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, 2001
                                            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.)


  2121 Jamieson Avenue, Suite 1406
       Alexandria, Virginia                                        22314
  --------------------------------                                 -----
(Address of principal executive office)                           (Zip Code)


Registrant's telephone number, including area code:   (703) 567-1284
                                                      --------------

         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

         The number of shares the common stock outstanding at November 14, 2001
was 55,290,235.




<PAGE>

                      COMMODORE APPLIED TECHNOLOGIES, INC.

                                    FORM 10-Q

                                      INDEX


                                                                        Page No.
                                                                        --------

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

Item 1.       Financial Statements (Unaudited)

              Condensed Consolidated Balance Sheet -
                      September 30, 2001 and December 31, 2000.................2

              Condensed Consolidated Statement of Operations -
                      Three and Nine months ended September 30, 2001 and
                      September 30, 2000.......................................4

              Condensed Consolidated Statement of Cash Flows -
                      Nine months ended September 30, 2001 and
                      September 30, 2000.......................................5

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

Item 2.       Management's Discussion and Analysis of Financial
                      Condition and Results of Operations.....................11

PART II  OTHER INFORMATION....................................................16

SIGNATURES....................................................................17

                                        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>

                                                                   Sept 30,       December 31,
                               ASSETS                               2001             2000
                                                                   --------       ------------
                                                                 (unaudited)
<S>                                                               <C>             <C>
Current Assets:
         Cash and cash equivalents                                $   1,612       $     1,980
         Accounts receivable, net                                     1,818             4,536
         Prepaid assets and other current receivables                   331               625
                                                                  ---------       -----------
                  Total Current Assets                                3,761             7,141

Property and equipment, net                                           1,602             1,983
Other assets
         Patents and completed technology, net of
              accumulated amortization of $715 and
              $613, respectively.                                       760               862
         Covenants not to compete, net of
             accumulated amortization of $569 and
             $175, respectively.                                      2,056             2,450
         Goodwill, net of accumulated amortization
              of $1,368 and $419, respectively.                      22,957            24,676
                                                                  ---------       -----------
                   Total Intangibles                                 25,773            27,988

         Other Assets                                                   378               361
                                                                  ---------       -----------

                   Total Assets                                   $  31,514       $    37,473
                                                                  =========       ===========
</TABLE>

                                       2

           See notes to condensed consolidated financial statements.


<PAGE>


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

<TABLE>
<CAPTION>

                                                                   Sept 30,       December 31,
                               LIABILITIES AND                      2001             2000
                               STOCKHOLDERS' EQUITY               --------       ------------
                                                                 (unaudited)
<S>                                                               <C>             <C>
Current Liabilities:
         Accounts payable                                         $   1,577       $     2,490
         Related party payable                                          185               247
         Current portion of long term debt                            2,650             2,650
         Line of credit                                                 161             1,459
         Notes payable                                               15,677            14,682
         Other accrued liabilities                                    1,994             2,489
                                                                  ---------       -----------
                  Total Current Liabilities                          22,244            24,017
Long term debt                                                        4,268             5,182
                                                                  ---------       -----------
                   Total Liabilities                                 26,512            29,199

Minority interest                                                        67               419
Commitments and contingencies                                            --                --

Stockholders' Equity
         Convertible Preferred Stock, Series E & F
         Par value $0.001 per share,
         5% to 12% cumulative dividends,
         601,700 shares authorized, 445,200 and 556,700
         shares issued and outstanding
         as of September 30, 2001 and December 31,
         2000, respectively.
         The shares had an aggregate liquidation
         value of $5,863 and $7,332 at
         September 30, 2001 and December 31, 2000
         Respectively.                                                   --                 1
         Common Stock, par value $0.001 per share,
         125,000,000 shares authorized, 55,086,153
         and 48,330,385 issued and outstanding,
         at September 30, 2001 and December 31,
         2000, respectively.                                             55                48
         Additional paid-in capital                                  66,550            66,495
         Accumulated deficit                                        (61,670)          (58,689)
                                                                  ---------       -----------
                  Total Stockholders' Equity                          4,935             7,855
                                                                  ---------       -----------

