UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 10-Q

 (Mark One)

  X               QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
 ----             SECURITIES EXCHANGE ACT OF 1934
                  For the quarterly period ended September 30, 2005
                                            OR
 ----             TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                  THE SECURITIES EXCHANGE ACT OF 1934

                         Commission File Number 1-11871

                      COMMODORE APPLIED TECHNOLOGIES, INC.
                      ------------------------------------
             (Exact name of Registrant as specified in its charter)


                  Delaware                                       11-3312952
                  --------                                       ----------
      (State or other jurisdiction of                         (I.R.S. Employer
       incorporation or organization)                       Identification No.)


         150 East 58th Street, Suite 3238
                New York, New York                                  10155
         --------------------------------                           -----
     (Address of principal executive office)                      (Zip Code)


Registrant's telephone number, including area code:   (212) 308-5800
                                                      --------------


         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes  X       No     .
                                              ---        ----

         Indicate by check mark whether the registrant is an  accelerated  filer
(as defined by Exchange Act Rule 12b-2). Yes ____ No __X_.

         The number of shares the common stock  outstanding at November 21, 2005
was 7,819,185.



<PAGE>


                      COMMODORE APPLIED TECHNOLOGIES, INC.

                                    FORM 10-Q

                                      INDEX


                                                                        Page No.

PART I   FINANCIAL INFORMATION................................................1

Item 1.       Financial Statements (Unaudited)

              Condensed Consolidated Balance Sheets -
                      September 30, 2005 and December 31, 2004................2

              Condensed Consolidated Statements of Operations -
                      Three and Nine months ended September 30, 2005 and
                      September 30, 2004......................................4

              Condensed Consolidated Statements of Cash Flows -
                      Nine months ended September 30, 2005 and
                      September 30, 2004......................................5

              Notes to Condensed Consolidated Financial Statements............6

Item 2.       Management's Discussion and Analysis of Financial
                      Condition and Results of Operations....................14

Item 3.       Quantitative and Qualitative Disclosures About Market Risk.....24

Item 4.       Controls and Procedures........................................24


PART II  OTHER INFORMATION...................................................26

SIGNATURES ..................................................................28


                                        1
<PAGE>

                         PART I - FINANCIAL INFORMATION

ITEM 1:  Financial Statements


              COMMODORE APPLIED TECHNOLOGIES, INC. AND SUBSIDIARIES

                      CONDENSED CONSOLIDATED BALANCE SHEET
                  (Dollars in Thousands, except per share data)

<TABLE>
<CAPTION>



                                                              September 30,      December 31,
                               ASSETS                              2005              2004
                                                              -------------     -------------
                                                               (unaudited)
<S>                                                           <C>               <C>
Current Assets:
         Cash and cash equivalents                            $         173     $          15
         Accounts receivable, net                                     3,176               259
         Prepaid assets and other current receivables                     9                 -
                                                              -------------     -------------
                  Total Current Assets                                3,358               274

Property and Equipment, net                                             167                95
Intangible Assets
         Patents and completed technology, net of
              accumulated amortization of $100 and
              $100 respectively                                           -                 -
                                                              -------------     -------------

                    Total Assets                              $       3,525     $         369
                                                              =============     =============



</TABLE>


            See notes to condensed consolidated financial statements.


                                       2
<PAGE>


              COMMODORE APPLIED TECHNOLOGIES, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEET
                  (Dollars in Thousands, except per share data)
<TABLE>
<CAPTION>



                                                              September 30,     December 31,
                          LIABILITIES AND                          2005             2004
                       STOCKHOLDERS' DEFICIT                  -------------     -------------
                                                               (unaudited)
<S>                                                           <C>               <C>
Current Liabilities:
         Accounts payable                                     $       1,740     $       1,045
         Related party payable                                          255               253
         Line of credit                                                 317                 -
         Notes payable                                                  261               258
         Derivative liability on conversion feature of
         preferred equity and note payable                            8,607
         Other accrued liabilities                                    4,644             5,107
                                                              -------------     -------------

                  Total Current Liabilities                          15,824             6,663

Long Term Debt                                                        5,436             3,034
                                                              -------------     -------------

                   Total Liabilities                                 21,260             9,697

Commitments and Contingencies

Stockholders' Deficit
         Convertible Preferred Stock, Series I & H
           Par value $0.001 per share,
           10% cumulative dividends, Series I,
           3%  cumulative dividends for Series H
            1,550,000  authorized, 1,190,302 shares and
            1,001,200 shares issued and outstanding as of
            September 30, 2005 and
            December 31, 2004, respectively.
           The shares had an aggregate liquidation
            value of $6,381 and $3,677 at
            September                                                     1                 1
            30, 2005 and December 31, 2004, respectively.
         Common Stock, par value $0.001 per share,
           300,000,000 shares authorized, 7,819,185
           and 6,717,303 issued and outstanding,
            at September 30, 2005 and December 31, 2004,                  8                 7
            respectively.
         Additional Paid-in Capital                                  68,694            67,503
         Accumulated Deficit                                        (86,175)          (76,576)
                                                              -------------     -------------
                                                                    (17,472)           (9,065)
         Treasury Stock, 171,875 shares
                                                                       (263)             (263)
                                                              -------------     -------------
                     Total Stockholders' Deficit                    (17,735)           (9,328)
                                                              -------------     -------------
          Total Liabilities and Stockholders' Deficit         $       3,525     $         369
                                                              =============     =============
</TABLE>

            See notes to condensed consolidated financial statements.

                                       3
<PAGE>


              COMMODORE APPLIED TECHNOLOGIES, INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
            (Unaudited - Dollars in Thousands, except per share data)
<TABLE>
<CAPTION>


                                                                     Three months ended             Nine months ended
                                                                 September       September     September      September
                                                                     30,             30,           30,           30,
                                                                    2005            2004          2005          2004
                                                               ------------     ----------    ----------     -----------
<S>                                                            <C>              <C>           <C>            <C>
Contract revenues                                              $      3,900     $      155    $    8,259     $       449
Costs and expenses:
         Cost of sales                                                3,160            180         7,180             687
         Research and development                                        --             --            --               7
         General and administrative                                     568            466         1,529           1,393
         Depreciation and amortization                                   21             20            33             149
                                                               ------------     ----------    ----------     -----------
                  Total costs and expenses                            3,749            666         8,742           2,236
                                                               ------------     ----------    ----------     -----------
Income (loss) from operations                                           151           (511)         (483)         (1,787)
                                                               ------------     ----------    ----------     -----------
Other income (expense):
         Interest expense                                              (159)          (115)         (509)           (295)
         Net gain (loss) on embedded derivative liability                44             --        (8,607)             --
                                                               ------------     ----------    ----------     -----------
                  Net other income (expense)                           (115)          (115)       (9,116)           (295)
                                                               ------------     ----------    ----------     -----------
Income (loss) before income taxes                                        36           (626)       (9,599)         (2,082)
         Income taxes                                                    --             --            --              --
                                                               ------------     ----------    ----------     -----------
         Net income  (loss)                                              36           (626)       (9,599)         (2,082)

         Dividends accrued to preferred stockholders                   (104)           (73)         (262)           (223)
                                                               ------------     ----------    ----------     -----------
         Net loss applicable to common shareholders            $        (68)    $     (699)   $   (9,861)    $    (2,305)
                                                               ============     ==========    ==========     ===========
         Loss per share - basic and diluted                    $      (0.01)    $    (0.11)   $    (1.35)    $     (0.37)
                                                               ============     ==========    ==========     ===========
Number of weighted average shares outstanding (000's)
       basic and diluted                                              7,819          6,364         7,290           6,252
                                                               ============     ==========    ==========     ===========

</TABLE>

            See notes to condensed consolidated financial statements.


