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, 2006
                                       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 if the  registrant  is a  well-known  seasoned
issuer, as defined in Rule 405 of the Securities Act.
Yes [   ]                           No  [ X ]

         Indicate  by  check  mark if the  registrant  is not  required  to file
reports  pursuant to Section 13 or Section 15(d) of the Exchange Act.
Yes [   ]                           No  [ X ]

         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 a large  accelerated
filer,  an accelerated  filer,  or a  non-accelerated  filer.  See definition of
"accelerated  filer and large  accelerated  filer" in Rule 12b-2 of the Exchange
Act.

 Large accelerated filer [ ]  Accelerated filer [ ]  Non-accelerated filer [ X ]

         Indicate by check mark whether the  registrant  is a shell  company (as
defined in Rule 12b-2 of the Exchange Act).
Yes [   ]                           No  [ X ]

         Indicate  the  number of  shares  outstanding  of each of the  issuer's
classes of common stock, as of the latest practicable date.

               Class                           Outstanding at November 14, 2006
-----------------------------------         ------------------------------------
   Common Stock, $0.001 par value                      8,168,217 shares


<PAGE>

                      COMMODORE APPLIED TECHNOLOGIES, INC.

                                    FORM 10-Q

                                      INDEX

                                                                           Page
                                                                           ----


Item 1.  Condensed Consolidated Financial
  Statements (unaudited).....................................................2
   Condensed Consolidated Balance Sheets at
     September 30, 2006 and December 31, 2005................................2
   Condensed Consolidated Statements of Operations
     for the Three and Nine Month Periods Ended
     September 30, 2006 and 2005.............................................4
   Condensed Consolidated Statements of Cash Flows
     for the Nine Month Periods Ended September 30,
     2006 and 2005...........................................................5
   Notes to Condensed Consolidated Financial Statements......................6

Item 2.  Management's Discussion and Analysis of
  Financial Condition and Results of Operations.............................16

Item 3.  Quantitative and Qualitative Disclosures
  About Market Risk.........................................................23

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


PART II.  OTHER INFORMATION.................................................25

Item 1.   Legal Proceedings.................................................25

Item 1A.  Risk Factors......................................................25

Item 6.   Exhibits and Reports on Form 8-K..................................26

SIGNATURES..................................................................27









                                       1
<PAGE>

                         PART I - FINANCIAL INFORMATION


ITEM 1:  Condensed Consolidated Financial Statements (unaudited)
         -------------------------------------------------------



              COMMODORE APPLIED TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

            (Unaudited - Dollars in Thousands, except per share data)


                                                   September 30,    December 31,
                               ASSETS                  2006             2005

Current Assets:
         Cash and cash equivalents                 $       126      $       65
         Accounts receivable, net                        2,033           2,065
         Prepaid assets and other
           current assets                                  140             139
                                                   -------------    ------------
                  Total Current Assets                   2,299           2,269

Property and equipment, net                                128             148
                                                   -------------    ------------

                    Total Assets                   $     2,427      $    2,417
                                                   =============    ============








            See notes to condensed consolidated financial statements.






                                       2
<PAGE>
              COMMODORE APPLIED TECHNOLOGIES, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
            (Unaudited - Dollars in Thousands, except per share data)


                                                   September 30,    December 31,
                          LIABILITIES AND              2006             2005
                        STOCKHOLDERS' DEFICIT      -------------    ------------


Current Liabilities:
         Accounts payable                          $     1,196      $     1,376
         Related party payable                             252              253
         Line of credit                                    344              141
         Notes payable, net                                375              635
         Other accrued liabilities                       5,180            4,450
                                                   -------------    ------------

                  Total Current Liabilities              7,347            6,855

Long term debt, net of current portion                   6,193            5,426
                                                   -------------    ------------

                   Total Liabilities                    13,540           12,281

Commitments and contingencies

Stockholders' Deficit
         Convertible preferred stock, Series H & J
           Par value $0.001 per share,
           liquidation value of $6,353 as
           of September 30, 2006 and December 31,
           2005, 3% cumulative dividends for
           Series H, 10% cumulative dividend for
           Series J, 1,550,000 shares authorized,
           1,188,302 shares issued and outstanding.          1                1

