|
|
|
|
Commodore Applied Technologies,
Inc. and Subsidiaries
Consolidated Statements of Cash
Flows
For the years ended December 31, 2007
and 2006
(Amounts in thousands)
|
|
2007
|
|
2006
|
Cash flows from operating activities:
|
|
|
|
Net loss
|
($1,978)
|
|
($1,849)
|
Adjustments to reconcile net loss
to net cash
|
|
|
|
used in operating activities:
|
|
|
|
Depreciation and amortization
|
80
|
|
25
|
Other asset writedown
|
56
|
|
-
|
Gain on settlement of DCAA audit
|
(376)
|
|
-
|
Medical insurance reserve accrual reversal
|
(56)
|
|
-
|
Gain on disposal of equipment
|
-
|
|
(3)
|
Issuance of common stock for services
|
23
|
|
28
|
Changes in assets and
liabilities:
|
|
|
|
Accounts receivable, net
|
411
|
|
1,263
|
Prepaid assets
|
14
|
|
1
|
Inventory
|
(73)
|
|
-
|
Accounts payable
|
(97)
|
|
(364)
|
Accrued interest
|
792
|
|
555
|
Deferred wages
|
156
|
|
194
|
Other accrued liabilities
|
(279)
|
|
(446)
|
Net
cash used - operating activities
|
(1,327)
|
|
(596)
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
Equipment purchased
|
(17)
|
|
-
|
Purchased intangible asset
|
(10)
|
|
-
|
Proceeds form sale of property
and equipment
|
-
|
|
7
|
Net
cash provided (used) - investing activities
|
(27)
|
|
7
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
Borrowings on debt
|
1,615
|
|
1,102
|
Payments on long-term debt
|
(188)
|
|
-
|
Payments to related
parties
|
-
|
|
(310)
|
Repayment of line of
credit
|
-
|
|
(141)
|
Net
cash provided - financing activities
|
1,427
|
|
651
|
|
|
|
|
Net change in cash
|
73
|
|
62
|
|
|
|
|
Cash at beginning of year
|
127
|
|
65
|
Cash at end of year
|
$
200
|
|
$
127
|
|
|
|
|
Supplemental disclosure of cash flow
information:
|
|
|
|
Cash paid during the year for interest
|
$
24
|
|
$
104
|
Non-cash investing and financing activities:
|
|
|
|
Purchase of equipment by issuing debt
|
$
91
|
|
$
-
|
Purchase of equipment by capital lease
|
$
12
|
|
$
-
|
Purchase of intangible asset by issuing debt
|
$
70
|
|
$
-
|
Accrued dividends on preferred stock
|
$
416
|
|
$
412
|
The accompanying
notes are an integral part of these consolidated financial statements.
25
Commodore Applied
Technologies, Inc. and Subsidiaries
Notes to
Consolidated Financial Statements
1.
Summary of Significant Accounting
Policies
Nature of
Operations
Commodore Applied
Technologies, Inc. and subsidiaries ("Applied" or the Company) is engaged in
the destruction and neutralization of hazardous waste from other materials.
Through its subsidiary, Commodore Solutions, Inc. (Solution), Applied
owns technologies related to the separation and destruction of polychlorinated
biphenyls (PCBs) and chlorofluorocarbons (CFCs). Applied is currently
working on the commercialization of these technologies through development
efforts, licensing arrangements and permitting activities.
Through Commodore
Advanced Sciences, Inc. ("Advanced Sciences"), Applied has contracts with
various government agencies and private companies in the United States and
abroad performing environmental monitoring and engineering services. Advanced
Sciences also distributes safety products and other materials used in connection
with monitoring and engineering services through its operating division
Commodore Sales Solution.
Principles of
Consolidation
The consolidated
financial statements include the accounts of Applied and its majority-owned
subsidiaries. All significant intercompany balances and transactions have
been eliminated.
Cash and Cash
Equivalents
Applied considers cash
and highly liquid debt instruments with original maturities of three months or
less at the date of purchase to be cash equivalents.
Concentration of
Credit Risk and Significant Customers
Applied maintains its
cash in bank deposit accounts which, at times, may exceed federally insured
limits. Applied has not experienced any losses in such accounts.
With respect to trade
receivables, Applied generally does not require collateral as the majority of
Applied's services are performed for the U.S. Government and prime contractors
that serve the U.S. Government. Applied believes it is not exposed to any
significant credit risk on cash, cash equivalents and trade receivables.
Sales to major customers which exceeded 10 percent of revenues are limited
to one customer as follows, in thousands:
2007
2006
Customer A
$
1,835
$
6,542
Customer A
accounts for approximately 67.6% of the accounts receivable balance as of
December 31, 2007.
Accounts receivable
Trade receivables are
carried at original invoice amount less an estimate made for doubtful
receivables based on a review of all outstanding amounts on a monthly basis.
Management determines the allowance for doubtful accounts by identifying
troubled accounts and by using historical experience applied to an aging of
accounts. Trade receivables are written off when deemed uncollectible.
Recoveries of trade receivables previously written off are recorded when
received.
A trade receivable is
considered to be past due if any portion of the receivable balance is
outstanding for more than 90 days, not counting retainage billed, which is due
at the end of the particular phase of the master government contract. At
December 31, 2007 and 2006, retainage of approximately $12 thousand and $568
thousand were included in trade accounts receivable, respectively, all expected
to be collected within one year. Interest is not charged on trade receivables.
26
Commodore Applied
Technologies, Inc. and Subsidiaries
Notes to
Consolidated Financial Statements
1.
Summary of Significant Accounting
Policies, Continued:
Inventory
Inventories, consisting
of finished goods purchased for resale, are valued at the lower of cost or
market and are removed from inventory using the average-cost method.
Property and
Equipment
Property and equipment
are recorded at cost, less accumulated depreciation. Improvements which
substantially increase the useful lives of assets are capitalized. Maintenance
and repairs are expensed as incurred. Upon retirement or disposal, the
related cost and accumulated depreciation are removed from the respective
accounts and any gain or loss is recorded in the Statement of Operations.
Depreciation is computed on the straight-line method based on the
estimated useful lives of the assets; machinery & equipment over 3 to 7
years, furniture and fixtures over 3 to 7 years and computer equipment and
software over 3 to 5 years.
Purchased
Intangibles
Applied amortizes
purchased intangibles on a straight-line basis over their contractual or
economic lives.
Impairment of
Long-Lived Assets
Applied reviews its
long-lived assets, including property, equipment and intangibles with useful
lives, for impairment annually or whenever circumstances indicate that the
carrying amount of the assets may not be recoverable. The Company
evaluates, at each balance sheet date, whether events and circumstances have
occurred which indicate possible impairment. The carrying value of a
long-lived asset is considered impaired when the estimated cumulative
undiscounted cash flows of the related asset or asset group is less than the
carrying value. In that event, a loss is recognized based on the amount by
which the carrying value exceeds the estimated fair market value of the
long-lived asset. Applied did not record any impairment charges for the years
ended December 31, 2007 and 2006.
Revenue
Recognition
Substantially all of
Applied's revenues are generated by its subsidiary, Advanced Sciences.
Advanced Sciences revenues consist of engineering and scientific services
and sales of scientific and safety products. Engineering and scientific services
are 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 is recorded when a
contract or arrangement exists, the fees to be charged are fixed or
determinable, the services have been provided, and collection of the billed
amounts is reasonably assured.
Revenue on product
sales is generally recognized when evidence of a customer arrangement exists,
prices are fixed and determinable and product title, ownership and risk of loss
transfers to the customer. Revenue for product sales also includes freight and
handling charges. The Companys standard shipping terms are FOB shipping point.
Income
Taxes
Income taxes are
recognized in accordance with Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes," (SFAS No. 109) whereby deferred income tax
liabilities or assets at the end of each period are determined using the tax
rate expected to be in effect when the taxes are actually paid or recovered. A
valuation allowance is recognized on deferred tax assets when it is more likely
than not that some or all of these deferred tax assets will not be realized.
27
Commodore Applied
Technologies, Inc. and Subsidiaries
Notes to
Consolidated Financial Statements
1.
Summary of Significant Accounting
Policies, Continued:
Income Taxes,
Continued:
On January 1, 2007, the
Company adopted Financial Accounting Standards Board Interpretation No. 48 (FIN
No. 48) Accounting for Uncertainty in Income Taxes. FIN No. 48 clarifies the
accounting for uncertainty in income taxes recognized in accordance with SFAS
No. 109, prescribing a recognition threshold and measurement attribute for the
recognition and measurement of a tax position taken or expected to be taken in a
tax return. In the course of our assessment, we have determined that we are
subject to examination of our income tax filings in the United States and state
jurisdictions for the 2003 through 2006 tax years. In the event that the Company
is assessed penalties and or interest, penalties will be charged to other
operating expense and interest will be charged to interest expense.
The Company adopted FIN
No. 48 using the modified prospective transition method, which requires the
application of the accounting standard as of January 1, 2007. There was no
impact on the financial statements as of and for the year ended December 31,
2007 as a result of the adoption of FIN No. 48. In accordance with the modified
prospective transition method, the financial statements for prior periods have
not been restated to reflect, and do not include, the impact of FIN No. 48.
Fair Value of Financial
Instruments
The fair value of
financial instruments is determined by reference to market data and other
valuation techniques as appropriate. Accounts receivable, accounts payable,
other accrued liabilities and long term debt are financial instruments that are
subject to material market variations from the recorded book value. The
fair value of these financial instruments approximates the recorded book value
as of December 31, 2007 and 2006.
Use of
Estimates
The preparation of
consolidated financial statements in conformity with U.S. Generally Accepted
Accounting Principles (GAAP) 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.
Recent Accounting
Pronouncements
In September 2006, the
Financial Accounting Standards Board issued SFAS No. 157, Fair Value
Measurements (SFAS 157). SFAS 157 defines fair value, establishes a framework
for measuring fair value, and expands disclosures about fair-value measurements
required under other accounting pronouncements, but does not change existing
guidance as to whether or not an instrument is carried at fair value. SFAS 157
is effective for the Companys fiscal year 2008. The Company is currently
evaluating the impact of adopting SFAS 157.
On January 1, 2007, the
Company adopted SFAS No. 154, Accounting Changes and Error Corrections a
replacement of APB Opinion No. 20 and FASB Statement No. 3. The Statement
establishes, unless impracticable, retrospective application as the required
method for reporting a change in accounting principle in the absence of explicit
transition requirements specific to the newly adopted accounting principle. The
adoption of this Statement had no material impact on the Companys financial
position or result of operations.
28
Commodore Applied
Technologies, Inc. and Subsidiaries
Notes to
Consolidated Financial Statements
1.
Summary of Significant Accounting
Policies, Continued:
Recent Accounting
Pronouncements, Continued
On January 1, 2007, the
Company adopted SFAS No. 155 Accounting for Certain Hybrid Financial
Instruments, which amends SFAS No. 133 Accounting for Derivative Instruments
and Hedging Activities and SFAS No. 140 Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities. SFAS No. 155 resolves
issues addressed in Statement 133 Implementation Issue No. D1 Application of
Statement 133 to Beneficial Interests in Securitized Financial Assets, and:
·
Permits fair value
re-measurement for any hybrid financial instrument that contains an embedded
derivative that otherwise would require bifurcation;
·
Clarifies which
interest-only strips are not subject to the requirements of SFAS No. 133;
·
Establishes a
requirement to evaluate interests in securitized financial assets to identify
interests that are freestanding derivatives or that are hybrid financial
instruments that contain an embedded derivative requiring bifurcation;
·
Clarifies that
concentrations of credit risk in the form of subordination are not embedded
derivatives; and
·
Amends SFAS No.