                                       4
<PAGE>

              COMMODORE APPLIED TECHNOLOGIES, INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
            (Unaudited - Dollars in Thousands, except per share data)
<TABLE>

                                                                     Nine months ended
                                                              September 30,     September 30,
                                                                   2005             2004
                                                              -------------     -------------
<S>                                                           <C>               <C>
Cash flows from operating activities:
     Net loss                                                 $      (9,599)    $      (2,082)
     Adjustments to reconcile net loss to net cash used in
     operating activities:
         Depreciation and amortization                                   33               149
         Amortization of debt discount                                   --                22
         Loss on embedded derivative liability                        8,607
         Changes in assets and liabilities:
                Accounts receivable, net                             (3,684)              (33)
                Prepaid assets                                           (9)               (4)
                Checks written in excess of cash                         --               (13)
                Accounts payable                                        695               (25)
                Other liabilities                                     2,779                755
                                                              -------------     -------------
                    Net cash used in operating activities            (1,178)           (1,231)

Cash flows from investing activities:
         Purchase of equipment                                         (105)               (1)
         Advances from (to) related parties                              --                42
                                                              -------------     -------------
                    Net cash used in investing activities              (105)               41

Cash flows from financing activities:
      Increase in (repayment of) line of credit                         317               (57)
      Increase in notes and loans payable                             1,024             1,294
      Proceeds from sale of common stock                                100                --
      Proceeds from exercised warrants                                   --                14
                                                              -------------     -------------
                    Net cash provided by financing activities         1,441             1,251


Increase (decrease) in cash                                             158                61
Cash, beginning of period                                                15                --
                                                              -------------     -------------
Cash, end of period                                           $         173     $          61
                                                              =============     =============
</TABLE>

            See notes to condensed consolidated financial statements.

                                       5
<PAGE>

              COMMODORE APPLIED TECHNOLOGIES, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


                               September 30, 2005


Note A - Basis of Presentation

         The accompanying  unaudited condensed consolidated financial statements
for Commodore  Applied  Technologies,  Inc. and  subsidiaries  (the "Company" or
"Applied")  have  been  prepared  in  accordance  with U.S.  generally  accepted
accounting   principles  for  interim   financial   information   and  with  the
instructions  to Form 10-Q and  Article  10 of  Regulation  S-X.  The  financial
statement  information was derived from unaudited  financial  statements  unless
indicated otherwise. Accordingly, they do not include all of the information and
footnotes required by U.S. generally accepted accounting principles for complete
financial statements.

         In the opinion of  management,  all  adjustments  (consisting of normal
recurring  accruals)  considered  necessary  for a fair  presentation  have been
included. Operating results for the three and nine month periods ended September
30, 2005 are not necessarily  indicative of the results that may be expected for
the year ending December 31, 2005.

         The accompanying  unaudited condensed consolidated financial statements
should be read in conjunction with the Company's  audited  financial  statements
included in the Company's annual report on Form 10-K for the year ended December
31, 2004.

         On August 29, 2005, at the close of business,  the Company  effectuated
the  previously  approved  reverse  stock split with the  established a ratio of
1-for 20. Applied common stock began trading on a reverse-split  basis on August
30, 2005.  As a result of the reverse  stock  split,  every 20 shares of Applied
common stock were combined into one share of Applied  common stock.  As a result
of the reverse stock split, the issued and outstanding  shares of Applied common
stock were reduced from  approximately  156 million shares to approximately  7.8
million shares. The number of authorized shares is not reduced.

         The reverse stock split affected all shares of common stock,  preferred
stock, stock options and warrants of Applied outstanding as of immediately prior
to the effective  time of the reverse stock split.  Fractional  shares of common
stock of the Company were not issued as a result of the reverse stock split, but
instead,  holders of pre-split  shares of common stock who otherwise  would have
been  entitled to receive a  fractional  share as a result of the reverse  split
received  one whole  share.  Shares of Applied  common stock trade on the Nasdaq
Over the Counter Bulletin Board Market under the symbol CXIA.

         Certain  prior-year  amounts have been  reclassified  to conform to the
current year presentation.

         The  accompanying  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. For the nine months ended September 30, 2005, and
for the years ended December 31, 2004,  2003, and 2002,  Applied incurred losses
of $9,599,000, $2,404,000; $2,957,000; and $5,972,000, respectively. The Company
has also  experienced net cash inflows  (outflows) from operating  activities of
($1,532,000),  ($955,000), and ($123,000) for the years ended December 31, 2004,
2003 and 2002 respectively.  The condensed  consolidated financial statements do

                                       6
<PAGE>

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 new 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.

         Anticipated  losses on contracts are provided for by a charge to income
during the period such losses are identified.  Changes in job  performance,  job
conditions,  estimated  profitability  (including  those  arising from  contract
penalty  provisions)  and final contract  settlements may result in revisions to
cost and income and are  recognized  in the  period in which the  revisions  are
determined.  Allowances for anticipated  losses totaled $376,000 and $376,000 at
September 30, 2005 and December 31, 2004,  respectively.  These  allowances  are
included in other accrued liabilities in the accompanying financial statements.

         In as much  as  Applied  rescinded  certain  options  during  2002  and
reissued new options to the option holders,  the options are considered variable
options and will be revalued each quarter to determine the effect on operations,
if any.  During the three and nine months ended  September  30, 2005, no expense
has  been  recognized  for the  variable  options  as the fair  market  value of
Applied's  common stock at September 30, 2005 was lower than the exercise  price
of the variable options.

         The  consolidated  financial  statements  include  the  accounts of the
Company  and  its  majority-owned  subsidiaries.  All  significant  intercompany
balances and transactions have been eliminated.  The preparation of consolidated
financial  statements  in conformity  with U.S.  generally  accepted  accounting
principles 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.

         The Company accounts for stock-based compensation under the recognition
and measurement principles of APB Opinion No. 25, Accounting for Stock Issued to
Employees,  and related  Interpretations.  No stock-based employee  compensation
cost is reflected in net income  (loss),  as all options  vested had an exercise
price equal to the market  value of the  underlying  common stock on the date of
grant or the date of  repricing.  No options  held by  employees  were issued or
vested  during the three and nine month  periods  ended  September  30, 2005 and
2004,  therefore,  there would be no effect on net income and earnings per share
if the  company  had  applied  the fair  value  recognition  provisions  of FASB
Statement No. 123,  Accounting  for  Stock-Based  Compensation,  to  stock-based
employee compensation.

Note B - Supplemental Cash Flow Information

         During the three and nine month periods ended September 30, 2005, 0 and
5,500  shares of Series E  Preferred  Stock were  converted  into 0 and  291,629
shares of the Company's  common stock,  respectively.  During the three and nine


                                       7
<PAGE>

month  periods  ended  September  30, 2005,  the Company  accrued all  dividends
payable on the Series E Preferred  Stock.  The Company accrued  dividends on the
Preferred  Stock Series E for the three and nine month periods  ended  September
30, 2005,  of $0 and $24,923  respectively,  which is included in Other  Accrued
Liabilities.

         During the three and nine month  periods  ended  September 30, 2005, no
shares of Preferred  Stock Series F were  converted into shares of the Company's
common stock. The Company accrued  dividends on the Preferred Stock Series F for
the three and nine month  periods  ended  September 30, 2005, of $0 and $36,355,
respectively, which is included in Other Accrued Liabilities.

         During the three and nine month  periods  ended  September 30, 2005, no
shares of Preferred  Stock Series H were  converted into shares of common stock.
The company paid no accrued  dividends on Preferred  Stock Series H. The Company
accrued  dividends  on  Preferred  Stock  Series H for the three and nine  month
periods ended September 30, 2005, of $6,000 and $18,000, respectively,  which is
included in Other Accrued Liabilities.

         On April 12, 2005, the Company entered into an exchange  agreement with
The Shaar Fund, LTD (the "Shaar Exchange  Agreement").  Under terms of the Shaar
Exchange  Agreement,  the  Company  agreed that Shaar will  exchange  all of its
right,  title and  interest in and to the  remaining  outstanding  shares of the
Series E  Preferred  and Series F  Preferred  (including  all other  accrued and
unpaid  dividends  thereon)  for  395,302  shares  of  the  Company's  Series  I
Preferred.