         Total Liabilities and Stockholders' Equity               $  31,514       $    37,473
                                                                  =========       ===========

</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
                                                        Sept 30,        Sept 30,    Sept 30,      Sept 30,
                                                         2001            2000         2001         2000
                                                       ----------     ----------   ---------     ----------

<S>                                                    <C>            <C>          <C>           <C>
Contract revenues                                      $    1,870     $    4,250   $   9,021     $   13,120
Costs and expenses:
         Cost of sales                                        890          3,856       2,824         11,714
         Research and development                              67            331         263            931
         General and administrative                         1,291          1,637       4,731          3,482
         Depreciation and amortization                        617            393       1,874            772
         Minority interest                                    (10)           (36)        419            (36)
                                                       ----------     ----------   ---------     ----------
                  Total costs and expenses                  2,855          6,181      10,111         16,863
                                                       ----------     ----------   ---------     ----------
Loss from operations                                         (985)        (1,931)     (1,090)        (3,743)
                                                       ----------     ----------   ---------     ----------
Other income (expense):
         Interest income                                       14             11          35             50
         Interest expense                                    (549)           (62)     (1,926)          (165)
         Other expense                                         --             (5)         --             (5)
                                                       ----------     ----------   ---------     ----------
                  Net other income (expense)                 (535)           (56)     (1,891)          (120)
                                                       ----------     ----------   ---------     ----------
Loss before income taxes                                   (1,520)        (1,987)     (2,981)        (3,863)
         Income taxes                                          --             --          --             --
                                                       ----------     ----------   ---------     ----------
         Net loss                                      $   (1,520)    $   (1,987)  $  (2,981)    $   (3,863)
                                                       ==========     ==========   =========     ==========
         Loss per share - basic and diluted            $    (0.03)    $    (0.05)  $   (0.06)    $    (0.12)
                                                       ==========     ==========   =========     ==========
Number of weighted average shares outstanding (000's)      55,086         36,272      52,605         33,344
                                                       ==========     ==========   =========     ==========
</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>
<CAPTION>
                                                                            Nine months ended
                                                                        Sept 30,          Sept 30,
                                                                         2001               2000
                                                                        --------          --------
<S>                                                                   <C>                <C>
Cash flows from operating activities:
     Net loss                                                         $    (2,981)       $    (3,863)
     Adjustments to reconcile net loss to net cash used in
     operating activities:
         Depreciation and amortization                                      1,874                772
         Amortization of debt discount                                      1,563                 --
         Other non-cash charges                                               167                174
         Minority interest                                                    419                (36)
         Changes in assets and liabilities, net of
         acquisitions:
                Accounts receivable                                         2,718                745
                Prepaid assets                                                127                (20)
                Other assets                                                  (17)               (70)
                Accounts payable                                             (913)                54
                Payables to related parties                                   (62)               541
                Other liabilities                                          (1,005)              (579)
                                                                      -----------        -----------
                  Net cash provided/(used) in operating activities          1,890             (2,282)

Cash flows from investing activities:
      Purchase of equipment                                                   (48)              (112)
      Acquisition of patents                                                   --                (37)
      Advances to related parties                                              --                 50
      Other investments                                                        --               (325)
      Purchase of DRM, net of cash acquired                                    --                587
                                                                      -----------        -----------
                  Net cash provided/(used) in investing activities            (48)               163

Cash flows from financing activities:
      Increase in (repayment of) line of credit                            (1,298)               305
      Increase (decrease) in notes and loans payable                        1,000                (45)
      Payments on notes payable                                            (2,162)                --
      Preferred stock dividends                                                --               (475)
      Proceeds from sale of preferred stock and warrants                       --              1,858
      Proceeds from sale of common stock                                      250                598
                                                                      -----------        -----------
                  Net cash provided/(used) in financing activities         (2,210)             1,631

Decrease in cash                                                             (368)              (488)
Cash, beginning of period                                                   1,980              1,797
                                                                      -----------        -----------
Cash, end of period                                                   $     1,612        $     1,309
                                                                      ===========        ===========

</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, 2001

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 accounting principles generally
accepted in the United States of America 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 accounting  principles  generally accepted
in the United States of America 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, 2001 are not necessarily  indicative of the results that may be expected for
the year ending December 31, 2001.