         Common stock, par value $0.001 per share,
           300,000,000 shares authorized,
           8,168,217 And 7,948,217 shares issued
           and outstanding, respectively.                    8                8
         Additional paid-in capital                     69,399           69,680
         Accumulated deficit                           (80,258)         (79,290)
                                                   -------------    ------------
                                                       (10,850)          (9,601)
         Treasury stock, 171,875 shares
                                                          (263)            (263)
                                                   -------------    ------------
                     Total Stockholders' Deficit       (11,113)          (9,864)
                                                   -------------    ------------
         Total Liabilities and Stockholders'
           Deficit                                 $     2,427      $     2,417
                                                   =============    ============



            See notes to condensed consolidated financial statements.


                                       3
<PAGE>
<TABLE>
<CAPTION>

                      COMMODORE APPLIED TECHNOLOGIES, INC. AND SUBSIDIARIES

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



                                           Three months ended            Nine months ended
                                      September 30,  September 30,  September 30,  September 30,
                                           2006           2005           2006          2005
                                      -------------  -------------  -------------  -------------
                                                       (restated)                   (restated)
<S>                                   <C>            <C>            <C>            <C>
Contract revenues                     $       2,281  $       3,900  $       6,343  $       8,259
Costs and expenses:
   Cost of sales                              2,106          3,034          5,865          7,073
   General and administrative                   345            694          1,111          1,637
   Depreciation and amortization                  8             21             16             33
                                      -------------  -------------  -------------  -------------
         Total costs and expenses             2,459          3,749          6,992          8,743
                                      -------------  -------------  -------------  -------------

Income (loss) from operations                  (178)           151           (649)          (484)
                                      -------------  -------------  -------------  -------------
Other income (expense):
   Gain on settlement of note
      payable and accrued interest                7             --            158             --
   Interest expense                            (167)          (432)          (477)        (1,009)
   Net gain (loss) on embedded
     derivative liability                        --             44             --           (544)
                                      -------------  -------------  -------------  -------------
         Net other expense                     (160)          (388)          (319)        (1,553)
                                      -------------  -------------  -------------  -------------

Income (loss) before income taxes              (338)          (237)          (968)        (2,037)
   Income taxes                                  --             --             --             --
                                      -------------  -------------  -------------  -------------
   Net loss                                    (338)          (237)          (968)        (2,037)

   Deemed dividends and dividends
    accrued to preferred
    stockholders                               (103)        (3,805)          (309)        (3,963)
                                      -------------  -------------  -------------  -------------
   Net loss applicable to common
     shareholders                     $        (441) $      (4,042) $      (1,277) $      (6,000)
                                      =============  =============  =============  =============
   Loss per share - basic and
     diluted                          $       (0.06) $       (0.53) $       (0.16) $       (0.84)
                                      =============  =============  =============  =============
Number of weighted average shares
  outstanding (000's)                         7,836          7,647          7,796          7,118
                                      =============  =============  =============  =============

</TABLE>

                    See notes to condensed consolidated financial statements.

                                                4
<PAGE>

              COMMODORE APPLIED TECHNOLOGIES, INC. AND SUBSIDIARIES

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



                                                        Nine months ended
                                                  September 30,    September 30,
                                                      2006              2005
                                                  ------------     -------------
                                                                     (restated)
Cash flows from operating activities:
     Net loss                                      $      (968)     $    (2,037)
     Adjustments to reconcile net loss to net
     cash used in operating activities:
         Depreciation and amortization                      16               33
         Issuance of common stock for services              28               --
         Loss on disposal of equipment                       4               --
         Amortization of debt discount                       -              500
         Derivative loss                                     -              544
         Gain on settlement of note payable
          and accrued interest                            (158)               -
         Changes in assets and liabilities:
                Accounts receivable, net                    32           (3,684)
                Prepaid assets and other
                  current assets                            (1)              (9)
                Accounts payable                          (180)             695
                Other liabilities                          518            2,780
                                                  ------------     -------------
                  Net cash used in operating
                    activities                            (709)          (1,178)
                                                  ------------     -------------

Cash flows from investing activities:
      Purchase of equipment                                 -              (105)
                                                  ------------     -------------

Cash flows from financing activities:
      Advances from (to) related parties, net               (1)              --
      Increase in (repayment of) line of credit            203              317
      Payment of notes and loans payable                  (199)              --
      Proceeds from sale or exchange of
       common stock                                         --              100
      Increase in notes and loans payable                  767            1,024
                                                  ------------     -------------
                  Net cash provided by financing
                    activities                             770            1,441

Increase in cash                                            61              158

Cash, beginning of period                                   65               15
                                                  ------------     -------------
Cash, end of period                                $       126      $       173
                                                  ============     ============



            See notes to condensed consolidated financial statements.


