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 June 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 August 22, 2005
was 156,382,099.


<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 -
                      June 30, 2005 and December 31, 2004.....................1

              Condensed Consolidated Statements of Operations -
                      Three and Six months ended June 30, 2005 and
                      June 30, 2004...........................................3

              Condensed Consolidated Statements of Cash Flows -
                      Six months ended June 30, 2005 and
                      June 30, 2004...........................................4

              Notes to Condensed Consolidated Financial Statements............5

Item 2.       Management's Discussion and Analysis of Financial
                      Condition and Results of Operations....................13

Item 3.       Quantitative and Qualitative Disclosures About Market Risk.....22

Item 4.       Controls and Procedures........................................22

PART II  OTHER INFORMATION...................................................23

SIGNATURES...................................................................25


                                       i
<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>

                                                              June 30,    December 31,
                               ASSETS                           2005          2004
                                                             ----------   ------------
                                                            (unaudited)
<S>                                                          <C>          <C>
Current Assets:
         Cash and cash equivalents                           $       32   $         15
         Accounts receivable, net                                 2,364            259
         Prepaid assets and other current receivables                15              -
                                                             ----------   ------------
                  Total Current Assets                            2,411            274

Property and Equipment, net                                         163             95
                                                             ----------   ------------

                  Total Assets                               $    2,574   $        369
                                                             ==========   ============

</TABLE>


            See notes to condensed consolidated financial statements.

                                       1
<PAGE>
              COMMODORE APPLIED TECHNOLOGIES, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                  (Dollars in Thousands, except per share data)
<TABLE>
<CAPTION>

                                                              June 30,    December 31,
                          LIABILITIES AND                       2005          2004
                         STOCKHOLDERS' DEFICIT               ----------   ------------
                                                             (unaudited)
<S>                                                          <C>          <C>
Current Liabilities:
         Accounts payable                                    $    1,685   $      1,045
         Related party payable                                      255            253
         Line of credit                                             116              -
         Notes payable                                              514            258
         Other accrued liabilities                                4,132          5,107
                                                             ----------   ------------

                  Total Current Liabilities                       6,702          6,663

Long Term Debt                                                    4,843          3,034
                                                             ----------   ------------

                   Total Liabilities                             11,545          9,697

Commitments and Contingencies (Note F)

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 June 30, 2005 and December
           31, 2004, respectively. The shares had an
           aggregate liquidation value of $6,381 and
           $3,677 at June 30, 2005 and December 31, 2004,
           respectively.                                              1              1
         Common Stock, par value $0.001 per share,
           300,000,000 shares authorized, 156,382,099 and
           134,346,053 issued and outstanding, at June 30,
           2005 and December 31, 2004, respectively.                157            134
         Additional Paid-in Capital                              68,694         67,376
         Accumulated Deficit                                    (77,560)       (76,576)
                                                             ----------   ------------
                                                                 (8,708)        (9,065)

         Treasury Stock, 3,437,500 shares                          (263)          (263)
                                                             ----------   ------------
                     Total Stockholders' Deficit                 (8,971)        (9,328)
                                                             ----------   ------------
         Total Liabilities and Stockholders' Deficit         $    2,574   $        369
                                                             ==========   ============

</TABLE>

            See notes to condensed consolidated financial statements.

                                       2
<PAGE>

              COMMODORE APPLIED TECHNOLOGIES, INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
            (Unaudited - Dollars in Thousands, except per share data)

<TABLE>
<CAPTION>
                                                                 Three months ended           Six months ended
                                                              June 30,        June 30,      June 30,       June 30,
                                                                2005            2004           2005          2004
                                                             ----------      ----------    ----------      ---------
<S>                                                          <C>             <C>           <C>             <C>
Contract revenues                                            $    2,733      $      112    $    4,359      $     294
Costs and expenses:
         Cost of sales                                            2,631             255         4,020            507
         Research and development                                     -               1             -              7
         General and administrative                                 401             472           961            918
         Depreciation and amortization                                6              65            12            129
                                                             ----------      ----------    ----------      ---------
                  Total costs and expenses                        3,038             793         4,993          1,561
                                                             ----------      ----------    ----------      ---------
Loss from operations                                               (305)           (681)         (634)        (1,267)

Other expense:
         Interest expense                                          (202)            (97)         (350)          (180)
                                                             ----------      ----------    ----------      ---------
Loss before income taxes                                           (507)           (778)         (984)        (1,447)
         Income taxes                                                --              --            --             --
                                                             ----------      ----------    ----------      ---------
         Net loss                                            $     (507)     $     (778)   $     (984)     $  (1,447)
                                                             ==========      ==========    ==========      =========
         Loss per share - basic and diluted                  $    (0.00)     $    (0.01)   $    (0.01)     $   (0.01)
                                                             ==========      ==========    ==========      =========
Number of weighted average shares outstanding (000's)
          - basic and diluted                                   148,848         127,235       140,416        123,921
                                                             ==========      ==========    ==========      =========
</TABLE>

            See notes to condensed consolidated financial statements.