         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/A  for the year  ended
December 31, 2000.

         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 period ended September 30, 2001, and the
years  ended  December  31,  2000,  1999 and 1998,  Applied  incurred  losses of
$2,981,000,  $11,441,000,  $3,985,000 and $13,353,000,  respectively.  Applied's
continuation  as a company 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, and 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 $76,000 at December 31,
2000 and September 30, 2001.

         The  consolidated  financial  statements  include  the  accounts of the
Company  and its  majority-owned  subsidiaries.  All  significant  inter-company
balances and transactions have been eliminated.  The preparation of consolidated
financial statements in conformity with accounting principles generally accepted
in the United  States of  America  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.



                                       6
<PAGE>


Note B - Segment Information

         Using the  guidelines  set forth in SFAS No.  131,  "Disclosures  About
Segments of an Enterprise and Related  Information",  the Company has identified
three  reportable  segments  in which it  operates,  based  on the  services  it
provides.  The  reportable  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) Dispute  Resolution  Management,  Inc., which was
acquired  (81%) on August  30,  2000,  provides a package  of  services  to help
companies recover financial  settlements from insurance policies to defray costs
associated with environmental liabilities.

         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 table.


Three Months Ended September 30, 2001
(Dollars in Thousands)
<TABLE>
<CAPTION>

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

<S>                                      <C>         <C>          <C>           <C>           <C>
Contract revenues                        $  1,870    $   1,071    $      --    $     799     $       --

Costs and expenses
     Cost of sales                            890          890           --            --             --
     Research and development                  67           --           67            --             --
     General and administrative             1,291          259          161           856             15
     Depreciation and amortization            617           20          115            11            471
     Minority interest                        (10)          --           --            --            (10)
                                         --------    ---------    ---------     ---------     ----------
              Total costs and expenses      2,855        1,169          343           867            476
                                         --------    ---------    ---------     ---------     ----------

Income (loss) from operations                (985)         (98)        (343)          (68)          (476)

     Interest income                           14           --           --            13              1
     Interest expense                        (549)          25           --            --           (574)
     Income taxes                              --           --           --            --             --
                                         --------    ---------    ---------     ---------     ----------
Net income (loss)                        $ (1,520)   $     (73)   $    (343)    $     (55)    $   (1,049)
                                         ========    =========    =========     =========     ==========

Total assets                             $ 31,514    $   1,537    $   1,489     $   3,091     $   25,397

Expenditures for long-lived assets       $      9    $      --    $      --     $       9     $       --
</TABLE>

                                       7
<PAGE>

<TABLE>
<CAPTION>

Nine Months Ended September 30, 2001
(Dollars in Thousands)

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

<S>                                      <C>         <C>          <C>           <C>           <C>

Contract revenues                        $  9,021    $   3,370    $     185     $   5,466     $       --

Costs and expenses
     Cost of sales                          2,824        2,625          199            --             --
     Research and development                 263           --          263            --             --
     General and administrative             4,731          698          401         3,263            369
     Depreciation and amortization          1,874           59          346            31          1,438
     Minority interest                        419           --           --            --            419
                                         --------    ---------    ---------     ---------     ----------
              Total costs and expenses     10,111        3,382        1,209         3,294          2,226
                                         --------    ---------    ---------     ---------     ----------
Income (loss) from operations              (1,090)         (12)      (1,024)        2,172         (2,226)

     Interest income                           35           --           --            31              4
     Interest expense                      (1,926)         (11)          --            --         (1,915)
     Income taxes                              --           --           --            --             --
                                         --------    ---------    ---------     ---------     ----------

