> 4,291
<SALES> 8
<TOTAL-REVENUES> 8
<CGS> 40
<TOTAL-COSTS> 764
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 130
<INCOME-PRETAX> (927)
<INCOME-TAX> 0
<INCOME-CONTINUING> (927)
<DISCONTINUED> 1,434
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 507
<EPS-BASIC> 0.01
<EPS-DILUTED> 0.01
</TABLE>