         During the three and nine month periods ended September 30, 2005, 0 and
5,000  shares of Series I  Preferred  Stock were  converted  into 0 and  310,174
shares of the Company's  common stock,  respectively.  During the three and nine
month  periods ended  September  30, 2005,  the Company paid no dividends on the
Series I Preferred  Stock.  The Company  accrued  dividends on  Preferred  Stock
Series I for the three and nine month  periods  ended  September  30,  2005,  of
$97,575  and  $182,174   respectively,   which  is  included  in  Other  Accrued
Liabilities.

Note C - Other Accrued Liabilities

Other accrued liabilities consist of the following:

                                                 September 30,     December 31,
                                                       2005            2004
                                                 -------------    -------------
                                                   (unaudited)
Compensation and employee benefits                    $  2,114       $  1,876
Subcontractors                                           1,071              -
Accrued interest                                           550            664
Loss reserve                                               376            376
Dividend payable                                           257          1,696
Related parties                                            185            185
Other                                                       91             91
Exit and forbearance fees on notes payable                   -            219
                                                --------------- --------------
                                                      $  4,644       $  5,107
                                                =============== ==============


                                       8
<PAGE>


Note D - Segment Information

         The  Company  has  identified  three  reportable  segments  in which it
operates,  based  on  the  guidelines  set  forth  in the  Financial  Accounting
Standards  Board's  Statement of Financial  Accounting  Standards No. 131. These
three segments are as follows:  (i) Commodore  Advanced  Sciences,  Inc.,  which
primarily provides various engineering,  legal,  sampling,  and public relations
services to Government agencies on a cost plus basis; (ii) Commodore  Solutions,
Inc., which is commercializing  technologies to treat mixed and hazardous waste;
and (iii) Corporate overhead and other miscellaneous activities.

         Applied evaluates segment performance based on the segment's net income
(loss).  Applied's  foreign and export sales and assets  located  outside of the
United States are not significant.  Summarized financial information  concerning
Applied's reportable segments is shown in the following tables.

Three Months Ended September 30, 2005
(Dollars in Thousands)
<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------
                                                                                       Corporate
                                                         Advanced                      Overhead
                                            Total        Sciences       Solution       and Other

<S>                                       <C>           <C>            <C>           <C>
Contract revenues                         $   3,900     $     3,900    $      --     $        --

Costs and expenses
     Cost of sales                            3,160           3,160           --              --
     Research and development                    --              --           --              --
     General and administrative                 568             305           --             263
     Depreciation and amortization               21              21           --              --
                                          ---------     -----------    ---------     -----------
              Total costs and expenses        3,749           3,486            0             263
                                          ---------     -----------    ---------     -----------
Income (loss) from operations                   151             414            0            (263)
     Interest expense                          (159)             (5)          --            (154)
     Net gain (loss) on embedded
     derivative                                  44              --           --              44
                                          ---------     -----------    ---------     -----------
Loss before income taxes                         36             409            0            (373)

     Income taxes                                --              --           --              --
                                          ---------     -----------    ---------     -----------
Net income (loss)                         $      36     $       409    $       0     $      (373)
                                          =========     ===========    =========     ===========

Total assets                              $   3,525     $     3,433    $      86     $         6


Expenditures for long-lived assets        $      33     $        31    $      --     $         2

</TABLE>

                                        9
<PAGE>

<TABLE>
<CAPTION>

Nine Months Ended September 30, 2005
(Dollars in Thousands)

------------------------------------------------------------------------------------------------
                                                                                       Corporate
                                                         Advanced                      Overhead
                                            Total        Sciences       Solution       and Other

<S>                                       <C>           <C>            <C>           <C>
Contract revenues                         $   8,259     $     8,173    $      86     $        --

Costs and expenses
     Cost of sales                            7,180           7,126           54              --
     Research and development                    --              --           --              --
     General and administrative               1,529             495           16           1,018
     Depreciation and amortization               33              33           --              --
                                          ---------     -----------    ---------     -----------
              Total costs and expenses        8,742           7,654           70           1,018
                                          ---------     -----------    ---------     -----------
Income (loss) from operations                  (483)            519           16          (1,018)

     Interest expense                          (509)             (5)          --            (504)

    Net gain (loss) on embedded
       derivative                            (8,607)             --           --          (8,607)
                                          ---------     -----------    ---------     -----------
Income (loss) before income taxes            (9,599)            514           16         (10,129)

     Income taxes                                --              --           --              --
                                          ---------     -----------    ---------     -----------

Net income (loss)                         $  (9,599)    $       514    $      16     $   (10,129)
                                          =========     ===========    =========     ===========

Total assets                              $   3,525     $     3,433    $      86     $         6

Expenditures for long-lived assets        $     105     $       101    $      --     $         4

</TABLE>

                                       10
<PAGE>

Three Months Ended September 30, 2004
(Dollars in Thousands)
<TABLE>
<CAPTION>


------------------------------------------------------------------------------------------------
                                                                                       Corporate
                                                         Advanced                      Overhead
                                            Total        Sciences       Solution       and Other

<S>                                       <C>           <C>            <C>           <C>
Contract revenues                         $     155     $       155    $      --     $        --

Costs and expenses
     Cost of sales                              180             122           58              --
     Research and development                    --              --           --              --
     General and administrative                 466             156           19             291
     Depreciation and amortization               20              --           20              --
                                          ---------     -----------    ---------     -----------
              Total costs and expenses          666             278           97             291
                                          ---------     -----------    ---------     -----------
Income (loss) from operations                  (511)           (123)         (97)           (291)

     Interest income                             --              --           --              --
     Interest expense                          (115)             --           --            (115)
                                          ---------     -----------    ---------     -----------
Loss before income taxes                       (626)           (123)         (97)           (406)

     Income taxes                                --              --           --              --
                                          ---------     -----------    ---------     -----------
Net income (loss)                         $    (626)    $      (123)   $     (97)    $      (406)
                                          =========     ===========    =========     ===========

Total assets                              $     196     $       196    $      --     $        --

Expenditures for long-lived assets        $       1     $         1    $      --     $        --

</TABLE>

                                       11
<PAGE>


Nine Months Ended September 30, 2004
(Dollars in Thousands)
<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------
                                                                                       Corporate
                                                         Advanced                      Overhead
                                            Total        Sciences       Solution       and Other

<S>                                       <C>           <C>            <C>           <C>
Contract revenues                         $     449     $       409    $      40     $        --

Costs and expenses
     Cost of sales                              687             366          321              --
     Research and development                     7              --            7              --
     General and administrative               1,393             279          168             946
     Depreciation and amortization              149              20          129              --
                                          ---------     -----------    ---------     -----------
              Total costs and expenses        2,236             665          625             946
                                          ---------     -----------    ---------     -----------
Income (loss) from operations                (1,787)           (256)        (585)           (946)

     Interest income                             --              --           --              --
     Interest expense                          (295)             --           --            (295)
                                          ---------     -----------    ---------     -----------
Loss before income taxes                     (2,082)           (256)        (585)         (1,241)

     Income taxes                                --              --           --              --
                                          ---------     -----------    ---------     -----------

Net Income (loss)                         $  (2,082)    $      (256)   $    (585)    $    (1,241)
                                          =========     ===========    =========     ===========

Total assets                              $     196     $       196    $      --     $        --

Expenditures for long-lived assets        $       1     $         1    $      --     $        --

</TABLE>

                                       12
<PAGE>

Note E - Net Loss per Common Share

         Basic net loss per common share ("Basic EPS") excludes  dilution and is
computed by dividing net loss available to common  shareholders  by the weighted
average number of common shares outstanding during the period.  Diluted net loss
per common share  ("Diluted  EPS")  reflects the  potential  dilution that could
occur if stock options or other  contracts to issue common stock were  exercised
or converted into common stock.  The  computation of Diluted EPS does not assume
exercise or conversion of securities that would have an anti-dilutive  effect on
net loss per common share.