Net Income (loss)                        $ (2,981)   $     (23)   $  (1,024)    $   2,203     $   (4,137)
                                         ========    =========    =========     =========     ==========

Total assets                             $ 31,514    $   1,537    $   1,489     $   3,091     $   25,397

Expenditures for long-lived assets       $     48    $      --    $      --     $      48     $       --

</TABLE>

                                       8
<PAGE>

<TABLE>
<CAPTION>

Three Months Ended September 30, 2000
(Dollars in Thousands)
--------------------------------------------------------------------------------------------------------
                                                                                               Corporate
                                                                                               Overhead
                                           Total        ASI       Solution         DRM         and Other

<S>                                      <C>         <C>          <C>           <C>           <C>
Contract revenues                        $  4,250    $   4,138    $      12     $     100     $        0
Costs and expenses
     Cost of sales                          3,856        3,739          117            --             --
     Research and development                 331           --          331            --             --
     General and administrative             1,637          411           16           280            930
     Depreciation and amortization            393           21          121             3            248
     Minority interest                        (36)          --           --           (36)            --
                                         --------    ---------    ---------     ---------     ----------
              Total costs and expenses      6,181        4,171          585           247          1,178
                                         --------    ---------    ---------     ---------     ----------
 ncome (Loss) from operations              (1,931)         (33)        (573)         (147)        (1,178)

     Interest income                           11           --           --             4              7
     Interest expense                         (62)         (36)         (23)           (3)            --
     Other expense                             (5)          --           --            (5)            --
                                         --------    ---------    ---------     ---------     ----------
Net income (loss)                        $ (1,987)   $     (69)   $    (596)    $    (151)    $   (1,171)
                                         ========    =========    =========     =========     ==========

Total assets                             $ 42,442    $   2,879    $   2,099     $     791     $   36,673

Expenditures for long-lived assets       $ 27,671    $       9    $      18     $      --     $   27,644
</TABLE>


                                       9
<PAGE>

<TABLE>
<CAPTION>

Nine Months Ended September 30, 2000
(Dollars in Thousands)
--------------------------------------------------------------------------------------------------------
                                                                                               Corporate
                                                                                               Overhead
                                           Total        ASI       Solution         DRM         and Other

<S>                                      <C>         <C>          <C>           <C>           <C>
Contract revenues                        $ 13,120    $  12,913    $      82     $     100     $       25

Costs and expenses
     Cost of sales                         11,714       11,442          272            --             --
     Research and development                 931           --        1,074            --           (143)
     General and administrative             3,482        1,107           35           280          2,060
     Depreciation and amortization            772           62          259             3            448
     Minority interest                        (36)          --           --           (36)            --
                                         --------    ---------    ---------     ---------     ----------
              Total costs and expenses     16,863       12,611        1,640           247          2,365
                                         --------    ---------    ---------     ---------     ----------
Income (Loss) from operations              (3,743)         302       (1,558)         (147)        (2,340)

     Interest income                           50           --           --             4             46
     Interest expense                        (165)         (92)         (70)           (3)            --
     Income tax expense                        (5)          --           --            (5)            --
                                         --------    ---------    ---------     ---------     ----------

Net Income (loss)                        $ (3,863)   $     210    $  (1,628)    $    (151)    $   (2,294)
                                         ========    =========    =========     =========     ==========

Total assets                             $ 42,442    $   2,879    $   2,099     $     791     $   36,673

Expenditures for long-lived assets         27,756    $      28    $      82     $      --     $   27,646
</TABLE>




Note C - 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.