140 to eliminate the prohibition on a qualifying special-purpose entity from
holding a derivative financial instrument that pertains to a beneficial interest
other than another derivative financial instrument.
The Company adopted
SFAS No. 155 using the modified prospective transition method, which requires
application of the standard as of January 1, 2007. There was no impact on the
financial statements as of and for the year ended December 31, 2007 as a result
of adoption of SFAS No. 155. In accordance with the modified prospective
transition method, the financial statements for prior periods have not been
restated to reflect, and do not include, the impact of SFAS No. 155.
On January 1, 2007, the
Company adopted SFAS No. 156, Accounting for Servicing of Financial Assets an
Amendment of FASB Statement No. 140. This Statement amended SFAS No. 140,
Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities, with respect to the accounting for separately recognized
servicing assets and servicing liabilities. The adoption of this Statement had
no material impact on the Companys financial position or results of
operations.
In February 2007, the
FASB issued SFAS No. 159, The Fair Value Option for Financial Assets
and Financial Liabilities. SFAS No. 159 permits companies to choose to
measure many financial instruments and certain other items at fair value. SFAS
No. 159 is effective for financial statements issued for fiscal years
beginning after November 15, 2007. The Company does not expect the adoption
of SFAS No. 159 to have a material impact on our consolidated financial
statements.
In December 2007, the
FASB issued SFAS No. 141 (R), Business Combinations, and SFAS
No. 160, Noncontrolling Interests in Consolidated Financial Statements.
SFAS No. 141 (R) requires an acquirer to measure the identifiable
assets acquired, the liabilities assumed and any noncontrolling interest in the
acquiree at their fair values on the acquisition date, with goodwill being the
excess value over the net identifiable assets acquired. SFAS No. 160
clarifies that a noncontrolling interest in a subsidiary should be reported as
equity in the consolidated financial statements. The calculation of earnings per
share will continue to be based on income amounts attributable to the parent.
SFAS No. 141 (R) and SFAS No. 160 are effective for financial
statements issued for fiscal years beginning after December 15, 2008. Early
adoption is prohibited. The Company not yet determined the effect on our
consolidated financial statements, if any, upon adoption of SFAS No. 141
(R) or SFAS No. 160.
29
Commodore Applied
Technologies, Inc. and Subsidiaries
Notes to
Consolidated Financial Statements
1.
Summary of Significant Accounting
Policies, Continued:
Stock-Based
Compensation
Effective January 1,
2006, the Company adopted the fair value recognition provisions of SFAS No. 123
(Revised), Share-Based Payment, using the modified-prospective transition
method. Under this transition method, the Company recognizes stock-based
compensation expense for stock-based awards granted subsequent to the year ended
December 31, 2005 in accordance with the provisions of SFAS No. 123R, and the
estimated expense for the portion vesting in the period for options granted
prior to, but not vested as of December 31, 2005, based on the grant date fair
value estimated in accordance with the original provisions of SFAS No. 123.
At December 31, 2007
and 2006, the Company had a stock plan for key employees, non-employee directors
and management consultants, described more fully in Note 11 Share-Based
Compensation. Managements adoption of SFAS 123R resulted in recognition of $0
of stock-based compensation expense in 2007 and 2006.
Reclassifications
Certain amounts in
prior years have been reclassified to conform to the current year presentation.
These reclassifications have no effect on net loss, total assets or
stockholders equity as previously reported. The reclassifications have no
effect on net loss or total stockholders deficit as previously reported.
2.
Going Concern
The accompanying
consolidated 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. As shown in the consolidated financial statements, Applied
incurred losses and negative cash flows from operating activities for the years
ended December 31, 2007 and 2006. Applied also has a working capital
deficit of approximately $6.8 million and an accumulated deficit of
approximately $83.1 million at December 31, 2007 and several of the Companys
notes payable are in default. These factors raise substantial doubt about
the Companys ability to continue as a going concern. The consolidated
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 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. Applied currently requires
additional cash funding from outside sources to sustain existing operations and
to meet current obligations and ongoing capital requirements.
3.
Accounts
Receivable
The components of
Applieds receivables as of December 31, 2007 and 2006 are as follows, in
thousands:
2007
2006
Accounts receivables
$
394
$
803
Related party receivables
3
3
Allowance for doubtful accounts
(6
)
(4
)
Accounts receivable, net
$
391
$
802
Substantially all of
Advanced Sciences accounts receivables are pledged to Wells Fargo Bank as
collateral under a factoring agreement guaranteed by Applied. See Note 4.
30
Commodore Applied
Technologies, Inc. and Subsidiaries
Notes to
Consolidated Financial Statements
4.
Sale of Accounts
Receivable
Advanced Sciences sells
its accounts receivable under the Environmental Data Acquisition and Management
(EDAM) contract to Wells Fargo Bank pursuant to the terms of a factoring
agreement. The agreement allows Advanced Sciences to receive 90% of eligible
receivables up to $2 million. According to the terms of the agreement
receivables are sold with full recourse and the Company assumes all risk of
collectability. Financing fees are paid monthly at prime plus 2.0 percent of
receivables sold, aggregate of 9.25% at December 31, 2007. Financing fees paid
for the year ended December 31, 2007 and 2006 were $11 and $18 thousand,
respectively under the agreement.
5.
Property and Equipment
Property and equipment
consist of the following as of December 31, 2007 and 2006, in thousands:
2007
2006
Machinery and equipment
$
659
$
571
Furniture and fixtures
60
47
Computer equipment
96
99
815
717
Accumulated depreciation
(643
)
(598
)
Property and equipment, net
$
172
$
119
During the year ended
December 31, 2007, $2 thousand of fully depreciated machinery and equipment was
sold, resulting in a recognized gain of $400. The Company also abandoned
$10 thousand of fully depreciated machinery and equipment. Cost and related
accumulated depreciation have been removed from the respective accounts.
6.
Contract Acquisition
In January 2007,
Advance Sciences acquired net assets in the form of equipment and monitoring
services contracts from American Aquatics Inc. in exchange $170 thousand in cash
and short-term notes payable. The acquisition increased environmental monitoring
revenues by $156 thousand, which are included in Services revenue in the
consolidated statement of operations and segment information reported in Note
17. The purchase price resulted in additions to property and equipment of
approximately $90 thousand and an intangible asset of approximately $79 thousand
for the monitoring service contracts. The acquired intangible will be amortized
on a straight-line basis over the life of the monitoring service contracts,
which extend through December 2009. For the year ended December 31, 2007 Applied
recorded $26 thousand in amortization expense on the purchased intangible.
Amortization expense and accumulated amortization will be $26 thousand and $52
thousand, respectively for 2008, and $27 thousand and $79 thousand, respectively
for 2009.
7.
Other Accrued Liabilities
Other accrued
liabilities consist of the following, in thousands:
2007
2006
Compensation and employee benefits
(1)
$
186
$
213
Subcontractors
(2)
-
355
Related party payable
(3)
269
185
Other
(4)
94
131
Total
$
549
$
884
(1)
Liability accrued for
payroll, payroll taxes and employee benefits earned by company employees but
paid subsequent to the close of the year of accrual.
(2)
Liability accrued for
services performed by subcontractors for the Company under its contracts with
the Department of Energy or Department of Defense.
(3)
Amounts payable to
parties related to the Company by past ownership of an acquired company.
(4)
Accruals for other
general liabilities of the Company.
31
Commodore Applied
Technologies, Inc. and Subsidiaries
Notes to
Consolidated Financial Statements
8.
Long-Term Debt
Long-term debt consists of the
following as of December 31, 2007 and 2006, in thousands:
2007
2006
Convertible note payable, 10% interest
(1)
$
8,009
$
6,509
Note payable, 12% interest
(2)
252
252
Note payable, 9% interest
(3)
312
312
Note payable, 8.75% interest
(4)
58
-
Note payable, 6.5% interest
(5)
80
-
Note payable, 6.0.% interest
(6)
24
90
Other
(7)
16
-
8,751
7,163
Less current portion
(735
)
(654
)
$
8,016
$
6,509
(1)
Notes payable to The
Shaar Fund, Ltd. with interest at 10%, interest only due in monthly installments
beginning on June 30, 2008, maturing in April 2009, no prepayment option, and
collateralized by property and equipment and patents. The note is
convertible into common stock at any time, and the interest can be paid in cash
or stock, at the option of either the Company or the holder. Both the conversion
and the payment of interest in the form of common stock are subject to a
limitation, such that no conversion or payment in the form of stock can be
exercised or made that would result in the holder owning 5% or more beneficial
ownership of the Companys common stock. The conversion price is the lower of
the average closing price of the ten days preceding the conversion date, or
$0.57. See Note 10. Also, these notes payable restrict the Companys
ability to declare or pay dividends on and repurchase common stock, materially
change the Companys business, enter a business combination, or transfer or sell
assets.
(2)
Notes payable to
individuals bearing 12.0% interest, in default as of January 15, 2005,
collateralized by accounts receivable.
(3)
Note payable to
individual with interest at 9.0%, unsecured and in default as of December 31,
2006.
(4)
Note payable to
American Aquatics, Inc. with interest at 8.75%, payable monthly through May
2008.
(5)
Note payable to
Sterling Lending financing the Companys general liability insurance, with
interest at 6.5% payable monthly through December 2008.
(6)
Note payable to
Sterling Lending financing the Companys directors and officers insurance, with
interest at 6.0% payable monthly through April 2008.
(7)
Other long-term debt
consists of short-term notes and capital leases for equipment. Interest rates
vary and dates of maturity are through April 2010.
Future maturities of
long-term debt is as follows, in thousands:
2008
$
735
2009
8,012
2010
3
2011
1
Thereafter
-
$
8,751
32
Commodore Applied
Technologies, Inc. and Subsidiaries
Notes to
Consolidated Financial Statements
9.
Income
Taxes
Applied provides for
deferred income taxes on temporary differences which represent tax effects of
transactions reported for tax purposes in periods different than for book
purposes.
The provision for
income taxes for the years ended December 31, 2007 and 2006 results in an
effective tax rate which differs from federal income tax rates as follows, in
thousands:
2007
2006
Expected tax benefit at federal statutory rate
$
(666)
$
(629)
State income tax benefit at federal statutory rate
(69)
(65)
Other
13
131
Change in valuation allowance
722
563
Income tax benefit
$
-
$
-
The components of the
net deferred tax assets as of December 31, 2007 and 2006 are as follows, in
thousands:
2007
2006
Reserves and accruals
$
27
$
158
Net operating loss carryforward
16,537
15,427
Depreciation, amortization and impairment charges
891
1,148
17,455
16,733
Valuation allowance
(17,455
)
(16,733
)
Net deferred tax assets
$
-
$
-
Management estimates
that our combined federal and state tax rates will be 36.3%. Applied conducts a
periodic examination of its valuation allowance, factors considered in the
evaluation include recent and expected future earnings and Applied's liquidity
and equity positions. As of December 31, 2007 and 2006, Applied has
established a valuation allowance for the entire amount of net deferred tax
assets, due to the Companys belief that it is more likely than not that the
deferred tax asset will not be realized.
Applied has net
operating loss ("NOL") carryforwards at December 31, 2007 of approximately
$43.4 million which expire in years 2010 through 2027. The NOL
carryforwards are limited to use against future taxable income due to changes in
ownership and control.
10.