         Options and  warrants to purchase  6,029,463  and  5,900,297  shares of
common stock and preferred stock  convertible  into shares of common stock as of
September 30, 2005 and 2004, respectively,  were not included in the computation
of Diluted EPS. Common stock  equivalents from preferred stock  convertible into
shares of common stock were also not included in the computation of Diluted EPS.
The inclusion of the options,  warrants and  convertible  preferred  stock would
have been anti-dilutive, thereby decreasing net loss per common share.

Note F - Contingencies

         Applied has matters of  litigation  arising in the  ordinary  course of
business  which in the opinion of  management  will not have a material  adverse
effect on its financial condition or results of operations.

Note G  - Derivative Liability Expense

         On April 11,  2005,  Applied,  through  the  issuance  of the  Series I
Preferred  and the  Amended  and  Restated  Shaar  Note,  recorded  an  embedded
derivative   liability  due  to  the  conversion   feature  of  these  financial
instruments  pursuant  to EITF 00-19.  Applied  recorded a gain of $44,000 and a
loss of ($8,607,000)  of non-cash income  (expense) for the three and nine month
periods ended September 30, 2005,  respectively.  The fair value of the embedded
derivatives  consisting of conversion features included in a note payable and in
the Series I Convertible  Preferred Stock is calculated as of the reporting date
using the Black-Scholes options pricing model.


                                       13
<PAGE>

ITEM 2.  Management's Discussion and Analysis of Financial Condition and
         ---------------------------------------------------------------
         Results of Operations
         ---------------------

Overview

         The  Company  is  engaged  in  providing  a range  of  engineering  and
technical  services to the public and private sectors related to (i) remediating
contamination in soils,  liquids and other materials and disposing of or reusing
certain waste by-products by utilizing SET; and (ii) providing  services related
to,   environmental   management   for  on-site  and  off-site   identification,
investigation  remediation  and management of hazardous,  mixed and  radioactive
waste.

         The Company owns technologies related to the separation and destruction
of mixed waste, polychlorinated biphenyls (PCBs) and chlorofluorocarbons (CFCs).
The Company is currently working on the  commercialization of these technologies
through development efforts,  licensing arrangements and joint ventures. Through
Advanced Sciences,  formerly Advanced Sciences,  Inc., a subsidiary  acquired on
October 1, 1996, the Company has contracts with various government  agencies and
private  companies  in the U.S.  As some  government  contracts  are  funded  in
one-year  increments,  there is a  possibility  for cutbacks as these  contracts
constitute a major portion of Advanced Sciences' revenues,  and such a reduction
would materially affect the operations.  However,  management  believes Advanced
Sciences'  existing  client  relationships  will allow the Company to obtain new
contracts in the future.

         The  Company  has  identified  two  reportable  segments  in  which  it
operates,  based  on  the  guidelines  set  forth  in the  Financial  Accounting
Standards Board's Statement of Financial Accounting Standards No. 131. These two
segments are as follows:  Commodore  Advanced  Sciences,  Inc.,  which primarily
provides various engineering,  legal, sampling, and public relations services to
Government agencies on a cost plus basis; and Commodore  Solutions,  Inc., which
is commercializing technologies to treat mixed and hazardous waste.

         On August 29, 2005, at the close of business,  the Company  effectuated
the  previously  approved  reverse  stock split with the  established a ratio of
1-for 20. Applied common stock began trading on a reverse-split  basis on August
30, 2005.  As a result of the reverse  stock  split,  every 20 shares of Applied
common stock was combined into one share of Applied common stock. As a result of
the reverse stock split,  the issued and  outstanding  shares of Applied  common
stock was reduced from  approximately  156 million shares to  approximately  7.8
million shares. The number of authorized shares is not reduced.

         The reverse  stock split  affected  all shares of common  stock,  stock
options  and  warrants of Applied  outstanding  as of  immediately  prior to the
effective time of the reverse stock split.  Fractional shares of common stock of
the Company were not issued as a result of the reverse stock split, but instead,
holders  of  pre-split  shares of common  stock who  otherwise  would  have been
entitled to receive a fractional share as a result of the reverse split received
one whole  share.  Shares of Applied  common  stock trade on the Nasdaq Over the
Counter Bulletin Board Market under the symbol CXIA.

         The Company  currently  requires  additional  cash to sustain  existing
operations and to meet current obligations and ongoing capital requirements. The
Company's   current   monthly   operating   expenses  exceed  cash  revenues  by

                                       14
<PAGE>

approximately $80,000.  Currently, the Company is addressing this cash shortfall
through loans from The Shaar Fund,  Ltd.,  but The Shaar Fund,  Ltd. is under no
obligation  to continue to make such  advances  to the  Company.  If this lender
decided  to  discontinue  advances,  the  Company  would not be able to meet its
current  obligations.  In addition,  the Company owes $818,330 in loans that are
currently due or are payable on demand. Although the lenders on these loans have
not yet called the loans, the Company does not currently have the ability to pay
these loans absent additional financing.

         The Company's report of independent  registered  public accounting firm
on our  fiscal  2002,  2003  and 2004  financial  statements  contains  a "going
concern"  qualification  in which  they  express  substantial  doubt  about  the
Company's  ability to continue in business,  absent  additional  financing.  The
Company currently requires additional cash to sustain existing operations and to
meet current obligations and ongoing capital requirements.

CRITICAL ACCOUNTING POLICIES

         We prepare our financial  statements in conformity with U.S.  generally
accepted  accounting  principles.  As  such,  we are  required  to make  certain
estimates,  judgments and assumptions  that we believe are reasonable based upon
the information  available.  These estimates and assumptions affect the reported
amounts of assets and  liabilities  at the date of the financial  statements and
the reported amounts of revenues and expenses during the periods presented.

         Our accounting policies that are the most important to the portrayal of
our  financial  condition and results,  and which require the highest  degree of
management  judgment relate to the reserves for doubtful accounts receivable and
the valuation of stock and options issued for services.

Reserves for Doubtful Accounts

         Management  estimates the amount of required reserves for the potential
non-collectibility  of accounts  receivable based upon the customer's  financial
condition, age of the customer's receivables,  changes in payment histories, and
consideration  of other  relevant  factors.  Because the  reserve  for  doubtful
accounts is an estimate  of events  that have not yet  occurred,  we could incur
additional  charges or  benefits  in the future to reflect  differences  between
estimated and actual collections.

Valuation of  Stock, Options and Embedded Derivatives

         We value and account for the issuance of equity  instruments,  embedded
or otherwise,  to  non-employees to acquire goods and services based on the fair
value of the goods and  services or the fair value of the equity  instrument  at
the time of issuance,  whichever is more reliably measurable.  The fair value of
stock  issued for goods or services  is  determined  based on the quoted  market
price on the date the commitment to issue the stock has occurred. The fair value
of stock options,  warrants  granted to  non-employees  for goods or services is
calculated on the date of grant using the  Black-Scholes  options pricing model.
The fair value of the embedded  derivatives  consisting of  conversion  features
included in a note payable and in the Series I  Convertible  Preferred  Stock is
calculated  as of the reporting  date using the  Black-Scholes  options  pricing
model.

Revenue Recognition

         Substantially all the Company's current revenues consist of engineering
and scientific  services 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 are recorded when
the services are provided.

                                       15
<PAGE>

         Most of the Company's  historical  contracts provided for reimbursement
of costs plus fixed  fees.  Direct  and  indirect  contract  costs  incurred  in
reimbursement  plus cost contracts are subject to audit by the Defense  Contract
Audit Agency  ("DCAA").  Management  does not expect these audits to  materially
affect the financial statements and have established  appropriate  allowances to
cover potential  audit  disallowances.  Contract  revenues have been recorded in
amounts  which are expected to be realized upon final  settlement.  The DCAA has
audited the Company's contracts through 1996. An allowance for doubtful accounts
and  potential  disallowances  has been  established  based upon the  portion of
billed and unbilled receivables that management believes may be uncollectible.

RESULTS OF OPERATIONS

Three and Nine Months Ended September 30, 2005 Compared to Three and Nine Months
Ended September 30, 2004

         Revenues from continuing  operations were $3,900,000 and $8,259,000 for
the three and nine months  ended  September  30, 2005  compared to $155,000  and
$449,000 for the three and nine months ended  September 30, 2004.  Such revenues
were primarily from the Company's subsidiary Advanced Sciences.