                                       10
<PAGE>



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

Overview

         Commodore Applied Technologies, Inc. and subsidiaries (the "Company" or
"Applied"),  is engaged in  providing  a range of  engineering,  technical,  and
financial  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,  (ii) the  settlement of complex,
long-tail and latent  insurance  claims by utilizing a series of tools including
an  internally  developed  risk modeling  program,  FOCUS,  and (iii)  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 is  currently  working on the  commercialization  of these
technologies  through  development  efforts,  licensing  arrangements  and joint
ventures.  Through Commodore Advanced  Sciences,  Inc. ("ASI") formerly Advanced
Sciences,  Inc.,  a  subsidiary  acquired  on October 1, 1996,  the  Company has
contracts with various  government  agencies and private companies in the United
States. As some government contracts are funded in one-year increments, there is
a possibility for cutbacks.  These contracts constitute a major portion of ASI's
revenues, and such a reduction would materially affect the operations.  However,
management believes its existing client  relationships will allow the Company to
obtain new contracts in the future. Through Dispute Resolution Management,  Inc.
("DRM"),  an 81% owned  subsidiary  acquired  August 30,  2000,  the Company has
several engagements with various industrial,  manufacturing and mining companies
in the U.S. and in Europe for the recovery of insurance claims.


RESULTS OF OPERATIONS

Three and Nine Months Ended September 30, 2001 Compared to Three and Nine Months
Ended September 30, 2000

         Revenues were  $1,870,000  and $9,021,000 for the three and nine months
ended  September 30, 2001,  compared to $4,250,000 and $13,120,000 for the three
and nine months ended  September 30, 2000. Such revenues were primarily from the
Company's two subsidiaries, ASI and DRM.

         In the case of DRM, revenues were $799,000 and $5,466,000  respectively
for the three and nine months ended  September 30, 2001.  The Company  purchased
its 81%  interest  in DRM on August 30, 2000 and was able to  consolidate  DRM's
revenues  and  earnings  as of that date.  Revenues in DRM were  primarily  from
completed  settlement  agreements  between  their  clients  and major  insurers.
Settlements are the result of 18 to 24 months of effort by various  employees of
DRM, of which the expenses are captured in general and  administrative  costs as
incurred.  Anticipated losses on engagements,  if any, will be provided for by a
charge to income during the period such losses are first identified.

         In  the  case  of  ASI,   revenues  were   $1,071,000   and  $3,370,000
respectively  for the three and nine months ended September 30, 2001 as compared
with  $4,138,000 and  $12,913,000  for the three and nine months ended September
30,  2000.  The  decrease in revenues is primarily  due to the  completion  of a
five-year  contract  to provide  technical  management  support  services to the
Department of Energy for the opening and operation of the Waste  Isolation Pilot
Plant near Carlsbad,  New Mexico, which ended on December 31, 2000. ASI has been
unsuccessful  with replacing this contract volume to date. The revenues from ASI
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

                                       11
<PAGE>

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. Currently, ASI has two major customers, each of which represent more than
10% of  total  revenue.  The  combined  revenue  for  these  two  customers  was
$1,071,000 and $3,370,000  respectively  (100% of total  revenues) for the three
and nine  months  ended  September  30,  2001.  Cost of sales was  $890,000  and
$2,625,000  respectively  for the three and nine months ended September 30, 2001
compared  to  $3,739,000  and  $11,442,000  respectively  for the three and nine
months  ended  September  30,  2000.  The  decrease in cost of sales is due to a
decrease in sales volume in the three and nine months ended September 30, 2001.

         In the case of Commodore Solution, Inc. ("Solution"),  revenues were $0
and $185,000 respectively for the three and nine months ended September 30, 2001
as compared  with  $12,000 and  $82,000  respectively  for three and nine months
ended September 30, 2000. The decrease in the three-month  period is a result of
the time  necessary to mobilize the equipment to a new site. The increase in the
nine-month  period is primarily due to the increase in  feasibility  studies and
commercial  processing.   Revenues  were  primarily  from  remediation  services
performed for  engineering  and waste  treatment  companies in the United States
under a variety of  contracts.  Solution has two major  customers,  each of whom
represents  more than 10% of the  revenue  for the three and nine  months  ended
September  30, 2001.  The combined  revenue for these two  customers  was $0 and
$185,000  respectively  (100% of the Solution's total revenue) for the three and
nine  months  ended  September  30,  2001.  Cost of  sales  was $0 and  $199,000
respectively  for the three and nine months ended September 30, 2001 as compared
to  $117,000  and  $272,000  respectively  for the three and nine  months  ended
September 30, 2000. The decrease for the  three-month  period is attributable to
lower  sales  and  marketing  expenses  as the  Company  was in the  process  of
demobilization,  shipping and  installing  its machinery at a new location.  The
overall  increase in the nine-month  period for cost of sales is attributable to
greater sales and marketing  expenses for the SET technology,  which the Company
anticipates will result in additional revenues from Solution in the remainder of
2001 and into 2002. 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,  2001,  the Company
incurred research and development costs of $67,000 and $263,000  respectively as
compared to $331,000  and  $931,000  respectively  for the three and nine months
ended  September 30, 2000.  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 the three and nine months ended
September 30, 2001 were  $1,291,000 and $4,731,000  respectively  as compared to
$1,637,000  and  $3,482,000  respectively  for the three and nine  months  ended
September 30, 2000. This difference is due to DRM's salaries and other expenses.