Stockholders Deficit
Series H Convertible
Preferred Stock
Applied issued 800,000
shares of Series H Preferred Stock (the Series H Preferred), par value $0.001
per share, having a stated value of $1 per share. The Series H Preferred
shall have the following rights, privileges, and limitations:
a)
The
conversion feature was exercisable on or after June 30, 2003.
b)
The
conversion price is determined by the average closing price of Companys common
stock in the previous 30 trading days, but in no event shall the conversion
price be less than $4.00 per share.
c)
The
Series H Preferred has a non-cumulative annual dividend of 3%, payable in cash
or Series H Preferred stock
within 30 days of the
end of Applieds fiscal year, at Applieds election. Dividends of $24
thousand were accrued during 2007 and 2006 respectively, and total accumulated
dividends of $131 thousand had been accrued at December 31, 2007.
d)
The Series H Preferred is not transferable.
33
Commodore Applied
Technologies, Inc. and Subsidiaries
Notes to
Consolidated Financial Statements
10.
Stockholders Deficit
, Continued
:
There have been no
shares of Series H Preferred stock converted into common shares as of December
31, 2007. In the event of liquidation, dissolution or winding up of
Applied, holders of Series H Convertible Preferred Stock are entitled to receive
liquidation distributions equivalent to $1.00 per share, and no more, before any
distribution to holders of the common stock.
Series J Convertible
Preferred Stock
Effective October 1,
2005, the Company authorized the issuance of 550,000 shares of Series J
Convertible Preferred Stock (Series J Preferred), par value $0.001 per share,
each such share having a stated value of $10.00 per share.
The Series J Preferred
have the following rights, privileges, and limitations:
a)
The
conversion feature was exercisable immediately upon issuance of the shares.
b)
The
conversion price is determined by the average closing price of the Companys
common stock in the previous 10 trading days, but in no event shall the
conversion price be more than $0.50 per share or less than $0.05 per share.
c)
If
the Companys common stock is not listed on an exchange at the time of the
conversion, then the conversion price will be 50% of the market price at that
time.
d)
The
Series J Preferred have a cumulative annual dividend of 10%, payable in cash or
shares of the Companys common stock at the Companys election.
e)
Dividends were to be paid quarterly commencing March 31, 2006, to
the holder of the shares of the Series J
Preferred Stock. As of
December 31, 2007, no dividends had yet been paid under these terms, and the
holder has agreed to a deferral of payment until June 30, 2008 without
consequence to the Company.
f)
The
Company has reserved 60,000,000 shares of its common stock for the conversion of
the Series J Preferred and the Amended New Shaar Convertible Note.
g)
Both
the conversion and the payment of dividends in the form of common stock are
subject to limitation, such that no conversion or payment in the form of stock
can be exercised or made that would result in the holder owning 5% or more
beneficial ownership of the Companys common stock.
h)
The
Company accrued approximately $392 thousand and $388 thousand of dividends in
2007 and 2006 on the Series J Preferred. Accumulated dividends totaled
approximately $877 thousand through December 31, 2007.
Upon liquidation,
dissolution or winding up of Applied, holders of Series J Convertible Preferred
Stock are entitled to receive liquidation distributions equivalent to a stated
value of $10.00 per share, plus 30% of the stated value, plus the aggregate of
all accrued and unpaid dividends, the total of such distributions to be made
before any distribution to holders of the common stock.
Rights and
Dividends
The holders of all
series of convertible preferred stock have the right, voting as a class, to
approve or disapprove of the issuance of any class or series of stock ranking
senior to or on a parity with the convertible preferred stock with respect to
declaration and payment of dividends or the distribution of assets on
liquidation, dissolution or winding up.
Cumulative unpaid
dividends on all series of preferred stock are approximately $1.2 million and
$773 thousand at December 31, 2007 and 2006, respectively.
34
Commodore Applied
Technologies, Inc. and Subsidiaries
Notes to
Consolidated Financial Statements
10.
Stockholders Deficit,
Continued:
Warrants
Each outstanding warrant is
exercisable into one share of the Companys common stock. A summary of the
warrants outstanding as of December 31, 2007 and 2006 and changes during the
periods then ended is presented below:
Weighted Avg.
# of Warrants
Exercise Price
Beginning Balance 2006
1,724,456
$
0.55
Granted
-
Expired
(91,665
)
1.23
Beginning Balance 2007
1,632,791
$
0.52
Granted
-
Expired
(50,001
)
0.57
Ending Balance 2007
1,582,790
$
0.52
Year of
Current
Expiration
Grant
Warrants
Exercise Price
Date
2003
1,367,790
$
0.57
Nov-08
2003
2,500
$
0.57
Nov-08
2004
12,500
$
0.60
Feb-09
2005
200,000
$
0.20
Apr-08
Total outstanding
1,582,790
As of December 31, 2007 there was no
unrecognized expense related to non-vested warrants granted under the Companys
plans.
As of December 31, 2007
all remaining outstanding warrants are exercisable.
11.
Share-Based Compensation
During the year ended
December 31, 2007, the Company issued 120,000 shares of common stock to an
investor relations services consulting firm, for which an expense of
approximately $23 thousand was recognized, measured by the fair value of the
shares at the date of issue.
In December 1998,
Applied adopted its 1998 Stock Option Plan pursuant to which officers,
directors, key employees and/or consultants of Applied can receive non-qualified
stock options to purchase up to an aggregate 250,000 shares of Applied's common
stock. During 1999 and 2000 Applied increased the number of shares
authorized by 250,000 shares each year resulting in 750,000 shares currently
available under the 1998 stock option plan. Exercise prices applicable to
stock options issued under this Plan represent no less than 100% of the fair
value of the underlying common stock as of the date of grant. Stock
options granted under the plan may vest immediately or for any period up to five
years.
The Company did not
recognize any compensation expense related to share-based payments under SFAS
123R for the years ended December 31, 2007 or 2006. As of December 31,
2007, there was no unrecognized compensation expense related to non-vested
share-based compensation arrangements granted under the Companys plans. No
stock options were granted in the years ended December 31, 2007 and 2006.
35
Commodore Applied
Technologies, Inc. and Subsidiaries
Notes to
Consolidated Financial Statements
11. Share-Based Compensation, Continued:
Stock
Options
A summary of stock
options outstanding as of December 31, 2007 and 2006 and changes during the
periods then ended is presented below:
Weighted Avg.
# of Options
Exercise Price
Beginning Balance 2006
4,325,841
1.08
Forfeited
(15,369)
106.47
Beginning Balance 2007
4,310,472
0.66
Forfeited
(2,500
)
1.06
Ending Balance 2007
4,307,972
$
0.66
Range of Exercise
# of Options
Weighted Avg.
Weighted Avg.
# of Shares
Prices
Outstanding
Remaining Life
Exercise Price
Exercisable
$0.00-$0.57
3,854,068
0.96
$
0.57
3,854,068
$0.58-$1.40
453,904
0.96
$
1.40
453,904
4,307,972
0.96
$
0.65
4,307,972
As of December 31, 2007, the aggregate
intrinsic value of options outstanding and exercisable was $0.
12.
Basic and Diluted Loss Per
Share
Basic loss per share is
computed by dividing net loss available to common shareholders by the weighted
average number of shares outstanding during the period. Diluted loss per
share is computed using the weighted average number of shares determined for the
basic computations plus the number of shares that would be issued assuming all
contingently issuable shares having a dilutive effect on earnings per share were
outstanding for the period. Options and warrants to purchase 5,890,762 and
5,943,263 shares of common stock were outstanding as of December 31, 2007 and
2006, respectively. Additionally, exercise of a convertible note,
interest, Series H and Series J Preferred and dividends would result in issuance
of 172,596,534 shares of common stock, subject to provisions that limit the
total of these conversions to less than 5% beneficial ownership by the holder.
Shares issuable upon exercise of options, warrants and convertible debt
and instruments were excluded from the calculation of diluted loss per share as
the effect would have been anti-dilutive as the Company has experienced net
losses.
13.
Related Party Transactions
Applied had the following related
party transactions not fully disclosed elsewhere:
a)
Applied has a
receivable from a related party of approximately $57 thousand for the year ended
December 31, 2006, and is included in other assets.
b)
Applied has payables to
related parties of approximately $269 and $185 thousand for the years ended
December 31, 2007 and 2006, and are included in other accrued liabilities.
c)
Applied has a note
payable to Bentley Blum, a member of the board of directors that is due on
demand and carries interest at 9%. The balance as of December 31, 2007 and
2006 was approximately $312 thousand. Accrued interest as of December 31, 2007
and 2006 was $127 thousand and $99 thousand, respectively. The note is in
default at December 31, 2007.
36
Commodore Applied
Technologies, Inc. and Subsidiaries
Notes to
Consolidated Financial Statements
13.
Related Party Transactions,
Continued:
d)
Applied has a long-term
convertible note payable to The Shaar Fund, Ltd., a shareholder of Applied, that
matures in April 2009. The note bears interest at 10% annually with interest
only due in monthly installments beginning June 30, 2008. The balance as of
December 31, 2007 and 2006 was approximately $8.0 million and $6.5 million,
respectively. Accrued interest on the note was approximately $1,718 thousand and
$984 thousand for the years ended December 31, 2007 and 2006 respectively, and
is included in other accrued liabilities.
e)
During 2007, the
Company engaged a consulting firm owned by its Chief Financial Officer to assist
the Company in its compliance with Section 404 of the Sarbanes-Oxley Act of
2002, incurring a total expense of $41,173 to this related party.
14. Operating Leases
Applied and its
subsidiaries are committed under non-cancellable operating leases for office
space and other equipment. Future obligations under the leases are as follows,
in thousands:
2008
$
128
2009
128
2010
128
2011
77
Thereafter
-
Total
$
461
Rent expense, including
cancelable month to month leases, was approximately $213 thousand and $198
thousand in 2007 and 2006, respectively.
15. Commitments and Contingencies
DCAA Audit
Contracts of the
Company may be subjected to audit by the Defense Contract Audit Agency (DCAA).
Anticipated losses on contracts are provided for by a charge to income during
the period such losses are first identified. During 2007, the Company completed
a DCAA audit of a single contract of the Company for the period January 1995
through December 1999. The DCAA had asserted that the Company incorrectly
overbilled the Government for services rendered under contracts performed during
said period. The Company had previously recorded a liability totaling $376
thousand as a reserve to settle any claims or expense that may be incurred as a
result of the audit process. The amount recorded was estimated based on an
assessment of potential liability using an analysis of available information
with respect to pending claims, historical experience and, where available,
recent and current trends. During the fourth quarter the DCAA completed their
audit and a settlement was reached. The Company recognized additional contract
revenues of $86 and subcontractor cost of revenue of $147 were recognized,
resulting in a decrease in the loss from operations of $315.
Guarantee
Applied, along with
several other entities in a prior year, guaranteed a performance bond of
Commodore Separation Technologies, Inc. relating to a contract with the Port of
Baltimore. Applied was notified on June 28, 2000, that the performance
bond was being called. It is not known at this time the amount, if any,
Applieds share will be. No liability has been reflected in the financial
statements as of December 31, 2007 or 2006 related to this bond, as the Company
feels an adverse determination is not probable, and the amount of loss is not
determinable.
37
Commodore Applied
Technologies, Inc. and Subsidiaries
Notes to
Consolidated Financial Statements
16.
401(K)
S
avings
Plan
Applied has adopted a
401(K) savings plan for all employees who qualify as to age and service.
Contributions by Applied are discretionary. Applied made
discretionary contributions of approximately $0 and $14 thousand to the plan
during the years ended December 31, 2007 and 2006, respectively.
17.
Segment
Information
Using the guidelines
set forth in SFAS No. 131, "Disclosures About Segments of an Enterprise and
Related Information," Applied has identified two reportable segments as
follows:
1.