         In  the  case  of  Advanced  Sciences,  revenues  were  $3,900,000  and
$8,173,000  respectively  for the three and nine months ended September 30, 2005
as compared  with  $155,000  and  $409,000  for the three and nine months  ended
September 30, 2004. Advanced Sciences has experienced a significant  increase in
revenue as the result of the  September  2004 award of the eDAM  contract in Oak
Ridge,  TN and  overall,  more work being  performed by Advanced  Sciences.  The
revenues from Advanced Sciences consisted of engineering and scientific services
performed for the United States government under a variety of contracts, some of
which  provide  for  reimbursement  of  cost  plus  fixed  fees.  Revenue  under
cost-reimbursement  contracts is recorded  under the  percentage  of  completion
method as costs are incurred and include  estimated fees in the proportion  that
costs to date bear to total estimated costs.  Advanced  Sciences has three major
customers,  two of which  represent  more than 10% of total  revenue  each.  The
combined  revenue  for these  three  customers  was  $3,900,000  and  $8,173,000
respectively  (100% of total  revenues)  for the  three  and nine  months  ended
September 30, 2005. Cost of sales was $3,160,000 and $7,126,000 respectively for
the three and nine months  ended  September  30, 2005  compared to $122,000  and
$366,000  respectively  for the three and nine months ended  September 30, 2004.
The increase in cost of sales can be attributed to an increase in variable costs
caused by the eDAM contract and overall,  more work being  performed by Advanced
Sciences.

         In the case of Solution,  revenues were $0 and $86,000 respectively for
the three and nine months  ended  September  30,  2005 as  compared  with $0 and
$40,000  respectively  for three  and nine  months  ended  September  30,  2004.
Solution had one major  customer  during the three and nine month  periods ended
September 30, 2005 which accounted for $0 and $86,000,  respectively, or 100% of
the total revenues for the period. Revenues, when recognized, are primarily from
remediation  services performed for engineering and waste treatment companies in
the  U.S.  under a  variety  of  contracts.  Cost of  sales  was $0 and  $54,000
respectively  for the three and nine months ended September 30, 2005 as compared
to  $58,000  and  $321,000  respectively  for the  three and nine  months  ended

                                       16
<PAGE>

September  30,  2004.  The cost of sales,  when  incurred,  is  attributable  to
installation,  set-up, supplies and salary expenses for the SET technology.  The
cost of sales also  includes  other  direct  sales and  proposal  expenses  when
incurred.  Anticipated losses on engagements,  if any, will be provided for by a
charge to income during the period such losses are first identified.

         For the three and nine months ended  September  30,  2005,  the Company
incurred research and development costs of $0 and $0 respectively as compared to
$0 and $7,000  respectively  for the three and nine months ended  September  30,
2004. Research and development costs include salaries,  wages, and other related
costs of personnel  engaged in research  and  development  activities,  contract
services and  materials,  test  equipment  and rent for  facilities  involved in
research and development activities. Research and development costs are expensed
when incurred,  except those costs related to the design or  construction  of an
asset having an economic useful life are capitalized,  and then depreciated over
the estimated useful life of the asset. The decrease in research and development
expense is due to the continued commercialization focus of the Company.

         General and administrative  expenses for continuing  operations for the
three and nine months ended  September  30, 2005 were  $568,000  and  $1,529,000
respectively as compared to $466,000 and $1,393,000  respectively  for the three
and nine months ended  September 30, 2004.  This  difference is primarily due to
the deferred  salaries for the  executives of the Company for the three and nine
month periods ended  September 30, 2005, the addition of a full time  accounting
employee,   and  fees  associated  with  a  marketing  consultant  for  the  SET
technology.

         In the case of Advanced Sciences,  general and administrative costs for
the three and nine month  periods  ended  September  30, 2005 were  $305,000 and
$495,000,  respectively,  compared to $156,000 and $279,000 respectively for the
three and nine  month  periods  ended  September  30,  2004.  This  increase  is
primarily due to the additional  administrative  costs  associated with the eDAM
contract in Oak Ridge, TN. Solution incurred general and administrative costs of
$0 and  $16,000,  respectively,  for the  three  and nine  month  periods  ended
September  30, 2005 as compared to $19,000  and  $168,000  respectively  for the
three and nine month  periods  ended  September  30,  2004.  This  decrease  was
primarily due to the reassignment of a Solution's employee to CASI field work on
the eDAM contract in Oak Ridge, TN.

         Interest  expense  for  continuing  operations  for the  three and nine
months  ended  September  30, 2005 was $159,000 and  $509,000,  respectively  as
compared to $115,000 and  $295,000,  respectively  for the three and nine months
ended  September  30,  2004.  The  increase in  interest  expense of $44,000 and
$214,000,  respectively,  is primarily  related to an increase in cash  interest
costs associated with a higher notes payable balance and a higher line of credit
balance compared to the prior year.

         On April 11,  2005,  Applied,  through  the  issuance  of the  Series I
Preferred  and the  Amended  and  Restated  Shaar  Note,  recorded  an  embedded
derivative   liability  due  to  the  conversion   feature  of  these  financial
instruments  pursuant  to EITF 00-19.  Applied  recorded a gain of $44,000 and a
loss of ($8,607,000)  of non-cash income  (expense) for the three and nine month
periods ended September 30, 2005,  respectively.  The fair value of the embedded
derivatives  consisting of conversion features included in a note payable and in
the Series I Convertible  Preferred Stock is calculated as of the reporting date
using the Black-Scholes options pricing model.


                                       17
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

         At September  30, 2005 and December  31, 2004  Advanced  Sciences had a
$317,000 and $0  outstanding  balance,  respectively,  on its revolving  line of
credit.

         The Company  currently  requires  additional  cash to sustain  existing
operations and to meet current obligations and ongoing capital requirements. The
Company's   current   monthly   operating   expenses  exceed  cash  revenues  by
approximately  $80,000  at  September  30,  2005.  Currently,   the  Company  is
addressing this cash shortfall  though loans from The Shaar Fund,  Ltd., but The
Shaar Fund, Ltd. is under no obligation to continue to make such advances to the
Company. If this lender decided to discontinue  advances,  the Company would not
be able to meet its current  obligations.  In  addition,  the current  principal
balance  in loans  that are  currently  due or are  payable  on demand  that the
Company  owes is  $818,330  as of  September  30,  2005 and remain  unpaid as of
November 14,  2005.  Although the lenders on these loans have not yet called the
loans, the Company does not currently have the ability to pay these loans absent
additional financing.

         The Company's report of independent  registered  public accounting firm
on our  fiscal  2002,  2003  and 2004  financial  statements  contains  a "going
concern"  qualification  in which  they  express  substantial  doubt  about  the
Company's  ability to continue in business,  absent  additional  financing.  The
Company currently requires additional cash to sustain existing operations and to
meet current obligations and ongoing capital requirements.

         For the three and nine month  periods  ended  September  30, 2005,  the
Company  incurred net income (loss) of $36,000 and ($9,599,000) as compared to a
net loss of  ($626,000)  and  ($2,082,000)  for the three and nine month periods
ended  September 30, 2004.  For the nine month period ended  September 30, 2005,
and for the years ended  December 31, 2004,  2003,  and 2002,  Applied  incurred
losses of ($992,000), ($2,404,000), ($2,957,000), and ($5,972,000) respectively.
The Company has also  experienced  net cash inflows  (outflows)  from  operating
activities  of  ($1,532,000),  ($955,000),  and  ($123,000)  for the years ended
December 31, 2004, 2003 and 2002 respectively.

         During the three and nine month periods ended  September 30, 2005,  the
Company converted (i) 0 and 5,500,  respectively,  shares of Series E Preferred;
(ii) 0 shares of Series F Preferred; and (iii) 0 and 5,000, respectively, shares
of Series I Preferred, for 0 and 601,803, respectively,  shares of the Company's
common stock for the three and nine month periods ended  September 30, 2005. For
the three and nine month periods ended September 30, 2005, the Company converted
no shares of Series H  Preferred  and  issued no stock  with  respect to accrued
dividends pertaining to the Series H Preferred.