                                       5
<PAGE>
              COMMODORE APPLIED TECHNOLOGIES, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


Note A - Basis of Presentation

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

         In the opinion of  management,  all  adjustments  (consisting of normal
recurring  accruals)  considered  necessary  for a fair  presentation  have been
included.  Operating  results for the nine month period ended September 30, 2006
are not necessarily  indicative of the results that may be expected for the year
ending December 31, 2006.

         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, 2005.

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

         The  accompanying  financial  statements  have been prepared  under the
assumption  that  Applied  will  continue as a going  concern.  Such  assumption
contemplates  the  realization of assets and the  satisfaction of liabilities in
the normal course of business. For the nine months ended September 30, 2006, and
for the years ended December 31, 2005,  2004, and 2003,  Applied incurred losses
of $968,000, $2,714,000,  $2,404,000, and $2,957,000,  respectively. The Company
has  also   experienced   net  cash  outflows  from   operating   activities  of
($1,337,000),  ($1,532,000),  and  ($955,000),  for the years ended December 31,
2005, 2004 and 2003,  respectively.  These factors raise substantial doubt about
Applied's  ability to continue as a going concern.  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.





                                       6
<PAGE>

Note B - Restatement of financial statements

         The  Company's  previously  issued  condensed   consolidated  financial
statements  as of and for the three and nine months  ended  September  30, 2005,
have  been  restated  to  record  the  embedded  derivatives  from the  embedded
conversion  option of the Convertible  Secured Note and the Series I Convertible
Preferred  Stock,  entered into on April 11, 2005, as a deemed dividend and as a
debt  discount,  respectively,  instead of as an other loss. As a result of this
restatement the Company recorded a deemed dividend of $3,701 and a debt discount
of $4,361,  and $273 and $500 of the debt discount was  amortized  into interest
expense during the three and nine months ended September 30, 2005, respectively.
Net income  (loss) was reduced by $273 and $7,562 for the three and nine months,
respectively,  due to these  restatements.  A  change  in the  valuation  of the
embedded  derivative  was  recorded in the amount of a gain of $44 and a loss of
($544) for the three and nine months ended September 30, 2005, respectively.

         The  following  table  summarizes  the  effect of the  restatement  and
reclassification adjustments on the financial statements as of and for the three
and nine months ended September 30, 2005.
<TABLE>
<CAPTION>

                                             Three Months Ended               Nine Months Ended
                                       -----------------------------   -----------------------------
                                       September 30,   September 30,   September 30,   September 30,
                                           2005            2005           2005             2005
                                       -------------  --------------   -------------   -------------
                                        (Restated)     (Previously      (Restated)      (Previously
                                                         Reported)                        Reported)
<S>                                     <C>           <C>              <C>             <C>
   Contract Revenues                    $     3,900   $       3,900    $       8,259   $      8,259


   Total cost and expenses              $     3,749   $       3,749    $       8,743   $      8,742
                                        ------------  -------------    -------------   -------------
   Income (loss) From Operations        $       151   $         151    $        (484)  $       (483)

   Other expense:

         Interest Expense               $      (432)  $        (159)   $      (1,009)  $       (509)
         Net gain (loss) on embedded
         derivative liability           $        44   $          44    $        (544)  $     (8,607)
                                        ------------  -------------    -------------   -------------
  Net gain (loss)                       $      (237)  $          36    $      (2,037)  $     (9,599)
  Deemed dividends and dividends
  accrued to preferred stockholders     $    (3,805)  $        (104)   $      (3,963)  $       (262)
  Net loss applicable to common         ------------  -------------    -------------   -------------
  shareholders                          $    (4,042)  $         (68)   $      (6,000)  $     (9,861)

</TABLE>

                                       7
<PAGE>

Note C - Summary of Significant Accounting Policies

Allowance for Anticipated Losses on Contracts

         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 at September 30,
2006 and December  31,  2005.  These  allowances  are included in other  accrued
liabilities in the accompanying financial statements.