Advanced Sciences, which primarily provides various engineering,
legal, sampling and public relations services to government agencies on a cost
plus basis.
2.
Solution which has equipment to treat mixed and hazardous waste
through a patented process using sodium and anhydrous ammonia.
Common overhead costs
are allocated between segments based on a record of time spent by executives.
Applied evaluates segment performance based on the segment's net income
(loss). The accounting policies of the segments are the same as those
described in the summary of significant accounting policies. Summarized
financial information concerning Applied's reportable segments is shown in the
following tables.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodore Applied Technologies, Inc. and
Subsidaries
|
Segment Disclosure
|
For the years ended December 31, 2007 and
2006
|
(Amounts in Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
2006
|
|
CASI
|
|
Solution
|
|
Corporate
& Other
|
|
Total
|
|
CASI
|
|
Solution
|
|
Corporate
& Other
|
|
Total
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services
|
$
2,589
|
|
$
-
|
|
$
-
|
|
$
2,589
|
|
$
7,254
|
|
$
-
|
|
$
-
|
|
$
7,254
|
Product
|
607
|
|
-
|
|
-
|
|
607
|
|
-
|
|
-
|
|
-
|
|
-
|
Total
Revenue
|
3,196
|
|
-
|
|
-
|
|
3,196
|
|
7,254
|
|
-
|
|
-
|
|
7,254
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services
|
2,608
|
|
-
|
|
-
|
|
2,608
|
|
7,153
|
|
-
|
|
-
|
|
7,153
|
Products
|
574
|
|
-
|
|
-
|
|
574
|
|
|
|
|
|
|
|
|
DCAA settlement,
net
|
(315)
|
|
-
|
|
-
|
|
(315)
|
|
-
|
|
-
|
|
-
|
|
-
|
General and
administrative
|
517
|
|
-
|
|
982
|
|
1,499
|
|
394
|
|
-
|
|
1,062
|
|
1,456
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and
expenses
|
3,384
|
|
-
|
|
982
|
|
4,366
|
|
7,547
|
|
0
|
|
1,062
|
|
8,609
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss)
from operations
|
(188)
|
|
-
|
|
(982)
|
|
(1,170)
|
|
(293)
|
|
0
|
|
(1,062)
|
|
(1,355)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
(1)
|
|
-
|
|
(807)
|
|
(808)
|
|
(4)
|
|
|
|
(655)
|
|
(659)
|
Other
Income
|
-
|
|
-
|
|
-
|
|
-
|
|
68
|
|
-
|
|
97
|
|
165
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss)
income
|
$
(189)
|
|
$
-
|
|
$
(1,789)
|
|
$
(1,978)
|
|
$
(229)
|
|
$
-
|
|
$
(1,620)
|
|
$
(1,849)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
$
628
|
|
-
|
|
$
386
|
|
$
1,014
|
|
$
1,024
|
|
-
|
|
$
219
|
|
$
1,243
|
Expenditures for
long-lived assets
|
$
200
|
|
-
|
|
-
|
|
$
200
|
|
-
|
|
-
|
|
-
|
|
-
|
38
ITEM 8
.
CHANGES IN AND
DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
There have been no disagreements between
the Company and its accountants regarding any matter or accounting principles or
practice or financial statement disclosures.
ITEM 8A
.
CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and
Procedures
At the end of the period covered by this
report, an evaluation was carried out under the supervision of, and with the
participation of, the Companys management, including the Chief Executive
Officer and Chief Financial Officer, of the effectiveness of the design and
operation of the Companys disclosure controls and procedures (as defined in
Rule 13a 15(e) and Rule 15d 15(e) of the Securities and Exchange Act of
1934, as amended). Based on that evaluation, the Chief Executive Officer
and Chief Financial Officer have concluded that as of the end of the period
covered by this report, the Companys disclosure controls and procedures were
adequately designed and effective in ensuring that information required to be
disclosed by the Company in its reports that it files or submits to the SEC
under the Exchange Act, is recorded, processed, summarized and reported within
the time period specified in applicable rules and forms.
Our Chief Executive Officer and Chief
Financial Officer have also determined that the disclosure controls and
procedures are effective to ensure that material information required to be
disclosed in our reports filed under the Exchange Act is accumulated and
communicated to our management, including the Companys Chief Executive Officer
and Chief Financial Officer, to allow for accurate required disclosure to be
made on a timely basis.
Managements Report on Internal Control
over Financial Reporting
The Companys management is responsible for
establishing and maintaining adequate internal control over financial
reporting. The Companys internal control over financial reporting is
a process designed under the supervision of its Chief Executive Officer and
Chief Financial Officer to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of the Companys
financial statements for external reporting in accordance with accounting
principles generally accepted in the United States of
America. Management evaluates the effectiveness of the Companys
internal control over financial reporting using the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO) in
Internal Control Integrated Framework. Management, under the
supervision and with the participation of the Companys Chief Executive Officer
and Chief Financial Officer, assessed the effectiveness of the Companys
internal control over financial reporting as of December 31, 2007 and concluded
that it is effective.
This annual report does not include an
attestation report of the Companys registered public accounting firm regarding
internal control over financial reporting. Managements report was not subject
to attestation by the Companys registered public accounting firm pursuant to
temporary rules of the Securities and Exchange Commission that permit the
Company to provide only managements report in this annual report.
Changes in internal controls over
financial reporting
During the period covered by this report,
there have been no changes in the Companys internal control over financial
reporting that have materially affected, or are reasonably likely to materially
affect, the Companys internal control over financial reporting.
ITEM
8B.
OTHER
INFORMATION
None
39
PART III
ITEM
9
.
DIRECTORS AND
EXECUTIVE OFFICERS OF THE REGISTRANT
.
EXECUTIVE OFFICERS AND DIRECTORS
The names and ages of
the executive officers and directors of the Company, and their positions with
the Company as of March 31, 2008 are as follows:
|
|
|
Name
|
Age
|
Position
|
Dr. Shelby T. Brewer
|
71
|
Director, Chairman of the Board and
Chief Executive Officer
|
O. Mack Jones
|
67
|
Director, President and Chief
Operating Officer
|
Ted R. Sharp
|
51
|
Director, Chief Financial Officer,
Treasurer and Secretary
|
Bentley J. Blum
|
66
|
Director
|
Paul E. Hannesson
|
67
|
Director
|
VADM Michael P. Kalleres
|
68
|
Director
|
Ambassador William A. Wilson
|
93
|
Director
|
Jan C. Huly
|
60
|
Director
|
Thomas J. Colatosti
|
60
|
Director
|
Dr. Shelby T. Brewer Chairman of the
Board and Chief Executive Officer
Dr. Brewer has served as
Chairman of the Board and Chief Executive Officer of the Company since April
2003. Prior to that Dr. Brewer served as President of the Company from January
2001 to April 2003. Since April 2000, Mr. Brewer served as Chairman and CEO of
Solutions, a wholly owned subsidiary of the Company. From 1996 to March 2000,
Dr. Brewer was President of S. Brewer Enterprises, a privately held consulting
firm he founded that is engaged in supporting mergers and acquisitions,
arranging private and public financing, and forming joint ventures abroad. He
served as President and CEO of the nuclear power businesses of ABB Combustion
Engineering, a public company, from 1985 to 1995. From 1981 to 1984, he served
as Assistant Secretary of Energy in the Reagan administration, holding the top
nuclear post in the US government. Dr. Brewer holds Ph.D. and M.S. degrees in
nuclear engineering from Massachusetts Institute of Technology; he holds a B.S.
degree in mechanical engineering and a B.A. in humanities from Columbia
University.
O. Mack Jones Director, President and
Chief Operating Officer
Mr. Jones has served as
President and C.O.O. of the Company since April 2003. Since February 2001, Mr.
Jones has served as Acting President of Advanced Sciences, a wholly owned
subsidiary of the Company from April 1998 to February 2001. He has also has
served as Vice President of Field Operations of the Company since April 1998,
managing its field treatability studies and commercial projects. From June
1996 to April 1998, Mr. Jones served as a consultant to the Company assisting in
the commercialization of the solvated electron technology. From 1991 to February
1998, Mr. Jones served as the founder and principal executive officer of a
privately held environmental consulting company, Florida Vector Services, which
provided both consulting and hands-on remediation services primarily in
TSCA-related areas. From 1986 to 1991, Mr. Jones was Vice President-Operations
with Quadrex Environmental Company, a public company, managing the companys
field remediation businesses. Mr. Jones held several managerial and operating
positions in power generation and distribution arenas during his twenty-six
years of service to General Electric Company, a public company. Mr. Jones holds
a degree in mechanical engineering from Mississippi State University and is
registered as a professional mechanical engineer.
Ted R. Sharp Director, Chief Financial
Officer, Treasurer and Secretary
Mr. Sharp began his
employment with the Company in November 2006 and has served as Chief Financial
Officer and Treasurer of the Company since January 2007. In November 2007 Mr.
Sharp was elected to the Board of Directors. Mr. Sharp is the principal owner of
Sharp Executive Associates, a private executive management consulting firm
located in Nampa, Idaho. Mr. Sharp also served as executive management for Key
Technology, Inc., a public company, including Chief Financial Officer, Managing
Director of European Operations (Netherlands) and Corporate Controller from
January 1989 to March 2003. Mr. Sharp received a BBA degree in Accounting from
Boise State University and currently holds active CPA licenses in both Idaho and
Washington. Mr. Sharp is a member of the American Institute of Certified
Public Accountants, the Idaho Society of CPAs and Financial Executives
International.
40
Bentley J. Blum Director
Mr. Blum has served as
director of the Company since March 1996. Prior to that Mr. Blum served as
Chairman of the Board of Environmental, a public company, from 1984 to November
1996 and is its principal stockholder. Currently he serves as a director of
Separation, a wholly owned subsidiary of Environmental. Currently he also serves
as a director of Solution, a wholly owned subsidiary of the Company. Mr. Blum is
the sole stockholder and director of a number of corporations that hold real
estate interests, oil drilling and other corporate interests that are privately
held companies. Mr. Blum is the brother-in-law of Paul E. Hannesson, a director
of the Company.
Paul E Hannesson Director
Mr. Hannesson has served
as a director of the Company since March 1996. Mr. Hannesson served as Chairman,
CEO and President of the Company from 1996 to January 2001. He also served as a
Director and Officer of Environmental, a public company, from 1996 to July 1998.
He served as Chairman of the Board and CEO of Separation, a wholly owned
subsidiary of the Company from May 1997 to December 2004. Mr. Hannesson is the
brother-in-law of Bentley Blum, a director of the Company.
Vice Admiral Michael P. Kalleres
Director
Vice Admiral (VADM)
Kalleres has served as a director of the Company since June 2002. VADM Kalleres
currently serves as President of Dare to Excel Inc., a privately held financial
management and consulting firm (1998 to present). He also served as President
and Chief Executive Officer of Global Associates, Ltd., Technology Services
Group, a privately held financial and corporate consulting firm, from 1994 to
1998. VADM Kalleres retired from active duty in September 1994 after 32
years as a naval officer. VADM Kalleres was awarded 18 personal/unit
military/combat decorations including the Defense Distinguished Service Medal (2
awards) and the U.S. Navy Distinguished Service Medal. He is also a recipient of
the Congressional, Ellis Island Medal of Honor. VADM Kalleres is a former member
(1994-1998) of the Defense Science Board, the Naval Studies Board of the
National Academy of Science. He is also a board member of the Dean's
Advisory Council at the Krannert School of Management-Purdue University, and the
National Board of the Salvation Army. VADM Admiral Kalleres was awarded a BS
degree in Industrial Management and Engineering from the Krannert School of
Management-Purdue University, and a MS degree in Political and International
Affairs from George Washington University.