                                       3
<PAGE>

              COMMODORE APPLIED TECHNOLOGIES, INC. AND SUBSIDIARIES

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

<TABLE>
<CAPTION>
                                                                          Six months ended
                                                                      June 30,         June 30,
                                                                        2005            2004
                                                                     -----------     -----------
<S>                                                                  <C>             <C>
Cash flows from operating activities:
     Net loss                                                        $     (984)     $    (1,447)
     Adjustments to reconcile net loss to net
     cash used in operating activities:
         Depreciation and amortization                                       12              129
         Amortization of debt discount                                        -               15

         Changes in operating assets and liabilities:
                Accounts receivable, net                                 (2,872)             (26)
                Prepaid assets                                              (15)              (4)
                Checks written in excess of cash                              -              (13)
                Accounts payable                                            640               (6)
                Other liabilities                                         2,408              500
                                                                     -----------     -----------
                  Net cash used in operating activities                    (811)            (852)
                                                                     -----------     -----------

Cash flows from investing activities:
      Purchase of equipment                                                 (72)               -

Cash flows from financing activities:
      Advances from (to) related parties, net                                 -               43
      Increase in (repayment of) line of credit                             116              (47)
      Increase in notes and loans payable                                   684              863
      Proceeds from sale of common stock                                    100                -
      Proceeds from exercised warrants                                         -              14
                                                                     -----------     -----------
                  Net cash provided by financing activities                 900              873
                                                                     -----------     -----------

Increase in cash                                                             17               21

Cash, beginning of period                                                    15                -
                                                                     -----------     -----------
Cash, end of period                                                  $       32      $        21
                                                                     ===========     ===========

</TABLE>

            See notes to condensed consolidated financial statements.

                                       4
<PAGE>

              COMMODORE APPLIED TECHNOLOGIES, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

                                  June 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 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 six-month period ended June 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.

         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 six months ended June 30, 2005,  and for
the years ended December 31, 2004,  2003, and 2002,  Applied  incurred losses of
$984,000, $2,404,000; $2,957,000; and $5,972,000,  respectively. The Company has
also  experienced net cash 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 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 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
June 30, 2005 and December 31, 2004, respectively. These allowances are included
in other accrued liabilities in the accompanying financial statements.

                                       5
<PAGE>

         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 are revalued each quarter to determine the effect on operations,  if
any.  During the three and six months ended June 30,  2005,  no expense has been
recognized for the variable options as the fair market value of Applied's common
stock at June 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 six months ended June 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 of Financial
Accounting  Standards  No. 123,  Accounting  for  Stock-Based  Compensation,  to
stock-based employee compensation.

Note B - Supplemental cash flow information

         During the three and six month periods ended June 30, 2005, 0 and 5,500
shares of Series E Preferred Stock were converted into 0 and 5,832,573 shares of
the Company's common stock, respectively. During the three and six month periods
ended June 30,  2005,  the Company  paid no  dividends on the Series E Preferred
Stock conversions. The Company accrued dividends on Series E Preferred Stock for
the  three  and  six-month  periods  ended  June  30,  2005,  of $0 and  $24,923
respectively, which is included in Other Accrued Liabilities.

         During the three and six month  periods  ended June 30, 2005, no shares
of Series F Preferred  Stock were converted into shares of the Company's  common
stock.  The Company accrued  dividends on Series F Preferred Stock for the three
and  six-month  periods  ended June 30, 2005,  of $0 and $36,355,  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.

                                       6
<PAGE>

         During the three and six month  periods  ended June 30, 2005, no shares
of Series H Preferred  Stock were  converted  into shares of common  stock.  The
company  paid no accrued  dividends  on Series H  Preferred  Stock.  The Company
accrued  dividends  on Series H  Preferred  Stock  for the  three and  six-month
periods  ended June 30,  2005,  of $6,000 and  $12,000,  respectively,  which is
included in Other Accrued Liabilities.