         Interest income was $14,000 and $35,000  respectively for the three and
nine  months  ended  September  30,  2001,  as  compared  to $11,000 and $50,000
respectively for the three and nine months ended September 30, 2000.

         Interest expense for the three and nine months ended September 30, 2001
was $549,000  and  $1,926,000  respectively  as compared to $62,000 and $165,000
respectively  for the  three and nine  months  ended  September  30,  2000.  The
increase in interest  expense is primarily  related to  amortization of non-cash
interest costs  associated  with the Company's  purchase of 81% of DRM on August
30, 2000, the amortization of non-cash interest costs associated with the Brewer
Promissory Note, the amortization of non-cash interest costs associated with the
Bridge Loan Notes,  and the  amortization of non-cash  interest costs associated
with the Milford/Shaar Bridge Loan Notes.

                                       12
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

         At  September  30, 2001 and  December  31, 2000 ASI had a $161,000  and
$1,459,000 outstanding balance, respectively, on its revolving lines of credit.

         In October  2001,  ASI  refinanced  their line of credit with  Commerce
Funding  Corporation (the "Commerce  Credit Line").  The Commerce Credit Line is
not to exceed 85  percent  of  eligible  receivables  or  $1,000,000  and is due
October 2002 with interest  payable monthly at prime plus 2 percent (7.0 percent
as of November 12,  2001).  The Commerce  Credit Line is  collateralized  by the
receivables  of ASI and is guaranteed by the Company.  The Commerce  Credit Line
contains certain financial  covenants and restrictions  including minimum ratios
that ASI must satisfy.  ASI was in compliance with the covenants of the Commerce
Credit Line at November 12, 2001.

         In addition,  the Commerce  Credit Line  agreement  stipulates  that no
payments  shall  be made by ASI to the  Company  other  than  monthly  scheduled
payments of principal with respect to the $8,280,000  subordinated  indebtedness
owed  by  ASI  to  the  Company  (which  is  eliminated  in  consolidation)  and
intercompany  indebtedness not to exceed $20,000 in any month. In addition,  ASI
shall not incur  indebtedness  in excess of $25,000,  other than trade payables,
the  above  subordinated  indebtedness  and  other  contractual  obligations  to
suppliers and customers incurred in the ordinary course of business.

         In October  2001,  ASI repaid their line of credit with KBK  Financial,
Inc. (the "KBK Credit  Line").  The KBK Credit Line was not to exceed 85 percent
of eligible  receivables  or  $2,500,000  and was due October 2002 with interest
payable monthly at prime plus 2 percent (8.00 percent as of September 30, 2001).
The KBK Credit Line was  collateralized  by the assets of ASI and was guaranteed
by the Company.  The KBK Credit Line contained certain  financial  covenants and
restrictions  including  minimum  ratios  that  ASI  must  satisfy.  ASI  was in
compliance  with the  covenants of the KBK Credit Line through the  repayment in
October 2001.