Ambassador William A. Wilson
Director
Mr. Wilson has been a
director of the Company since June 2002. Mr. Wilson has been active in ranching
and farming in California and Mexico from 1980 to 1997. Mr. Wilson was active in
real estate development in California from 1961 through 1985. Mr. Wilson served
as Chief Engineer of Wilson Oil Tools, a privately held company, from 1938
through 1955 and as Chairman from 1955 to 1961. Mr. Wilson served as the
Presidential Envoy to the Holy See from 1980 to 1984 and as Ambassador to the
Holy See from 1984 to 1986. Mr. Wilson served on the Board of Directors of
Jorgensen Steel Co., a public company, from 1973 to 1984 and again from 1986 to
1991. Mr. Wilson also served on the Board of Directors of Pennzoil
Company, a public company, from 1983 to 1987. Mr. Wilson holds a BA in
Mechanical Engineering from Stanford University and a Doctor of Laws, Honoris
Causa from Assumption College, Barry University, and Pepperdine University.
Jan C. Huly Director
Mr. Huly was elected to
the Board of Director in November 2007. In 2006, Jan C. Huly retired as
Lieutenant General in the U.S. Marine Corps with over thirty years of experience
as a leader and administrator, holding such positions as: Deputy Commandant,
Plans, Policies and Operations, Washington DC from 2003 to 2006; Commanding
General, Marine Corps Recruit Depot, San Diego, CA from 2000 to 2003; Director
of Operations, U.S. Marine Corps, Washington DC from 1998 to 2000, and Deputy
Commander, U.S. Marine Reserves, New Orleans, LA from 1996 to 1998. Prior
to 1996, Mr. Huly held several positions with the Marine Corps, variously
responsible for operations and planning, security and force protection,
recruiting and training, public relations, budgeting and programming, and human
resources. He received a BS degree from the University of California, Berkeley
and an MA degree from Central Michigan University.
Thomas J. Colatosti Director
Mr. Colatosti was
elected to the Board of Directors in November 2007. Mr. Colatosti has been the
President and Chief Executive Officer of American Security Ventures (ASV) since
2002. ASV provides strategic management services and capital resources to
emerging and developing companies in the biometric and homeland security
industries. Since August 2005, Mr.
41
Colatosti has been President , Treasurer
and a Director of Good Harbor Partners Acquisition Corp. Mr. Colatosti is
also the Chairman of the Board of Directors and Co-CEO of BIO-Key International,
Inc., an OTC Bulletin Board listed company that develops advanced biometric
finger identification and wireless mobile technologies. Prior to founding
American Security Ventures, from 1997 to May 2002, Mr. Colatosti was
President and Chief Executive Officer of Viisage Technology, Inc., a Nasdaq
listed company that provides biometric face-recognition technology and highly
secure identification documents and systems. Before joining Viisage, from 1995
to 1997, Mr. Colatosti was President and Chief Executive Officer of CIS
Corporation, a provider of software solutions for higher education. From 1973
until 1995, Mr. Colatosti worked at Digital Equipment Corporation (DEC), a
large multinational computer company. As Vice President of the Government
Systems Group, a billion dollar revenue division of DEC, he was responsible for
all products and services to the federal government, aerospace, electronics and
manufacturing industries. Mr. Colatosti also currently serves on the board
of several privately held companies and non-profit organizations. He also served
on the Board of Advisors of Saflink Corporation, a Nasdaq listed provider of
software security solutions. Mr. Colatosti is a decorated Vietnam veteran.
He received a B.S. and an M.B.A. from Suffolk University.
Each director is elected
to serve for a term of one year or until his or her successor is duly elected
and qualified. The Companys officers are elected by, and serve at the pleasure
of, the Board of Directors, subject to the terms of any employment agreements.
Messrs. Hannesson and Blum are brothers-in-law. No family relationship exists
among any other directors or executive officers of the Company.
KEY EMPLOYEES
The names and ages of
the key employees of the Company not listed above, and their positions with the
Company as of March 31, 2008, are as follows:
|
|
|
Name
|
Age
|
Position
|
Walter L.
Foutz
|
53
|
Vice
President of Operations, Advanced Sciences
|
Mr. Foutz was appointed
Vice President of Operations of Advanced Sciences in April 2005.
Previously, Mr. Foutz served as Advanced Sciences Western Regional
Manager from January of 2002. Previously, Mr. Foutz has been a Sr. Project
Manager with corporate and management responsibilities for Advanced Sciences
from December 2000 to January 2002. From 1991 to 2000 Mr. Foutz was the
Environmental Program Manager for MDM Services Corporation, managing
environmental task-order contracts with numerous government clients. From
1986-1991 Mr. Foutz was the lead Senior Environmental Geologist on RFI/CMS and
RI/FS projects at Dyess Air Force Base, Texas; Fallon Naval Air Station, Nevada;
Kansas City DOE Plant, Arizona Air National Guard Base, Tucson; US Army
Kwajelein Atoll, Marshall Islands.
Mr. Foutz received his
B.S. in Geology in 1981. He has 24 years of progressive professional
experience in geological, hydro-geological, and environmental consulting and
contrayct management as a Department of Energy contractor.
BOARD COMMITTEES
The Company's Board of
Directors has (i) an Audit Committee and (ii) a Compensation, Stock
Option and Benefits Committee. On August 30, 2000, the Board of Directors
unanimously voted to abolish the Finance Committee and determined that the
entire Board of Directors would perform its function.
As of December 31, 2007,
the Compensation, Stock Option and Benefits Committee, was composed of Michael
P. Kalleres, Ambassador William A. Wilson, Jan Huly and Dr. Shelby T. Brewer.
The position of Chairman of the Compensation, Stock Option and Benefits
Committee was vacant as of December 31, 2007 as a result of the resignation of
Dr. Frank E. Coffman from the Board in November 2007. The Compensation, Stock
Option, and Benefits Committee has responsibility for establishing and reviewing
employee and consultant/advisor compensation, bonuses and incentive compensation
awards, administering and interpreting the Company's 1998 Stock Option Plan, as
amended (the 1998 Plan), and determining the recipients, amounts and other
terms (subject to the requirements of the 1998 Plan) of options which may be
granted under the 1998 Plan and outside the 1998 Plan, from time to time and
providing guidance to management in connection with establishing additional
benefit plans.
As of December 31, 2007,
the Audit Committee was composed of Michael P. Kalleres as Chairman, Tom
Colatosti and Ambassador William A. Wilson. The responsibilities of the Audit
Committee include selecting, engaging and determining the compensation of the
firm of independent accountants to be retained by the Company, reviewing with
the Company's
42
independent accountants the scope and
results of their audits, reviewing with the independent accountants and
management the Company's accounting and reporting principles, policies and
practices, as well as the Company's accounting, financial and operating controls
and staff, supervising the Company's policies relating to business conduct and
dealing with conflicts of interest relating to officers and directors of the
Company.
AUDIT COMMITTEE AND FINANCIAL EXPERT
Michael P. Kalleres
currently serves as the Chairman of the Audit Committee and the Board of
Directors has determined him to be an audit committee financial expert and an
independent Director of the Company.
COMPENSATION OF DIRECTORS
The Company pays
non-management directors a director's fee in the amount of $375 per meeting for
attendance at the meetings of the Board of Directors, and the Company reimburses
the directors for actual expenses incurred in respect of such attendance. The
Company does not separately compensate employees for serving as directors.
COMPLIANCE WITH SECTION 16(a
)
OF
THE EXCHANGE ACT
Section 16(a) of the
Exchange Act requires the Company's directors and executive officers, and
persons who own more than 10% of the outstanding shares of the Company's common
stock, to file initial reports of beneficial ownership and reports of changes in
beneficial ownership of shares of common stock with the Commission. Such
persons are required by regulations promulgated under the Exchange Act to
furnish the Company with copies of all Section 16(a) forms filed with the
Commission.
Based on representations
from the officers and directors, the Company believes that no director,
executive officer or holder of more than 10% of the outstanding shares of common
stock failed to file on a timely basis the reports required by Section 16(a) of
the Exchange Act during, or with respect to, the year ended December 31,
2007.
CODE OF ETHICS
The Companys Board of
Directors has established and adopted a code of ethics in 2004 applicable to its
senior executives, financial officers and directors. See Exhibit 14.01
Code of Ethics of Commodore Applied Technologies, Inc.
ITEM
10.
EXECUTIVE
COMPENSATION
.
SUMMARY
The following table sets
forth the amount of all compensation paid by the Company and/or its affiliates
and allocated to the Company's operations for services rendered during each of
2007 and 2006 to all persons serving as the Company's Chief Executive Officer
during 2007 and 2006 and to each of the Company's four most highly compensated
executive officers other than the Chief Executive Officer whose total salary and
bonus compensation exceeded $100 thousand during any such year.
43
Summary Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Compensation
|
|
Long-Term Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted
|
|
Under-
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
Stock
|
|
Lying
|
|
LTIP
|
|
|
|
Name and Principal
|
|
|
|
|
|
|
Annual
|
|
Awards
|
|
Options
|
|
Pay-outs
|
|
All Other
|
|
Position
|
Year
|
|
Salary ($)
|
|
Bonus ($)
|
|
Comp ($)
|
|
($)
|
|
(#)
|
|
($)
|
|
Comp ($)
|
|
(a)
|
(b)
|
|
(c)
|
|
(d)
|
|
(e)
|
|
(f)
|
|
(g)
|
|
(h)
|
|
(i)
|
|
Dr. Shelby T.
Brewer
(1)
|
2007
|
|
199,609
|
(2)
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
Chief
Executive Officer
|
2006
|
|
208,012
|
(2)
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
O. Mack
Jones
(3)
|
2007
|
|
176,905
|
(4)
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
President
and
|
2006
|
|
185,634
|
(4)
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
Chief
Operating Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James M.
DeAngelis
(5)
|
2007
|
|
86,152
|
(6)
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
Senior Vice
President
|
2006
|
|
165,497
|
(6)
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Walter L.
Foutz
(7)
|
2007
|
|
135,221
|
(8)
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
VP of
Operations
|
2006
|
|
126,518
|
(8)
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ted R. Sharp
(9)
|
2007
|
|
120,000
|
(10)
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
41,173
|
(11)
|
Chief
Financial Officer
|
2006
|
|
16,154
|
(10)
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(1)
Mr. Brewer served as Chief Executive Officer and President of
Solutions and a director of the Company since April 2000. Mr. Brewer assumed the
positions of Chairman, Chief Executive Officer and President of the Company from
January 2001 through October 2003 and continues to serve as Chief Executive
Officer and a director since October 2003 to present.
(2)
Represents the amount of Mr. Brewers base salary paid by the
Company less amounts deferred. Brewer. Mr. Brewers base salary for 2007 was
$280,000, of which $83,391 was originally deferred until December 31, 2007, and
remains unpaid as of March 31, 2008. Mr. Brewers base salary for 2006 was
$285,000, of which $76,988 was originally deferred until December 31, 2006, and
remains unpaid as of March 31, 2008
(3)
Mr. Jones served as President of Advanced Sciences from February
2001 to present, and President and Chief Operating Officer of the Company from
April 2003 to present. Mr. Jones has served as a director of the Company since
October 2003.
(4)
Represents the amount of Mr. Jones base salary paid by the
Company less amounts deferred. Mr. Jones total base salary for 2007 was
$250,000 of which $73,095 was originally deferred until December 31, 2007, and
remains unpaid as of March 31, 2008. Mr. Jones total base salary for 2006 was
$250,000, of which $66,346 was originally deferred until December 31, 2006, and
remains unpaid as of March 31, 2008.