         In November  2000, the Company  completed  $500,000 in financing in the
form of a loan (the  "Weiss  Group  Note") from a group of four  investors.  The
Weiss  Group Note  bears  interest  at 12% per annum and was due and  payable on
February  12,  2001.  All holders of the Weiss Group Note have  granted  payment
extensions  to the Company  until  January 15, 2005 in exchange for warrants for
125,000 shares of the Company's  common stock at an exercise price of $0.57. The
current  principal  balance of the Weiss Group Note is $252,397 as of  September
30, 2005 and remains unpaid as of November 21, 2005.

         Effective  February  14,  2004,  the  members  of the Weiss  Group Note
voluntarily  cancelled  all issued  warrants  to  purchase  75,000  shares at an
exercise  price of $1.00 per share of the  Company's  common stock in connection
with the Weiss Group Note.

                                       18
<PAGE>

         Effective  February 15, 2004, the Company  issued  warrants to purchase
125,000  shares of its common  stock at an exercise  price of $0.57 per share to
all holders of the Weiss Group Note in consideration of the extension of the due
date of such loans by such persons  from May 31, 2002 to January 15,  2005.  The
Company   believes  that  this  transaction  is  exempt  from  the  registration
requirements  of the  Securities Act under Section 4(2) thereof as a transaction
not involving any public offering of securities.

         On May 23, 2001, a private investor purchased $250,000 of the Company's
common stock at the market price. The Company issued the private investor 98,654
shares of common  stock of the  Company as a result of the equity  purchase.  In
connection  with the purchase of the shares of the Company's  common stock,  the
Company  issued the private  investor a 2-year  warrant for 25,000 shares of the
Company's  common  stock at an  exercise  price of $4.40 per share.  The Company
re-priced  this warrant in November  2003 to $0.57 and  extended the  expiration
date of this  warrant to  November  21,  2005.  The Company  believes  that this
transaction is exempt from the  registration  requirements of the Securities Act
under Section 4(2) thereof as a transaction not involving any public offering of
securities.  The private  investor  exercised  this warrant on April 7, 2004 and
received 25,000 shares of the Company's common stock.

         On June 13,  2001,  the  Company  issued  and sold to  Milford  Capital
Management, Inc. and the Shaar Fund, Ltd. (hereinafter known as "Milford/Shaar")
one-year,  15% Senior Secured Promissory Notes (the  "Milford/Shaar  Bridge Loan
Notes") in the aggregate principal amount of $1,000,000.  In connection with the
Milford/Shaar Bridge Loan Notes, the Company issued to Milford/Shaar a five-year
warrant for 16,667 shares of the Company's  common stock at an exercise price of
$4.40 per share. The Company pledged its equipment and SET related  intellectual
property as collateral for the Milford/Shaar Bridge Loan Notes.

         The Company  made all payments on the  Milford/Shaar  Bridge Loan Notes
until  November 13, 2001.  The Company asked for and received a  forbearance  of
payments on the  Milford/Shaar  Bridge Loan Notes from  November  13, 2001 until
December 31, 2005. In connection with the  Milford/Shaar  Bridge Loan Notes, the
Company issued to Milford/Shaar in February 2004, a five-year warrant for 12,500
shares of the  Company's  common stock at an exercise  price of $0.60 per share.
The Shaar Fund, Ltd.,  through the Shaar Bridge Loan,  continues to provide cash
installments  on a  periodic  basis in the  form of  additional  principal.  The
Milford/Shaar Bridge Loan Notes were restructured into the New Shaar Convertible
Note as of April 11, 2005. Prior to the New Shaar  Convertible Note, the current
principal  balance of the  Milford/Shaar  Bridge Loan Notes was $3,033,741 as of
March 31, 2005.  Additionally,  as of December  31, 2004,  there was $119,073 in
accumulated  forbearance fees and $100,000 due in exit fees on the Milford/Shaar
Bridge Loan Notes.

         On October 2, 2002,  Mr.  Bentley Blum, a Director of the Company,  had
previously loaned the Company with $125,000 of cash installments over the period
of one year (the "Blum Loan").  The Company  elected to convert the Blum Loan to
the  Company's  common stock using the  conversion  feature of the 5-day average
closing price of the Company's common stock prior to October 2, 2002. On October
2, 2002,  Blum  issued a  conversion  notice  for  $125,000  of the  outstanding
principal of the Blum Loan into 125,000  shares.  Mr. Blum  continued to provide
cash  installments  in the form of a loan to the Company  through  February 2004
(the "Blum Demand  Note").  The Blum Demand Note bears  interest at 9% per annum
and is payable on demand.  The current principal balance of the Blum Demand Note
is $312,032 as of September 30, 2005 and remains unpaid as of November 21, 2005.

                                       19
<PAGE>

         On  November  19,  2003,  the  Company  issued a  warrant  to  purchase
1,367,790  shares of its common  stock at an  exercise  price of $0.57 per share
(the  closing  price of our common  stock on the OTCBB on such date) to the Blum
Asset Trust, a company controlled by Bentley Blum, a Director of the Company, in
consideration  for the loans made to the Company  and the usage of office  space
and  personnel  of the Blum Asset  Trust over the last five  years.  The Company
believes that this transaction is exempt from the  registration  requirements of
the Securities Act under Section 4(2) thereof as a transaction not involving any
public offering of securities.

         On April 12,  2005,  the  Company  authorized  the  issuance of 550,000
shares of Series I Convertible Preferred Stock ("Series I Preferred"), par value
$0.001 per share, each such share of Series I Preferred having a stated value of
$10.00 per share.

         The Series I Preferred shall have the following rights, privileges, and
limitations:

         a)   The conversion feature shall be exercisable immediately.
         b)   The conversion price of the Series I Preferred shall be determined
              by the average  closing  price of  Company's  common  stock in the
              previous 10 trading  days,  but in no event  shall the  conversion
              price be more than $0.57 per share.
         c)   If the Company's  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 I Preferred shall have a non-cumulative annual dividend
              of 10%, payable in cash or shares of the Company's common stock at
              the Company's election.
         e)   Dividend will be paid  quarterly  commencing  May 15, 2005, to the
              Holders  of  record of shares  of the  Series I  Preferred  Stock.
              Dividends  until  February  14, 2006 shall accrue but shall not be
              payable until February 15, 2006.
         f)   The Company will reserve  3,750,000 shares of its common stock for
              the conversion of the Series I Preferred.

         On April 12, 2005, the Company entered into an exchange  agreement with
The Shaar Fund, LTD (the "Shaar Exchange  Agreement").  Under terms of the Shaar
Exchange  Agreement,  the  Company  agreed that Shaar will  exchange  all of its
right,  title and  interest in and to the  remaining  outstanding  shares of the
Series E  Preferred  and Series F  Preferred  (including  all other  accrued and
unpaid  dividends  thereon)  for  395,302  shares  of  the  Company's  Series  I
Preferred.

         Additionally, under the Shaar Exchange Agreement, the Company issued an
Amended and  Restated  Secured  Promissory  Note of the  Company,  amending  and
restating  a note  originally  issued  June 13,  2001,  which  such  Note has an
outstanding  principal balance as of April 12, 2005 of $3,251,585.35 ("Old Shaar
Note").