         During the three and six month periods  ended June 30, 2005,  5,000 and
5,000  shares of Series I Preferred  Stock were  converted  into  6,203,473  and
6,203,473 shares of the Company's common stock,  respectively.  During the three
and six month periods ended June 30, 2005,  the Company paid no dividends on the
Series I Preferred Stock conversions.  The Company accrued dividends on Series I
Preferred  Stock for the three and  six-month  periods  ended June 30, 2005,  of
$84,598  and  $84,598   respectively,   which  is  included  in  Other   Accrued
Liabilities.

         Of the $1,700, 580 of outstanding dividends accrued on the Series E and
F Preferred  Stock as of April 12, 2005,  including those accrued during the six
months  ended June 30,  2005,  all but  $300,000  were  forgiven by their holder
pursuant to the Shaar Exchange  Agreement noted above,  and related  agreements.
The Company recorded the forgiveness of the $1,400,580  accrued  dividends as an
addition to additional  paid-in capital,  as the Company had originally  reduced
additional  paid-in capital for the accrual of these dividends.  Pursuant to the
Shaar  Exchange  Agreement  and  related  agreements,  the  $300,000  of accrued
dividends that were not forgiven were re-financed into the principal  balance on
the note payable due Shaar.

Note C - Other Accrued Liabilities

Other accrued liabilities consist of the following:

                                             June 30, 2005    December 31, 2004
                                             -------------    -----------------
                                              (unaudited)         (audited)
Compensation and employee benefits               $  2,102         $  1,876
Dividend payable                                      153            1,696
Accrued interest                                      393              664
Subcontractors                                        674                -
Loss reserve                                          376              376
Exit and forbearance fees on notes payable              -              219
Related parties                                       185              185
Other                                                 249               91
                                             ------------- ----------------
                                                 $  4,132         $  5,107
                                             ============= ================


                                       7
<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 June 30, 2005
(Dollars in Thousands)

--------------------------------------------------------------------------------
                                                                       Corporate
                                                                       Overhead
                                       Total        ASI      Solution  and Other

Contract revenues                    $   2,733   $   2,664   $     69   $    --

Costs and expenses
     Cost of sales                       2,631       2,578         53        --
     Research and development               --          --         --        --
     General and administrative            401          19         --       382
     Depreciation and amortization           6           6         --        --
                                     ---------   ---------   --------   --------
           Total costs and expenses      3,038       2,603         53       382
                                     ---------   ---------   --------   --------
Income (Loss) from operations             (305)         61         16      (382)

     Interest income                        --          --         --        --
     Interest expense                     (202)         --         --      (202)
     Income taxes                           --          --         --        --
                                     ---------   ---------   --------   --------
Net Income (Loss)                    $    (507)  $      61   $     16   $  (584)
                                     =========   =========   ========   ========

Total assets                         $   2,574   $   2,466   $     86   $    22

Expenditures for long-lived assets   $      22   $      20   $     --   $     2


                                       8
<PAGE>

Six Months Ended June 30, 2005
(Dollars in Thousands)

--------------------------------------------------------------------------------
                                                                       Corporate
                                                                       Overhead
                                       Total        ASI      Solution  and Other

Contract revenues                    $   4,359   $   4,273   $     86   $    --


Costs and expenses
     Cost of sales                       4,020       3,966         54        --
     Research and development               --          --         --        --
     General and administrative            961         190         16       755
     Depreciation and amortization          12          12         --        --
                                     ---------   ---------   --------   --------
           Total costs and expenses      4,993       4,168         70       755
                                     ---------   ---------   --------   --------
Loss from operations                      (634)        105         16      (755)

     Interest income                        --          --         --        --
     Interest expense                     (350)         --         --      (350)
     Income taxes                           --          --         --        --
                                     ---------   ---------   --------   --------
Net Income (Loss)                    $    (984)  $     105   $     16   $(1,105)
                                     =========   =========   ========   ========

Total assets                         $   2,574   $   2,466   $     86   $    22

Expenditures for long-lived assets   $      72   $      70   $     --   $     2


                                       9
<PAGE>


Three Months Ended June 30, 2004
(Dollars in Thousands)
--------------------------------------------------------------------------------
                                                                       Corporate
                                                                       Overhead
                                       Total        ASI      Solution  and Other


Contract revenues                    $     112   $     112   $     --   $    --

Costs and expenses
     Cost of sales                         255         166         89        --
     Research and development                1          --          1        --
     General and administrative            472          19         71       382
     Depreciation and amortization          65          11         54        --
                                     ---------   ---------   --------   --------
           Total costs and expenses        793         196        215       382
                                     ---------   ---------   --------   --------
Loss from operations                      (681)        (84)      (215)     (382)