(5)
Mr. DeAngelis served as Sr. Vice President, Chief Financial and
Administrative Officer, Treasurer and Secretary from December 1999 to December
2006. Mr. DeAngelis served as Senior Vice President of the Company form December
2006 to August 2007. Mr. DeAngelis served as a director of the Company from June
2002 to August 2007. Mr. DeAngelis resigned from his position as Senior Vice
President and Director effective September 1, 2007.
(6)
Represents the amount of Mr. DeAngelis base salary paid by the
Company through September 2007 less any amounts deferred. Mr. DeAngelis
base salary for 2007 was $120,000 of which $2,596 was originally deferred until
December 31, 2007, and remains unpaid as of March 31, 2008. Mr. DeAngelis total
base salary for 2006 was $225,000 of which $59,712 was originally deferred until
December 31, 2006, and remains unpaid as of March 31, 2008.
(7)
Mr. Foutz served as the Western Regional Manager of Advanced
Sciences from January 2002 to March 2005. Mr. Foutz served as Vice
President of Operations of Advanced Sciences, Inc. since April 2005 to present.
44
(8)
Represents the amount of Mr. Foutzs base salary paid by the
Company. Mr. Foutzs total base salary for 2007 was $130,000. Mr. Foutzs
total base salary for 2006 was $125,000.
(9)
Represents the amount paid to Mr. Sharp to provide services as the
Companys Chief Financial Officer. The Company entered into an employment
agreement with Mr. Sharp to serve as the Company as Chief Financial Officer
effective January 1, 2007. Mr. Sharp for 2006 began his employment November 1,
2006 and assumed full responsibility for the position on January 1, 2007.
(10)
Represents the pro rated base salary paid to Mr. Sharp by the
Company. Mr. Sharps annual base salary for 2007 and 2006 was $120,000.
(11)
Represents amounts paid to a consulting firm owned by Mr. Sharp,
which was engaged to assist the Company in its compliance with Section 404 of
the Sarbanes-Oxley Act of 2002.
STOCK OPTIONS
No options were granted
during the year ended December 31, 2007 to any individuals listed in the Summary
Compensation Table pursuant to the Company's 1998 Stock Option Plan, as amended,
(the "1998 Plan") and no options were granted to any individuals outside of the
1998 Plan. The Company has no outstanding stock appreciation rights and granted
no stock appreciation rights during the years ended December 31, 2007 and
2006.
The following table sets
forth certain information concerning the exercise of options and the value of
unexercised options held under the 1998 Plan and outside of the 1998 Plan at
December 31, 2007 by the individuals listed in the Summary Compensation
Table.
Aggregated Option Exercises in Last
Fiscal Year and Fiscal Year-End Option Values
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities
Underlying Unexercised
Options at FY-End (#)
|
|
Value of Unexercised
In-the-
Money Options
at FY-End ($)
(1)
|
|
Shares
Acquired on Exercise
|
Values
|
|
|
Name
|
(#)
|
Realized
|
|
Exercisable
|
Unexercisable
|
|
Exercisable
|
Unexercisable
|
Dr. Shelby T.
Brewer
|
-
|
-
|
|
2,115,802
|
-
|
|
-
|
-
|
James M.
DeAngelis
|
-
|
-
|
|
1,124,175
|
-
|
|
-
|
-
|
O. Mack
Jones
|
-
|
-
|
|
600,000
|
-
|
|
-
|
-
|
Walter L.
Foutz
|
-
|
-
|
|
14,813
|
-
|
|
-
|
-
|
(1)
There were no outstanding in-the-money options at year end. The
last reported sale price of the common stock on March 27, 2008 was $0.07 and the
exercise prices of the options range from $0.57 to $1.40.
EMPLOYMENT AGREEMENTS
The Company has no
employment contracts.
ITEM 11.
SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets
forth certain information regarding the beneficial ownership of shares of the
Companys common stock as of March 31, 2008 by each person who is known by the
Company to beneficially own more than 5% of its issued and outstanding shares of
common stock, its named executive officers, its directors and all of its
executive officers and directors as a group. As used herein, the term beneficial
ownership with respect to a security is defined by Rule 13d-3 under the Exchange
Act as consisting of sole or shared voting power (including the power to vote or
direct the disposition of) with respect to the security through any contract,
arrangement, understanding, relationship or otherwise, including a right to
acquire such power(s) during the next 60 days. Unless otherwise noted,
beneficial ownership consists of sole ownership, voting and investment rights.
45
|
|
|
|
|
|
Title of Class
|
Name of Shareholder
|
Address
|
Amount and Nature of Beneficial Ownership
|
|
Percent of Class
(1)
|
Directors and Named Executive Officers
|
Common Stock
|
Shelby T. Brewer
|
2151 Jamieson Street
Carlyle Towers, Suite 308
Alexandria, VA 22314
|
2,791,079
|
(2)
|
26.9%
|
Common Stock
|
Bentley J. Blum
|
150 East 58
th
Street, Suite 3238
New York, NY 10155
|
1,605,311
|
(3)
|
16.6%
|
Common Stock
|
James M. DeAngelis
|
359 Thames Street, Unit A/B #3
Newport, RI 02840
|
1,140,714
|
(4)
|
12.1%
|
Common Stock
|
O.
Mack Jones
|
507 Knight Street, Suite B
Richland, WA 99352
|
604,444
|
(5)
|
6.8%
|
Common Stock
|
Paul E. Hannesson
|
150 East 58
th
Street, Suite 3238
New York, NY 10155
|
321,757
|
(6)
|
3.7%
|
Common Stock
|
Michael P. Kalleres
|
507 Knight Street, Suite B
Richland, WA 99352
|
22,500
|
(7)
|
*
|
Common Stock
|
William A. Wilson
|
507 Knight Street, Suite B
Richland, WA 99352
|
22,500
|
(7)
|
*
|
Common Stock
|
Ted R. Sharp
|
507 Knight Street, Suite B
Richland, WA 99352
|
-
|
|
*
|
Common Stock
|
Jan C. Huly
|
507 Knight Street, Suite B
Richland, WA 99352
|
-
|
|
*
|
Common Stock
|
Thomas J. Colatosti
|
507 Knight Street, Suite B
Richland, WA 99352
|
-
|
|
*
|
Common Stock
|
All current executive officers and directors as a
group
|
6,508,726
|
|
47.54%
|
5% or greater shareholders
|
None
|
|
|
|
|
|
*
Less
than 1%.
(1)
Calculated
based on 8,288,217 shares of common stock issued and outstanding as of March 31,
2008.
(2)
Consists of 675,277 shares of common stock and 2,115,802 shares of
common stock acquirable upon exercise of options exercisable before December 15,
2008.
(3)
Consists of: (i) 125,000 shares of common stock; (ii) 7,210
shares of common stock acquirable upon exercise of options exercisable before
December 15, 2008; (iii) 1,367,790 shares of common stock acquirable upon
exercise of warrants before November 19, 2008; and (iv) Mr. Blum's indirect
beneficial ownership of common stock based upon his ownership of
28,479,737 shares and his spouse's ownership of 2,000,000 shares of Commodore
Environmental Services, Inc. (Environmental) common stock, representing
together 37.74% of the outstanding shares of Environmental common stock at March
31, 2008, and 4,500,000 shares of Environmental common stock underlying
currently exercisable stock options, representing together 41.02% of the
outstanding shares of Environmental. Does not include 785,400 shares of
Environmental common stock owned by Simone Blum, the mother of Mr. Blum. Mr.
Blum disclaims any beneficial interest in the shares of Environmental common
stock owned by his spouse and mother.
(4)
Consists of 14,535 shares of common stock, 1,124,175 shares of
common stock acquirable upon exercise of options exercisable before December 15,
2008; and Mr. DeAngelis indirect beneficial ownership of common stock based
upon his ownership of 580,000 shares of Environmental.
(5)
Consists of 604,444 shares of common stock acquirable upon
exercise of option exercisable before December 15, 2008, of which 4,444 of the
options are held by Mr. Jones spouse.
(6)
Consists of 300,000 shares of common stock acquirable upon
exercise of options exercisable before December 15, 2008 and Mr. Hannesson's
indirect beneficial ownership of common stock based upon his ownership of an
aggregate of (a) 2,650,000 shares of Environmental common stock owned by Suzanne
Hannesson, the spouse of Mr. Hannesson, (b) 2,650,000 shares of Environmental
common stock owned by the Hannesson Family Trust (Suzanne Hannesson and John D.
Hannesson, trustees) for the benefit of Mr. Hannesson's spouse and (c) 500,000
shares of Environmental common stock in exchange for options to purchase 950,000
shares of Environmental common stock, issued to Hannesson Family Trust,
representing together 7.18% of the outstanding shares of Environmental common
stock as of March 31, 2007, and (d) currently exercisable options to purchase
525,705 shares of Environmental common stock, representing together 7.78% of the
outstanding shares of Environmental common stock. Does not include (i)
2,000 shares of the Companys common stock owned by each of Jon Paul and Krista
Hannesson, the adult children of Mr. Hannesson; and (ii) 1,000,000 shares of
Environmental common stock owned by each of Jon Paul and Krista Hannesson.
Mr. Hannesson disclaims any beneficial interest in the shares of
Environmental common stock owned by or for the benefit of his spouse and
children. All amounts adjusted for the 1 for 20 reverse split of the Companys
common stock on August 29, 2005.
(7)
Consists of 22,500 shares of common stock acquirable upon exercise
of option exercisable before December 15, 2008.
Messrs. Blum and
Hannesson are brothers-in-law.
46
Other than as described below, the Company has no knowledge of any
other arrangements, including any pledge by any person of its securities, the
operation of which may at a subsequent date result in a change in control of the
Company.
·
The Shaar Fund holds a convertible note, together with accrued
interest thereon, and convertible Series J Preferred stock, together with
accrued dividends on the Series I and J Preferred stock. The payment of
accrued interest and dividends may be made in cash or common stock. The
conversion of the note and the Series J Preferred stock, and the payment of
interest and dividends in the form of common stock are subject to limitation,
such that no conversion or payment in the form of stock can be exercised or made
that would result in the holder owning 5% or more beneficial ownership of the
Companys common stock. Should this limitation be removed, as much as an
additional 186 million shares of the Companys common stock could be issued,
which would result in a change in control of the Company.
We are not, to the best of our knowledge, directly or indirectly
owned or controlled by another corporation or foreign government.
EQUITY COMPENSATION PLAN
INFORMATION
The following table reflects the number of
shares of our common stock that, as of December 31, 2007, were outstanding and
available for issuance under compensation plans that have previously been
approved by our stockholders as well as compensation plans that have not
previously been approved by our stockholders.
|
|
|
|
Plan Category
|
Number of securities to be issued upon exercise of
outstanding options, warrants and rights
(a)
|
Weighted average exercise price of outstanding options,
warrants and rights
(b)
|
Number of securities remaining available for future
issuance under equity compensation plans
(c)
|
Equity compensation plans approved by security
holders
1998
Stock Option Plan
(1)(2)
|
453,904
|
$1.40
|
265,384
|
Equity compensation plans not approved by security
holders
(3)(4)
|
5,436,858
|
$0.56
|
-
|
Total
|
5,890,762
|
$0.63
|
265,384
|
(1)
Consists of options issuable under the 1998 Stock Option Plan, as
amended, as approved by the stockholders on September 12, 2003.