         On April 12, 2005 Shaar executed a purchase agreement ("Milford Capital
Purchase Agreement") to Milford Capital & Management ("Milford").  In accordance
with the terms of the Milford  Capital  Purchase  Agreement,  Shaar  purchased a
secured promissory note of the Company,  initially issued to Milford on June 13,
2001, in the original  principal  amount of $500,000,  which had an  outstanding
principal  balance on March 31, 2005 of $188,149 ("Old Milford Note"),  together
with (i) all interest,  additional  obligations,  forbearance  fees,  exit fees,
penalties  and other  amounts  due and  payable  from  time to time  under or in
connection  with  the Old  Milford  Note,  and (ii) the  Forbearance  Amount  in
connection  with the  Forbearance  Agreement,  dated  January 30, 2004,  between
Milford and the Company, and Shaar in which Shaar agreed to forgive payment from

                                       20
<PAGE>

the Company to Shaar of $300,000  of accrued and unpaid  dividends  on shares of
the  Company's  Series E  Preferred  held by Shaar  ("Forgiven  Dividends")  and
consented  to the  transfer of the dollar  value of the  Forgiven  Dividends  to
Milford as part of the  forbearance fee payable to Milford under the Forbearance
Agreement of 2004.

         Shaar  and the  Company  have  agreed  that  Shaar  will  exchange  the
outstanding  principal  amount of the Old Shaar  Note and the Old  Milford  Note
(including all accrued and unpaid interest,  unpaid fees and Forgiven Dividends)
for the Company's newly issued 10% convertible secured promissory note (the "New
Shaar Convertible Note").

         The New  Shaar  Convertible  Note  shall  have  the  following  rights,
privileges, and limitations:

         a)   The New Shaar  Convertible  Note bears an interest rate of 10% per
              annum,  which is payable in cash or shares of the Company's common
              stock at the Company's election.
         b)   Interest  shall  accrue  on the  principal  amount  for a one year
              period  ("Deferral  Period").  On March 22, 2006, the Company will
              make a single lump sum payment to the holder in an amount equal to
              all interest that accrued during the Deferral Period
         c)   Beginning  April 15, 2006, and monthly  thereafter on the 15th day
              of each month until March 22, 2009 ("Maturity  Date"), the Company
              shall pay to Shaar all  accrued  and  unpaid  interest  ("Interest
              Payments")on the principal balance of the note accruing during the
              prior month.
         d)   On the  Maturity  Date,  the Company  shall make a single lump sum
              payment to Shaar equal to the outstanding principal balance of the
              New Shaar  Convertible Note ("Principal  Balance"),  together with
              all accrued and unpaid interest.
         e)   At the option of Shaar, the outstanding  Principal  Balance may be
              converted,  either  in  whole  or in  part,  into  shares  of  the
              Company's common stock.
         f)   The conversion price of the payment of the Principal Balance,  the
              Deferral Period,  and the Interest Payments shall be determined by
              the average  closing  price of  Company's  common  stock in the 10
              trading days preceding the conversion date,, but in no event shall
              the  conversion  price be more than  $0.57 per share  ("Conversion
              Price").
         g)   If the Company's  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.
         h)   The New Shaar  Convertible  Note may not be prepaid by the Company
              prior to the Maturity Date.

         On April 11,  2005,  Applied,  through  the  issuance  of the  Series I
Preferred  and the  Amended  and  Restated  Shaar  Note,  recorded  an  embedded
derivative   liability  due  to  the  conversion   feature  of  these  financial
instruments  pursuant  to EITF 00-19.  Applied  recorded a gain of $44,000 and a
loss of ($8,607,000)  of non-cash income  (expense) for the three and nine month
periods ended September 30, 2005, respectively.



                                       21
<PAGE>

         The current principal balance of the New Shaar Note is $5,146,233 as of
September 30, 2005 and remains unpaid as of November 21, 2005.

         The  recipient  of  securities  in  this  transaction  represented  its
intention to acquire the securities for investment  only and not with a view to,
or for sale in  connection  with,  any  distribution  thereof,  and  appropriate
restrictive   legends  were  affixed  to  the  warrants  and  the   certificates
representing the shares issued in this  transaction.  The Company made available
to The Shaar Fund Ltd., written information about the Company in accordance with
Rule 502 of the Securities Act and advised such recipient of the  limitations on
resale of such  securities.  In  addition,  The Shaar Fund Ltd.  was offered the
opportunity,  prior to  exchanging  and/or  purchasing  any  securities,  to ask
questions of, and receive  answers from,  the Company  concerning  the terms and
conditions of the  transaction  and to obtain  additional  relevant  information
about the  Company.  Based  upon the facts  above,  the  Company  believed  this
transaction to be exempt from the  registration  requirements  of the Securities
Act in reliance  on Section 4 (2) thereof as a  transaction  not  involving  any
public offering of securities.

         On April  27,  2005,  a  private  investor  purchased  $100,000  of the
Company's  unregistered common stock at the market price. The Company issued the
private investor 500,000 shares of unregistered common stock of the Company as a
result of the equity purchase.  In connection with the purchase of the shares of
the Company's  common stock,  the Company  issued the private  investor a 3-year
warrant for 200,000 shares of the Company's common stock at an exercise price of
$0.20 per share.  The Company  believes that this transaction is exempt from the
registration  requirements of the Securities Act under Section 4(2) thereof as a
transaction not involving any public offering of securities.

         On August 29, 2005, at the close of business,  the Company  effectuated
the  previously  approved  reverse  stock split with the  established a ratio of
1-for 20. Applied common stock began trading on a reverse-split  basis on August
30, 2005.  As a result of the reverse  stock  split,  every 20 shares of Applied
common stock was combined into one share of Applied common stock. As a result of
the reverse stock split,  the issued and  outstanding  shares of Applied  common
stock will be reduced from approximately 156 million shares to approximately 7.8
million shares. The number of authorized shares will not be reduced.

         The reverse  stock split  affected  all shares of common  stock,  stock
options  and  warrants of Applied  outstanding  as of  immediately  prior to the
effective time of the reverse stock split.  Fractional shares of common stock of
the Company were not issued as a result of the reverse stock split, but instead,
holders  of  pre-split  shares of common  stock who  otherwise  would  have been
entitled to receive a fractional share as a result of the reverse split received
one whole  share.  Shares of Applied  common  stock trade on the Nasdaq Over the
Counter Bulletin Board Market under the symbol CXIA.

         The  Company  hopes  to  meet  its  short-term   capital   requirements
(including its $80,000 monthly cash shortfall)  through continued loans from The
Shaar Fund,  Ltd.,  although  this lender is under no  obligation to continue to
make  advances to the Company.  The Company  intends to negotiate a  forbearance
arrangement with other lenders on loans that are currently due. Ultimately,  the
Company  intends to reduce its cash  shortfall and intends to meet its long term
capital needs through  obtaining  additional  contracts that will generate funds
from operations and obtaining  additional debt or equity  financing as necessary
or engaging in merger or sale transactions.  There can be no assurance that such
sources of funds  will be  available  to the  Company or that it will be able to
meet its short or long term capital requirements.

                                       22
<PAGE>

NET OPERATING LOSS CARRYFORWARDS

         The  Company  has net  operating  loss  carryforwards  (the  "NOLs") of
approximately  $36,487,000  as of December 31,  2004,  which expire in the years
2010 through  2024.  The amount of NOLs that can be used in any one year will be
limited by the  applicable tax laws that are in effect at the time such NOLs can
be utilized.  The unused NOLs balances may be accumulated and used in subsequent
years.  A full  valuation  allowance has been  established to offset any benefit
from the net operating loss  carryforwards.  It cannot be determined  when or if
the Company will be able to utilize the NOLs.

FORWARD-LOOKING STATEMENTS

         Certain  matters  discussed in this Annual Report are  "forward-looking
statements" intended to qualify for the safe harbors from liability  established
by Section 27A of the Securities Act and Section 21E of the Securities  Exchange
Act of 1934, as amended (the "Exchange Act"). These  forward-looking  statements
can generally be  identified  as such because the context of the statement  will
include words such as the Company "believes,"  "anticipates," "expects" or words
of similar  import.  Similarly,  statements  that describe the Company's  future
plans, objectives or goals are also forward-looking statements.