     Interest income                        --          --         --        --
     Interest expense                      (97)         --         --       (97)
     Income taxes                           --          --         --        --
                                     ---------   ---------   --------   --------
Net loss                             $    (778)  $     (84)  $   (215)  $  (479)
                                     =========   =========   ========   ========

Total assets                         $     168   $     143   $     11   $    14

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

                                       10
<PAGE>

Six Months Ended June 30, 2004
(Dollars in Thousands)
Three Months Ended June 30, 2004
(Dollars in Thousands)
--------------------------------------------------------------------------------
                                                                       Corporate
                                                                       Overhead
                                       Total        ASI      Solution  and Other

Contract revenues                    $     294   $     254   $     40   $    --

Costs and expenses
     Cost of sales                         507         244        263        --
     Research and development                7          --          7        --
     General and administrative            918         121        151       646
     Depreciation and amortization         129          20        109        --
                                     ---------   ---------   --------   --------
           Total costs and expenses      1,561         385        530       646
                                     ---------   ---------   --------   --------
Loss from operations                    (1,267)       (131)      (490)     (646)

     Interest income                        --          --         --        --
     Interest expense                     (180)         --         --      (180)
     Income taxes                           --          --         --        --
                                     ---------   ---------   --------   --------
Net Loss                             $  (1,447)  $    (131)  $   (490)  $  (826)
                                     =========   =========   ===-====   ========

Total assets                         $     168   $     143   $     11   $    14

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



                                       11
<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  122,005,936 and 123,370,308 shares of
common  stock as of June 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 and  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.




                                       12
<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  the  Company's  proprietary  Solvated
Electron   Technology   ("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,  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  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.

         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.  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.



                                       13
<PAGE>

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 and options

         We  value  and  account  for the  issuance  of  equity  instruments  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 or
warrants  granted to  non-employees  for goods or services is  calculated on the
date of grant 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.

         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 has 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.


                                       14
<PAGE>

RESULTS OF OPERATIONS

Three and Six Months Ended June 30, 2005  Compared to Three and Six Months Ended
June 30, 2004

         Revenues were  $2,733,000  and  $4,359,000 for the three and six months
ended June 30,  2005,  respectively,  compared to $112,000  and $294,000 for the
three and six months  ended June 30,  2004,  respectively.  Such  revenues  were
primarily from the Company's subsidiary ASI.

         In  the  case  of  ASI,   revenues  were   $2,664,000  and  $4,273,000,
respectively,  for the three and six months ended June 30, 2005 as compared with
$112,000  and  $254,000  for the  three  and six  months  ended  June 30,  2004,
respectively.  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, most of
which  provide  for  reimbursement  of  cost  plus  fixed  fees.  Revenue  under
cost-reimbursement  contracts is recorded  under the  percentage  of  completion
method as costs 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  $2,664,000  and  $4,273,000,
respectively,  (100% of total  revenues) for the three and six months ended June
30, 2005.  Cost of sales was $2,578,000 and  $3,966,000,  respectively,  for the
three and six months  ended June 30, 2005  compared to  $166,000  and  $244,000,
respectively,  for the three and six months ended June 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 Commodore  Solution,  Inc.  ("Solution"),  revenues were
$69,000 and $86,000,  respectively,  for the three and six months ended June 30,
2005 as compared  with $0 and  $40,000,  respectively,  for three and six months
ended  June 30,  2004.  Solution  had one major  customer  during  the three and
six-month  periods ended June 30, 2005, which accounted for $69,000 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 $53,000 and $54,000,  respectively, for the three and six months ended
June 30, 2005 as compared to $89,000 and $263,000,  respectively,  for the three
and six  months  ended  June 30,  2004.  The cost of sales,  when  incurred,  is
attributable to sales and marketing expenses for the SET technology. 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 six months ended June 30, 2005, the Company  incurred
research and development costs of $0 and $0, respectively, as compared to $1,000
and  $7,000,  respectively,  for the three and six months  ended June 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.

                                       15
<PAGE>

         General and administrative  expenses for continuing  operations for the
three  and  six  months  ended  June  30,  2005  were   $401,000  and  $961,000,
respectively, as compared to $472,000 and $918,000,  respectively, for the three
and six months  ended June 30, 2004.  This  difference  is primarily  due to the
deferred  salaries for the executives of the Company for the three and six-month
periods ended June 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  six-month  periods ended June 30, 2005 were $19,000 and $190,000,
respectively,  compared to $19,000 and $121,000, respectively, for the three and
six months ended June 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  six-month  periods  ended  June 30,  2005 as
compared  to $71,000 and  $151,000,  respectively,  for the three and  six-month
periods ended June 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 the three and six months  ended June 30, 2005 was
$202,000  and  $350,000,  respectively,  as compared  to $97,000  and  $180,000,
respectively,  for the three and six month  periods  ended  June 30,  2004.  The
increase in interest  expense of $105,000 and  $170,000,  respectively,  for the
three and six month  periods  ended  June 30,  2005 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.