         For the three and nine months ended  September  30,  2001,  the Company
incurred a net loss of $1,520,000 and $2,981,000  respectively  as compared to a
net loss of $1,987,000 and $3,863,000 respectively for the three and nine months
ended September 30, 2000. For the years ended December 31, 2000, 1999, and 1998,
the  Company  incurred  losses  and  also  experienced  net cash  outflows  from
operating  activities.  At  September  30, 2001 the Company had working  capital
deficit of $18,483,000 and shareholders' equity of $4,935,000.

         In March 2000, the Company  completed $2.0 million in financing through
a private  placement.  The  Company  issued  226,000  shares  of a new  Series F
Convertible Preferred Stock, convertible into common stock of the Company at the
market  price,  after  September 30, 2000 and up through April 30, 2003 at which
time it  automatically  converts  to  Common  Stock.  The  Series F  Convertible
Preferred  Stock has a variable rate dividend  averaging  8.15% over the term of
the security.

         On September  15, 2000,  the Company  issued to S. Brewer  Enterprises,
Inc.  (the "SB  Enterprises")  a 9.75%  Secured  Promissory  Note  (the  "Brewer
Promissory Note") in the aggregate  principal amount of $500,000.  In connection
with the Brewer Promissory Note, Commodore Environmental Services, Inc., pledged
to SB  Enterprises  500,000  shares  of our  common  stock  owned  by  Commodore
Environmental  Services,  Inc. as security for the Brewer  Promissory  Note. The
Company shall pay SB Enterprises  the interest on a monthly basis in arrears and
pay the  outstanding  principal  amount on the earliest to occur (the  "Maturity

                                       13
<PAGE>

Date") of (i) the sale of the Company's interest in the Teledyne-Commodore, LLC;
or (iii) on March 15,  2001.  The Brewer  Promissory  Note may be prepaid at any
time without penalty.

         On March 15,  2001,  SB  Enterprises  executed an Amended and  Restated
Promissory Note (the "Restated  Brewer Note"),  which extended the Maturity Date
of the note until December 31, 2001. Additionally, the conversion feature of the
Restated  Brewer  Note was  changed to the 5-day  average  closing  price of the
Company's  common  stock  prior to a  conversion  notice.  On  April 9,  2001 SB
Enterprises issued a conversion notice for $250,000 of the outstanding principal
of the Brewer Restated Note. The Company issued SB Enterprises  1,041,667 shares
of common stock of the Company as a result of the conversion notice.

         On November 13, 2000, the Company issued and sold to certain  investors
(the "Investors") 12% Senior Secured  Promissory Notes (the "Bridge Loan Notes")
in the aggregate  principal  amount of $500,000.  In connection  with the Bridge
Loan  Notes,  Commodore  Environmental  Services,  Inc.  issued  and sold to the
Investors 1,000,000 shares of our common stock owned by Commodore  Environmental
Services, Inc, at a purchase price of $.01 per share. We shall pay each Investor
the outstanding principal amount,  together with all accrued and unpaid interest
on the  earliest to occur (the  "Maturity  Date") of (i) the  prepayment  of the
Bridge  Loan  Notes out of one  hundred  percent  (100%)  of the first  proceeds
received by us as a cash  distribution  (whether in the form of an  intercompany
dividend,  bonus, loan or otherwise) from DRM, or (ii) on February 12, 2001. The
Bridge Loan Notes may be prepaid at any time,  on five (5)  business  days prior
notice, without penalty. The Company did not pay the Bridge Loan Notes as of the
Maturity Date.

         On April 16, 2001, the Investors executed a Memorandum of Understanding
to extend the payment  date of the  $500,000 of Bridge Loan Notes.  Three of the
holders of the Bridge Loan Notes have granted payment  extensions  until June 30
and July 31, 2001, while the fourth holder of the Bridge Loan Notes has extended
only until May 1, 2001.  The Company  made the June 30, 2001 payment to three of
the  holders of the Bridge  Loan Notes and made a partial  payment to the fourth
holder of the Bridge Loan Notes on June 19,  2001.  The Company did not make the
July 31,  2001  payment to three of the  holders of the Bridge Loan Note and has
not paid the balance owed to the fourth  holder of the Bridge Loan Notes.  As of
November 14, 2001, the principal  balance on the Bridge Loan Notes aggregates to
$225,000.