         Such  statements may address  future events and conditions  concerning,
among other things, the Company's results of operations and financial condition;
the  consummation  of  acquisition  and  financing  transactions  and the effect
thereof on the Company's business; capital expenditures;  litigation; regulatory
matters;  and the  Company's  plans and  objectives  for future  operations  and
expansion. Any such forward-looking statements would be subject to the risks and
uncertainties   that  could  cause  actual  results  of  operations,   financial
condition,  acquisitions,  financing  transactions,   operations,  expenditures,
expansion and other events to differ  materially from those expressed or implied
in such forward-looking statements. Any such forward-looking statements would be
subject  to a number  of  assumptions  regarding,  among  other  things,  future
economic, competitive and market conditions generally. Such assumptions would be
based on facts and conditions as they exist at the time such statements are made
as  well  as  predictions  as to  future  facts  and  conditions,  the  accurate
prediction of which may be difficult and involve the assessment of events beyond
the Company's control.

         Further,  the  Company's  business  is subject to a number of risks and
uncertainties that would affect any such forward-looking statements. These risks
and uncertainties include, but are not limited to:

         o    the  Company's  critical  need  for  additional  cash  to  sustain
              existing  operations  and meet  existing  obligations  and capital
              requirements (the Company's  auditor's opinion on our fiscal 2002,
              2003 and 2004  financial  statements  contains  a "going  concern"
              qualification  in which they  express  doubt  about the  Company's
              ability to continue in business, absent additional financing);
         o    the ability to generate  profitable  operations from a large scale
              remediation project;
         o    the ability of the Company to renew its nationwide permit to treat
              PCBs;
         o    the  ability of the  Company  to  implement  its waste  processing
              operations,   including  obtaining   commercial  waste  processing
              contracts and  processing  waste under such  contracts in a timely
              and cost  effective  manner;  the timing and award of contracts by

                                       23
<PAGE>

              the U.S.  Department  of Energy  for the  cleanup  of waste  sites
              administered by it;
         o    the timing and award of contracts by the U.S. Department of Energy
              for the cleanup of waste sites administered by it;
         o    the acceptance and implementation of the Company's waste treatment
              technologies in the government and commercial sectors;
         o    the  Company's  ability to obtain and  perform  under  other large
              technical support services projects; developments in environmental
              legislation and regulation;
         o    the ability of the Company to obtain future financing on favorable
              terms; and
         o    other circumstances affecting anticipated revenues and costs.

         These risks and uncertainties could cause actual results of the Company
to differ  materially  from those  projected or implied by such  forward-looking
statements.

ITEM 3.  Quantitative and Qualitative Disclosures About Market Risk

         Not applicable.

ITEM 4.  Controls and Procedures

         (a) Evaluation of disclosure controls and procedures

         We maintain  disclosure controls and procedures designed to ensure that
information  required to be disclosed in our reports filed under the  Securities
Exchange Act of 1934, as amended (the "Exchange  Act"), is recorded,  processed,
summarized,  and  reported  within  the  required  time  periods,  and that such
information is accumulated and  communicated  to our  management,  including our
Chief Executive Officer and Chief Financial  Officer,  as appropriate,  to allow
for timely decisions regarding required disclosure.

         We maintain  disclosure controls and procedures designed to ensure that
information  required to be disclosed in our reports filed under the  Securities
Exchange Act of 1934, as amended (the "Exchange  Act"), is recorded,  processed,
summarized,  and  reported  within  the  required  time  periods,  and that such
information is accumulated and  communicated  to our  management,  including our
Chief Executive Officer and Chief Financial  Officer,  as appropriate,  to allow
for  timely  decisions  regarding  required  disclosure.  As  required  by  Rule
13a-15(b)  under  the  Exchange  Act,  we  conducted  an  evaluation,  under the
supervision of our Chief Executive Officer and Chief Financial  Officer,  of the
effectiveness  of our  disclosure  controls and  procedures  as of September 30,
2005. Based on this evaluation, solely for the reason below, our Chief Executive
Officer and Chief Financial Officer  concluded that our disclosure  controls and
procedures  were not  effective as of September  30, 2005 in alerting  them in a
timely  manner to  material  information  required to be included in our reports
filed under the Exchange Act. This evaluation  identified a material weakness in
our disclosure controls and procedures with respect to analyzing debt and equity
instruments  to  identify  potential  embedded   derivatives  and  any  required
accounting   entries  and  disclosures   pertaining  to  embedded   derivatives.
Management is taking steps to implement  appropriate  corrective  action in this
regard.

                                       24
<PAGE>


         (b) Changes in internal controls

         There were no significant  changes in the Company's  internal  controls
over  financial  reporting or in other factors that could  significantly  affect
these internal controls  subsequent to the date of their most recent evaluation,
including any  corrective  actions with regard to significant  deficiencies  and
material weaknesses.


                                       25
<PAGE>


                           PART II - OTHER INFORMATION



ITEM 1.  Legal Proceedings

         There have been no material legal proceedings to which the Company is a
party which have not been disclosed in previous  filings with the Securities and
Exchange  Commission.  There are no material  developments to be reported in any
previously reported legal proceedings.

ITEM 2.  Change in Securities

         Not applicable

ITEM 3.  Defaults among Senior Securities

         Not applicable.

ITEM 4.  Submission of  Matters to a Vote of Security Holders

         Not applicable.

ITEM 5.  Other Events

         Not applicable.

ITEM 6.  Exhibits and Reports on Form 8 - K


         (a) Exhibits -

         1.   31.1 - Certification Pursuant to Section 302 of the Sarbanes-Oxley
              Act of 2002
         2.   31.2 - Certification Pursuant to Section 302 of the Sarbanes-Oxley
              Act of 2002
         3.   32.1 -  Certification  Pursuant  to 18  U.S.C.  Section  1350,  as
              Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
         4.   32.2 -  Certification  Pursuant  to 18  U.S.C.  Section  1350,  as
              Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(b)            Reports on Form 8-K.

         1.   The Company filed a Current  Report on Form 8-K,  dated August 23,
              2005, announcing its June 30, 2005 Quarterly earnings.

                                       26
<PAGE>

              The Company also announced that the ongoing months of execution of
              the EDAM contract at Oak Ridge, TN by its wholly owned  subsidiary
              Commodore Advanced Sciences, Inc. (CASI) have been successful, and
              that the  Company  plans to  market  these  services  at other DOE
              sites.

         2.   The Company filed a Current  Report on Form 8-K,  dated August 31,
              2005,  announcing that the previously approved reverse stock split
              with the  established a ratio of 1-for 20 became  effective at the
              close of business on August 29,  2005.  Applied  common stock will
              begin  trading on a  reverse-split  basis on August 30, 2005. As a
              result of the  reverse  stock  split,  every 20 shares of  Applied
              common  stock will be  combined  into one share of Applied  common
              stock.  As a result of the  reverse  stock  split,  the issued and
              outstanding  shares of Applied  common  stock will be reduced from
              approximately  156  million  shares to  approximately  7.8 million
              shares. The number of authorized shares will not be reduced.

              The reverse stock split affects all shares of common stock,  stock
              options and  warrants  of Applied  outstanding  as of  immediately
              prior to the effective time of the reverse stock split. Fractional
              shares  of  common  stock of the  Company  will not be issued as a
              result  of the  reverse  stock  split,  but  instead,  holders  of
              pre-split  shares of common  stock who  otherwise  would have been
              entitled to receive a fractional  share as a result of the reverse
              split will receive one whole share. Shares of Applied common stock
              will trade on the Nasdaq Over the Counter  Bulletin  Board  Market
              under the symbol CXIA after the reverse  split goes into effect on
              August 30, 2005.

              The  Company  also  announced  that  Bechtel  Jacobs has  recently
              doubled its two year [2005 & 2006]  valuation of the EDAM contract
              with  Commodore/SAIC,  from about $7 Million to about $14 million.
              The  contract  calls for a duration of two years with an option to
              extend another two years.


                                       27
<PAGE>

                                   SIGNATURES


Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.






Date: November 21, 2005        COMMODORE APPLIED TECHNOLOGIES, INC.
                                       (Registrant)


                                By  /s/ James M. DeAngelis
                                --------------------------
                                    James M. DeAngelis - Senior Vice President
                                    and Chief Financial Officer (as both a duly
                                    authorized officer of the registrant and the
                                    principal financial officer of the
                                    registrant)


                                       28