(2)
Consists of options issuable outside of the 1998 Stock Option
Plan, as amended as approved by the stockholders on September 12, 2003.
(3)
Includes options to purchase a total of 3,854,068 shares issued in
November 2003 outside of the 1998 Stock Option Plan, as amended.
(4)
Includes warrants issued in November 2003 to purchase a total of
1,582,790.
The following is a brief
description of the material features of the equity compensation plans not
approved by our stockholders that are reflected in the chart above.
On November 19, 2003,
our Board of Directors approved the issuance of stock options outside of the
Companys 1998 Stock Option Plan, as amended, and warrants for the Companys
common stock to executive officers and directors of the Company. A total
of 3,854,068 fully vested, non-qualified stock options were issued with an
exercise price of $0.57 and an expiration date of December 14, 2008 (as
described in footnote 3 above). A warrant for a total of 1,367,790 shares
of the Companys common stock was issued to a director with an exercise price of
$0.57 and an expiration date of November 18, 2008 (as described in footnote 4
above). The purpose of these options and warrant is to advance the
interests of our stockholders by enhancing our ability to attract, retain and
motivate persons who make important contributions to the Company by providing
them with equity ownership opportunities that better align their interests with
those of our stockholders.
47
ITEM
12
.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Related Transactions
During 2007, we engaged Sharp Executive Associates, Inc., a
consulting firm owned by our Chief Financial Officer to assist the Company in
its compliance with Rule 404 of the Sarbanes-Oxley Act of 2002, incurring a
total expense of $41,173 to this related party. There were no related party
transactions during the year ended December 31, 2006.
ITEM 13
.
EXHIBITS
Other than contracts made in the ordinary course of
business, the following are the material contracts that we have entered into
within the two years preceding the date of this Form 10-KSB:
|
|
Exhibit
No.
|
Description
|
3.1
|
Certificate
of Incorporation of the Company.
(1)
|
3.2
|
By-Laws of
the Company.
(1)
|
4.1
|
Specimen
common stock Certificate.
(3)
|
4.11
|
Common Stock
Purchase Agreements, dated as of September 26, 1997, by and between the
Company and each of certain private investors listed therein.
(9)
|
4.19
|
Warrant to
purchase shares of common stock of Commodore Applied Technologies, Inc.
issued to The Shaar Fund Ltd.
(16)
|
4.20
|
Certificate
of Designation of Series E Preferred Stock.
(16)
|
4.21
|
Warrant to
purchase shares of common stock of Commodore Applied Technologies, Inc.
issued to Avalon Research Group, Inc.
(16)
|
4.22
|
Warrant to
purchase shares of common stock of Commodore Applied Technologies, Inc.
issued to The Shaar Fund Ltd.
(20)
|
4.22
|
Certificate
of Designation of Series F Preferred Stock.
(20)
|
4.23
|
Warrant to
purchase shares of common stock of Commodore Applied Technologies, Inc.
issued to Avalon Research Group, Inc.
(20)
|
4.24
|
Certificate
of Designation of Series H Preferred Stock.
(24)
|
4.25
|
Certificate
of Designation of Series I Preferred Stock.
(26)
|
4.26
|
Certificate
of Designation of Series J Preferred Stock.
(27)
|
10.15
|
Non-Competition, Non-Disclosure and Intellectual Property
Agreement, dated March 29, 1996, between the Company and Gerry D. Getman.
(1)
|
10.7
|
1996 Stock
Option Plan of the Company.
(1)
|
10.9
|
Nationwide
Permit for PCB Disposal issued by the EPA to Commodore Remediation
Technologies, Inc.
(1)
|
10.17
|
License
Agreement, dated as of March 29, 1996, by and between the Company and
Environmental, relating to the use of SET in the CFC Business.
(2)
|
10.32
|
Services
Agreement, dated as of September 1, 1997, by and among the Company,
Environmental, Separation, Advanced Sciences and other affiliated
companies named therein.
(14)
|
10.33
|
Amended and
Restated 1996 Stock Option Plan.
(13)
|
10.34
|
Securities
Purchase Agreement, dated November 4, 1999, between Commodore Applied
Technologies, Inc. and The Shaar Fund Ltd.
(16)
|
48
|
|
10.35
|
Registration
Rights Agreement, dated November 4, 1999, between Commodore Applied
Technologies, Inc. and the Shaar Fund Ltd.
(16)
|
10.37
|
Securities
Purchase Agreement, dated March 15, 2000, between Commodore Applied
Technologies, Inc. and The Shaar Fund Ltd. (16)
|
10.38
|
Registration
Rights Agreement, dated March 15, 2000, between Commodore Applied
Technologies, Inc. and the Shaar Fund Ltd. (16)
|
10.43
|
Specimen Form
of Common Stock Certificate. (1)
|
10.50
|
Secured
Promissory Note, dated November 13, 2000, issued to Klass Partners Ltd. in
the principal amount of $250,000. (20)
|
10.51
|
Secured
Promissory Note, dated November 13, 2000, issued to Mathers Associates in
the principal amount of $150,000. (20)
|
10.52
|
Secured
Promissory Note, dated November 13, 2000, issued to Jon Paul Hannesson in
the principal amount of $75,000. (20)
|
10.53
|
Secured
Promissory Note, dated November 13, 2000, issued to Stephen A. Weiss in
the principal amount of $25,000. (20)
|
10.55
|
Securities
Purchase Agreement, dated November 13, 2000, by and among Commodore
Applied Technologies, Inc., Commodore Environmental Services, Inc.,
Mathers Associates, Klass Partners, Ltd., Jon Paul Hannesson and Stephen
A. Weiss. (20)
|
10.56
|
Security
Agreement, dated November 13, 2000 by and among Mathers Associates, Klass
Partners, Ltd., Jon Paul Hannesson, Stephen A. Weiss and Commodore Applied
Technologies, Inc. (20)
|
10.57
|
Registration
Rights Agreement, dated November 13, 2000, among Mathers Associates, Klass
Partners, Ltd., Jon Paul Hannesson, Stephen A. Weiss and Commodore Applied
Technologies, Inc. (20)
|
10.58
|
Dispute
Resolution Management, Inc. Undertaking Letter, dated November 13, 2000.
(20)
|
10.59
|
Nationwide
Permit Extension for PCB Disposal issued by the EPA to Commodore
Remediation Technologies, Inc. (20)
|
10.71
|
Memorandum of
Understanding for Amendment of $500,000 CXI Bridge Loan Documents, dated
April 16, 2001, by and among the Company, Commodore Environmental
Services, Inc., Mathers Associates, Jon Paul Hannesson and Stephen A.
Weiss. (20)
|
10.72
|
Klass
Partners Ltd. Agreement for Amendment of CXI Bridge Loan Documents, dated
April 16, 2001, by the Company and Klass Partners, Ltd. (20)
|
10.73
|
Warrant to
purchase 300,000 shares of common stock of the Company issued to Mathers
Associates. (20)
|
10.74
|
Warrant to
purchase 75,000 shares of common stock of the Company issued to Jon Paul
Hannesson. (20)
|
10.75
|
Warrant to
purchase 75,000 shares of common stock of the Company issued to Krista S.
Hannesson. (20)
|
10.76
|
Warrant to
purchase 50,000 shares of common stock of the Company issued to Stephen A.
Weiss. (20)
|
10.77
|
Memorandum of
Understanding for Amendment of $500,000 CXI Bridge Loan Documents, dated
April 16, 2001, by and among the Company, Commodore Environmental
Services, Inc., Mathers Associates, Klass Partners, Jon Paul Hannesson and
Stephen A. Weiss. (23)
|
10.78
|
Warrant to
purchase 222,222 shares of common stock of the Company issued to Klass
Partners. (23)
|
49
|
|
10.79
|
Warrant to
purchase 166,667 shares of common stock of the Company issued to Mathers
Associates. (23)
|
10.80
|
Warrant to
purchase 41,666 shares of common stock of the Company issued to Jon Paul
Hannesson. (23)
|
10.81
|
Warrant to
purchase 41,666 shares of common stock of the Company issued to Krista S.
Hannesson. (23)
|
10.82
|
Warrant to
purchase 27,778 shares of common stock of the Company issued to Stephen A.
Weiss. (23)
|
10.84
|
Registration
Rights Agreement dated May 22, 2001, between Commodore Applied
Technologies, Inc., and Dr. Marion Danna. (23)
|
10.85
|
Warrant to
purchase 500,000 shares of common stock of the Company issued to Dr.
Marion Danna. (23)
|
10.89
|
Registration
Rights Agreement dated June 13, 2001, between Commodore Applied
Technologies, Inc., and the Shaar Fund, Ltd. (23)
|
10.91
|
Warrant to
purchase 166,667 shares of common stock of the Company issued to the Shaar
Fund, Ltd. (23)
|
10.102
|
Forbearance
Agreement dated April 1, 2002, between Commodore Applied Technologies,
Inc., and Milford Capital & Management. (24)
|
10.103
|
Memorandum of
Understanding for Amendment of $500,000 CXI Bridge Loan Documents, dated
April 29, 2002, by and among the Company, Commodore Environmental
Services, Inc., Mathers Associates, Klass Partners, Jon Paul Hannesson and
Stephen A. Weiss. (24)
|
10.108
|
Settlement
Agreement dated August 19, 2002 by and among Commodore Applied
Technologies, Inc., Dispute Resolution Management, Inc., William J.
Russell and Tamie P. Speciale. (24)
|
10.109
|
Liability
Release Agreement dated August 19, 2002 by Dispute Resolution Management,
Inc., William J. Russell and Tamie P. Speciale to Commodore Applied
Technologies, Inc. (24)
|
10.110
|
Liability
Release Agreement dated August 19, 2002 by Commodore Applied Technologies,
Inc. to Dispute Resolution Management, Inc., William J. Russell and Tamie
P. Speciale. (24)
|
10.114
|
Memorandum of
Understanding for Amendment of $500,000 CXI Bridge Loan Documents, dated
November 18, 2002, by and among the Company, Commodore Environmental
Services, Inc., Mathers Associates, Klass Partners, Jon Paul Hannesson and
Stephen A. Weiss. (24)
|
10.127
|
Warrant to
purchase 27,355,800 shares of common stock issued to Blum Asset Trust.
(25)
|
10.130
|
Memorandum of
Understanding for Amendment of $500,000 CXI Bridge Loan Documents, dated
February 15, 2004, by and among the Company, Mathers Associates, Klass
Partners, Jon Paul Hannesson and Stephen A. Weiss. (25)
|
10.131
|
Warrant to
purchase 222,222 shares of common stock of the Company issued to Klass
Partners. (25)
|
10.132
|
Warrant to
purchase 166,667 shares of common stock of the Company issued to Mathers
Associates. (25)
|
10.133
|
Warrant to purchase 41,667 shares of
common stock of the Company issued to Jon Paul Hannesson. (25)
|
10.134
|
Warrant to
purchase 41,667 shares of common stock of the Company issued to Krista S.
Hannesson. (25)
|
10.135
|
Warrant to
purchase 27,778 shares of common stock of the Company issued to Stephen A.
Weiss. (25)
|
10.136
|
Warrant to
purchase 500,000 shares of common stock of the Company issued to Klass
Partners. (25)
|
50
|
|
10.137
|
Warrant to purchase 300,000 shares of
common stock of the Company issued to Mathers Associates. (25)
|
10.138
|
Warrant to
purchase 75,000 shares of common stock of the Company issued to Jon Paul
Hannesson. (25)
|
10.139
|
Warrant to
purchase 75,000 shares of common stock of the Company issued to Krista S.