         If the fourth holder of the Bridge Loan Notes  declared a default on or
after May 1, 2001,  the other  three  holders of the Bridge  Loan Notes also are
permitted to declare a default. As of November 12, 2001 the Company has not been
notified of the  holder's  intent to declare a default on the Bridge Loan Notes.
In  connection  with the  bridge  loan  extension,  the  Company  issued  to the
Investors  warrants  for  500,000  shares of the  Company's  common  stock at an
exercise price of $0.22 per share.

         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
1,923,077  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.

         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 333,333 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
shall pay  Milford/Shaar  principal  and interest on a monthly basis in arrears.
The Milford/Shaar Bridge Loan Notes may be prepaid at any time without penalty.

                                       14
<PAGE>

         The Company has an irrevocable obligation to repurchase from the former
shareholders  of DRM, by August 30, 2001,  that number of 9.5 million  shares of
the  Company's  common stock (at a per share price equal to the greater of $1.50
or the closing  price of our common stock 30 days prior to purchase) as shall be
necessary  to provide the holders of such shares with a total of $14.5  million.
The  original  repurchase  obligation  deadline  of August 30,  2001,  initially
extended to September 29, 2001,  subsequently  extended to October 29, 2001, has
now been  further  extended to January 16,  2002.  As partial  security  for the
payment of such  obligation,  all of the shares of DRM common stock owned by the
Company have been pledged to Messrs.  William J. Russell and Tamie P.  Speciale,
the former sole  stockholders of DRM. In the event the Company is unable to make
such $14.5  million  payment,  when due, the  pledgees may  foreclose on the DRM
stock; in which event the Company would lose its entire equity  ownership in the
DRM subsidiary.

         The Company  originally  intended to meet its repurchase  obligation to
the former  shareholders  of DRM by  reacquiring  their shares and selling those
shares to generate  the cash  necessary  to meet the  obligation;  however,  the
Company's ability to effect the repurchase  obligation in this manner is heavily
dependent  on the stock price of the  Company's  common stock at the time of the
repurchase.  At November 12, 2001,  the closing  price of the  Company's  common
stock on the American Stock Exchange, Inc. was $0.11 per share.

         The Company  currently  requires  additional  cash to sustain  existing
operations and meet the Company's  ongoing capital  requirements.  Excluding the
Company's DRM  subsidiary,  the Company's  current  monthly  operating  expenses
exceed its cash revenues by  approximately  $200,000.  The  continuation  of the
Company's  operations  is dependent in the short term upon its ability to obtain
additional  financing and, in the long term, 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.

         The  Company  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  of  approximately
$39,000,000.  The amount of net operating loss  carryforward that can be used in
any one year will be limited by the  applicable  tax laws which are in effect at
the time such carryforward can be utilized.  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 net
operating losses.


FORWARD-LOOKING STATEMENTS

         Certain matters discussed in this Quarterly 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

                                       15
<PAGE>

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 that
would affect any such forward-looking statements.  These risks and uncertainties
include, but are not limited to, the ability of the Company to commercialize its
technology;  product demand and industry pricing;  the ability of the Company to
obtain patent  protection  for its  technology;  developments  in  environmental
legislation  and  regulation;  the  ability  of the  company  to  obtain  future
financing on favorable  terms;  and other  circumstances  affecting  anticipated
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.






                                       16
<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 - None.

         (b) Reports on Form 8-K.

         1.   The Company filed a Current  Report on Form 8-K,  dated  September
              26,  2001,  regarding  a 30-day  extension  to its Stock  Purchase
              Agreement with Dispute Resolution Management,  Inc., until October
              29, 2001.

         2.   The Company filed a Current  Report on Form 8-K, dated October 31,
              2001,   regarding  an  80-day  extension  to  its  Stock  Purchase
              Agreement with Dispute Resolution Management,  Inc., until January
              16, 2002.

                                       17
<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 14, 2001    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)

                                       18
<PAGE>