LIQUIDITY AND CAPITAL RESOURCES

         At June 30, 2005 and December 31, 2004 Advanced Sciences had a $116,000
and $17,000 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 June 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 Company owes $818,330 in loans
that are  currently  due or are payable on demand as of June 30, 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.

                                       16
<PAGE>

         For the three and six month  periods  ended June 30, 2005,  the Company
incurred a net loss of $507,000 and $984,000, respectively, as compared to a net
loss of $778,000 and $1,447,000 for the three-month  period ended June 30, 2004,
respectively.  For the six month period  ended June 30, 2004,  and for the years
ended December 31, 2004, 2003, and 2002,  Applied incurred losses of ($984,000),
($2,404,000), ($2,957,000), and ($5,972,000), respectively. The Company has also
experienced  net  cash  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 six month periods ended June 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) 5,000 and 5,000, respectively, shares of
Series I Preferred,  for 6,203,473 and 12,036,046,  respectively,  shares of the
Company's  common stock for the three and six month periods ended June 30, 2005.
For the three and six month periods ended June 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
2,500,000  shares of the Company's common stock at an exercise price of $0.0285.
The current principal balance of the Weiss Group Note is $252,397 as of June 30,
2005 and remains unpaid as of August 22, 2005.

         Effective  February  14,  2004,  the  members  of the Weiss  Group Note
voluntarily  cancelled all issued  warrants to purchase  1,500,000  shares at an
exercise  price of $0.05 per share of the  Company's  common stock in connection
with the Weiss Group Note.

         Effective  February 15, 2004, the Company  issued  warrants to purchase
2,500,000  shares of its common stock at an exercise  price of $0.0285 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
1,973,077  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 500,000
shares of the  Company's  common stock at an exercise  price of $0.22 per share.
The Company  re-priced this warrant in November 2003 to $0.0285 and extended the
expiration date of this warrant to November 19, 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 500,000 shares of the Company's common stock.

                                       17
<PAGE>

         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 333,334 shares of the Company's common stock at an exercise price of
$0.22 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
250,000  shares of the Company's  common stock at an exercise price of $0.03 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 2,500,000 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 June 30, 2005 and remains unpaid as of August 22, 2005.

         On  November  19,  2003,  the  Company  issued a  warrant  to  purchase
27,355,800  shares of its common stock at an exercise price of $0.0285 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.

                                       18
<PAGE>

         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 $0.0285 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 75 million 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
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:

                                       19
<PAGE>

         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 $0.0285 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.

         The current principal balance of the New Shaar Note is $4,846,233 as of
June 30, 2005 and remains unpaid as of August 22, 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  10,000,000 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 4,000,000 shares of the Company's common stock at an exercise
price of $0.01 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.

                                       20
<PAGE>

         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.

NET OPERATING LOSS CARRYFORWARDS

         The  Company  has net  operating  loss  carryforwards  (the  "NOLs") of
approximately  $36,487,000,  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:

                                       21
<PAGE>

         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
              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

         Based on their  evaluations  as of June 30, 2005,  the chief  executive
officer and chief  financial  officer of the  Company  have  concluded  that the
Company's  disclosure controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e)  under the  Securities  Exchange  Act) are  effective  to ensure  that
information  required to be disclosed by the Company in reports that it files or
submits under the Securities Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the rules and forms of the SEC.

         (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.

                                       22
<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 May 15,
              2005, announcing its March 31, 2005 Quarterly earnings.

                                       23
<PAGE>

         2.   The  Company  filed a Current  Report on Form 8-K,  dated July 27,
              2005,  announcing it entered into a stock purchase  agreement (the
              "Agreement")  and a  warrant  agreement  (the  "Warrant")  with  a
              private  investor,  Dr. Marion Danna (the "Investor") on April 27,
              2005.  The  closing  of  the  transactions   contemplated  by  the
              Agreement took place on July 10, 2005.

              Under the terms of the  Agreement  the Investor  purchased,  for a
              purchase price of $100,000.00,  10,000,000 shares of the Company's
              common  stock  bearing a  restrictive  legend  and a  warrant  for
              4,000,000  shares of the  Company's  common stock with an exercise
              price of $0.01, exercisable immediately with a three year life.



                                       24
<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: August 22, 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)




                                       25