Hannesson. (25)
|
10.140
|
Warrant to
purchase 50,000 shares of common stock of the Company issued to Stephen A.
Weiss. (25)
|
10.141
|
Warrant to
purchase 444,444 shares of common stock of the Company issued to Klass
Partners. (25)
|
10.142
|
Warrant to purchase 333,334 shares of
common stock of the Company issued to Mathers Associates. (25)
|
10.143
|
Warrant to
purchase 83,332 shares of common stock of the Company issued to Jon Paul
Hannesson. (25)
|
10.144
|
Warrant to
purchase 83,332 shares of common stock of the Company issued to Krista S.
Hannesson. (25)
|
10.145
|
Warrant to
purchase 55,556 shares of common stock of the Company issued to Stephen A.
Weiss. (25)
|
10.146
|
Series E
Convertible Preferred automatic conversion date extension dated March 10,
2004, between the Company and The Shaar Fund, Ltd. (25)
|
10.147
|
Series F
Convertible Preferred automatic conversion date extension dated April 9,
2004, between the Company and The Shaar Fund, Ltd. (25)
|
10.148
|
Dividend
Forgiveness letter dated April 9, 2004, between the Company and The Shaar
Fund, Ltd. (25)
|
10.149
|
Promissory
Note dated April 12, 2005, between the Company and The Shaar Fund, Ltd.
(26)
|
10.150
|
Amended and
Restated Security Agreement dated April 12, 2005, between the Company and
The Shaar Fund, Ltd. (26)
|
10.151
|
Patent
Collateral Assignment dated April 12, 2005, between the Company and The
Shaar Fund, Ltd. (26)
|
10.152
|
Amended and
Restated Guaranty and Suretyship Agreement dated April 12, 2005, between
the Company and The Shaar Fund, Ltd. (26)
|
10.153
|
Exchange
Agreement dated April 12, 2005, between the Company and The Shaar Fund,
Ltd. (26)
|
10.154
|
Warrant to
purchase 4,000,000 shares of common stock of the Company issued to Dr.
Marion Danna. (27)
|
10.155
|
Securities
Purchase Agreement dated April 27, 2005, between Commodore Applied
Technologies, Inc., and Dr. Marion Danna. (27)
|
10.156
|
Registration
Rights Agreement dated April 27, 2005, between Commodore Applied
Technologies, Inc., and Dr. Marion Danna. (27)
|
10.157
|
Amended
Promissory Note effective October 1, 2005, between the Company and The
Shaar Fund, Ltd. (27)
|
10.158
|
Amended
Exchange Agreement effective October 1, 2005, between the Company and The
Shaar Fund, Ltd. (27)
|
10.159
|
Purchase
Agreement with American Aquatics, dated xx, 2007
|
14.01
|
Code of
Ethics of Commodore Applied Technologies, Inc.
(26)
|
51
|
|
16.1
|
Letter
regarding change in certifying accountant. (12)
|
16.2
|
Letter
regarding change in certifying accountant. (17)
|
*22.1
|
Subsidiaries
of the Company.
|
*31.1
|
Certification
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
*31.2
|
Certification
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
*32.1
|
Certification
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
|
*32.2
|
Certification
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
|
99.1
|
Debt
Repayment Agreement, dated September 28, 1998, between the Company and
Environmental. (15)
|
99.2
|
Registration
Rights Agreement, dated September 28, 1998, between the Company and
Environmental. (15)
|
* Filed herewith.
(1)
Incorporated by reference and filed as Exhibit to Registrant's
Registration Statement on Form S-1 filed with the Securities and Exchange
Commission on May 2, 1996 (File No. 333-4396).
(2)
Incorporated by reference and filed as Exhibit to Registrant's
Amendment No. 1 to Registration Statement on Form S-1 filed with the Securities
and Exchange Commission on June 11, 1996 (File No. 333-4396).
(3)
Incorporated by reference and filed as Exhibit to Registrant's
Amendment No. 2 to Registration Amendment No.2 to Registration Statement on Form
S-1 filed with the Securities and Exchange Commission on June 25, 1996 (File No.
333-4396).
(4)
Incorporated by reference and filed as Exhibit to Registrant's
Post-Effective Amendment No. 1 to Registration Statement on Form S-1 filed with
the Securities and Exchange Commission on July 1, 1996 (File No. 333-4396).
(5)
Incorporated by reference and filed as Exhibit to Registrant's
Current Report on Form 8-K filed with the Securities and Exchange Commission on
October 15, 1996 (File No. 1-11871).
(6)
Incorporated by reference and filed as Exhibit to Registrant's
Current Report on Form 8-K filed with the Securities and Exchange Commission on
January 27, 1997 (File No. 1-11871).
(7)
Incorporated by reference and filed as Exhibit to Amendment No. 3
to Registration Statement on Form S-1 of Separation filed with the Securities
and Exchange Commission on January 23, 1997 (File No. 333-11813).
(8)
Incorporated by reference and filed as Exhibit to Annual Report on
Form 10-K for the fiscal year ended December 31, 1996 of Environmental filed
with the Securities and Exchange Commission on April 15, 1997 (File No.
0-10054).
(9)
Incorporated by reference and filed as an Exhibit to Registrant's
Current Report on Form 8-K filed with the Securities and Exchange Commission on
October 3, 1997 (File No. 1-11871).
(10)
Incorporated by reference and filed as an Exhibit to Registrant's
Current Report on Form 8-K filed with the Securities and Exchange Commission on
February 23, 1998 (File No. 1-11871).
(11)
Incorporated by reference and filed as an Exhibit to Registrant's
Annual Report on Form 10-K for the fiscal year ended December 31, 1996 filed
with the Securities and Exchange Commission on April 15, 1997 (File No.
1-11871).
(12)
Incorporated by reference and filed as an Exhibit to Registrants
Current Report on Form 8-K filed with the Securities and Exchange Commission on
December 24, 1996 (File No. 1-11871).
(13)
Incorporated by reference and filed as an Exhibit to the
Registrants Registration Statement on Form S-8 filed with the Securities and
Exchange Commission on December 5, 1997 (File No. 333-41643).
(14)
Incorporated by reference and filed as an Exhibit to Registrants
Annual Report on Form 10-K for the fiscal year ended December 31, 1997 filed
with the Securities and Exchange Commission on March 31, 1998 (File No.
1-11871).
(15)
Incorporated by reference and filed as an Exhibit to Registrants
Current Report on Form 8-K filed with the Securities and Exchange Commission on
January 5, 1999 (File No. 1-11871).
52
(16)
Incorporated by reference and filed as an Exhibit to Registrants
Current Report on Form 8-K filed with the Securities and Exchange Commission on
January 5, 1999 (File No. 1-11871).
(17)
Incorporated by reference and filed as Exhibit to Amendment No. 5
to Registrants Registration Statement on Form S-3 filed with the Securities and
Exchange Commission on September 12, 1999 (File No. 333-95445).
(18)
Incorporated by reference and filed as an Exhibit to Registrants
Current Report on Form 8-K filed with the Securities and Exchange Commission on
August 23, 1999 (File No. 1-11871).
(19)
Incorporated by reference and filed as an Exhibit to Registrants
Current Report on Form 8-K filed with the Securities and Exchange Commission on
September 13, 2000 (File No. 1-11871).
(20)
Incorporated by reference and filed as an Exhibit to Registrants
Annual Report on Form 10-K/A for the fiscal year ended December 31, 2000 filed
with the Securities and Exchange Commission on May 04, 2001 (File No.
1-11871).
(21)
Incorporated by reference and filed as an Exhibit to Registrants
Current Report on Form 8-K filed with the Securities and Exchange Commission on
September 26, 2001 (File No. 1-11871).
(22)
Incorporated by reference and filed as an Exhibit to Registrants
Current Report on Form 8-K filed with the Securities and Exchange Commission on
October 31, 2001 (File No. 1-11871).
(23)
Incorporated by reference and filed as an Exhibit to Registrants
Annual Report on Form 10-K for the fiscal year ended December 31, 2001 filed
with the Securities and Exchange Commission on April 15, 2002 (File No.
1-11871).
(24)
Incorporated by reference and filed as an Exhibit to Registrants
Annual Report on Form 10-K for the fiscal year ended December 31, 2002 filed
with the Securities and Exchange Commission on April 15, 2003 (File No.
1-11871).
(25)
Incorporated by reference and filed as an Exhibit to Registrants
Annual Report on Form 10-K for the fiscal year ended December 31, 2003 filed
with the Securities and Exchange Commission on April 15, 2004 (File No.
1-11871).
(26)
Incorporated by reference and filed as an Exhibit to Registrants
Annual Report on Form 10-K for the fiscal year ended December 31, 2004 filed
with the Securities and Exchange Commission on April 15, 2005 (File No.
1-11871).
(27)
Incorporated by reference and filed as an Exhibit to Registrants
Annual Report on Form 10-K for the fiscal year ended December 31, 2005 filed
with the Securities and Exchange Commission on April 17, 2006 (File No.
1-11871).
ITEM 14.
PRINCIPAL ACCOUNTANT
FEES AND SERVICES
The
following is a summary of the fees billed to the Company by its principal
accountants during the years ended December 31, 2007 and December 31, 2006:
|
|
|
|
|
2007
|
|
2006
|
Audit fees
|
$ 69,604
|
|
$
87,560
|
Audit related fees
|
5,000
|
|
2,195
|
Tax fees
|
-
|
|
12,109
|
All other fees
|
-
|
|
-
|
Total
|
$74,604
|
|
$
101,864
|
Fees
for audit services include fees associated with the annual audit, the reviews of
our quarterly reports on Form 10-QSB, assistance with and review of documents
filed with the SEC. Audit-related fees consist of fees related to the
edgarization and filing of SEC forms.
Tax
fees include tax compliance and tax consultations.
The
board of directors has adopted a policy that requires advance approval of all
audit, audit-related, tax services, and other services performed by our
independent registered public accountants. The policy provides for pre-approval
by the board of directors of specifically defined audit and non-audit services.
Unless the specific service has been previously pre-approved with respect to
that year, the board of directors must approve the permitted service before the
independent registered public accountants are engaged to perform it.
Principal Accountant
Independence
The
Audit Committee has determined that the provision of all non-audit services
performed by the principal accountants were compatible with maintaining their
independence.
53
SIGNATURES
Pursuant to the
requirements to Section 13 or 15(d) 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: April 15, 2008
COMMODORE APPLIED TECHNOLOGIES, INC.
By:
/s/ Ted R. Sharp
Ted R. Sharp
Chief Financial Officer
Pursuant to the
requirements of the Securities Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the registrant and in the capacities
and on the dates indicated.
|
|
|
/s/ Shelby
T. Brewer
Dr. Shelby T. Brewer
|
Chairman of the Board and
Chief Executive Officer (principal executive officer)
|
April 15,
2008
|
/s/ Ted R.
Sharp
Ted R.
Sharp
|
Chief Financial Officer
(principal financial officer)
|
April 15,
2008
|
/s/
Bentley J. Blum
Bentley J.
Blum
|
Director
|
April 15,
2008
|
Paul E.
Hannesson
|
Director
|
April 15,
2008
|
/s/ O.
Mack Jones
O. Mack
Jones
|
Director
|
April 15,
2008
|
/s/
Michael P. Kalleres
VADM Michael
P. Kalleres
|
Director
|
April 15,
2008
|
Ambassador
William A. Wilson
|
Director
|
April 15,
2008
|
/s/ Jan
C. Huly
Jan C.
Huly
|
Director
|
April 15,
2008
|
/s/ Thomas
J. Colatosti
Thomas J.
Colatosti
|
Director
|
April 15,
2008
|
54