Consolidation

         The condensed 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.

Stock Based Compensation

         The Company has established the 1998 Stock Option Plan, as amended (the
"1998 Plan"),  and performance based stock options to executives  outside of the
1998 Plan granted in 2003,  for the award of stock  options and stock bonuses to
employees,  executive  officers,  members of the Board of Directors  and outside
consultants.  The  Compensation  Committee  of the  Board of  Directors  has the
ability to determine the terms of the option,  the exercise price, the number of
shares subject to each option, and the exercisability of the options.

         Under the terms of the 1998  Plan,  options  generally  expire 10 years
from the date of grant or within 90 days of  termination.  Options granted under
these plans  generally  vest at 25 percent  after the  completion of one year of
service and then 1/36 per month for the remaining three years and would be fully
vested  at the  end  of  four  years.  Pursuant  to the  terms  of  their  grant
agreements,  certain of the options  granted under these plans may be subject to
accelerated vesting upon a change in control of the Company.

         Under the terms of the  performance  based stock  options to executives
outside of the 1998 Plan granted in 2003,  options generally expire 5 years from
the date of grant or within 90 days of termination.  Options granted under these
plans generally vest at grant date.

         Prior to December 31, 2005, as permitted  under  Statement of Financial
Accounting  Standards  ("SFAS")  No. 123,  the Company  accounted  for its stock
option plans following the recognition and measurement  principles of Accounting
Principles  Board  ("APB")  Opinion  No.  25,  "Accounting  for Stock  issued to
Employees,"   and   related   interpretations.   Accordingly,   no   stock-based


                                       8
<PAGE>

compensation   expense  had  been  reflected  in  the  Company's  statements  of
operations as all options granted had an exercise price equal to or greater than
the market  value of the  underlying  common  stock on the date of grant and the
related number of shares granted was fixed at that point in time.

         In December 2004,  the Financial  Accounting  Standards  Board ("FASB")
issued SFAS No. 123(R),  "Share Based Payment." This statement  revised SFAS No.
123 by  eliminating  the option to account for employee  stock options under APB
No.  25 and  requires  companies  to  recognize  the cost of  employee  services
received in exchange  for awards of equity  instruments  based on the grant date
fair value of those awards.

         Effective   January  1,  2006,  the  Company  adopted  the  fair  value
recognition  provisions  of SFAS  No.  123(R)  using  the  modified  prospective
application  method.  Under  this  transition  method,  the  Company  would have
recorded  compensation  expense on a straight-line  basis for the three and nine
month periods ended  September 30, 2006, for: (a) the vesting of options granted
prior to  January  1, 2006  (based on the grant  date fair  value  estimated  in
accordance  with  the  original  provisions  of SFAS  No.  123,  and  previously
presented in the pro-forma  footnote  disclosures),  and (b) stock-based  awards
granted  subsequent  to  January  1, 2006  (based on the grant  date fair  value
estimated in accordance with the provisions of SFAS No.  123(R)).  In accordance
with the modified prospective application method, results for the three and nine
months ended September 30, 2005 have not been restated.

         There were no options granted in the three and nine month periods ended
September 30, 2006, and all options  granted prior to January 1, 2006 were fully
vested  prior to January 1, 2006.  As such,  there was no  compensation  expense
recorded for options during the three and nine month periods ended September 30,
2006.  Also,  there were no options  granted to  employees in the three and nine
month periods ended September 30, 2005.

Note D - Supplemental cash flow information

         During the three and nine month  periods  ended  September 30, 2006, no
shares of Series J Preferred  Stock were  converted into shares of the Company's
common stock.  During the three and nine month periods ended September 30, 2006,
the  Company  paid no  dividends  on the Series J Preferred  Stock.  The Company
accrued  dividends  on  Preferred  Stock  Series J for the three and  nine-month
periods ended  September 30, 2006, of $97,075 and $291,226  respectively,  which
are included in Other Accrued Liabilities.

         During the three and nine month  periods  ended  September 30, 2006, no
shares of Preferred  Stock Series H were  converted into shares of the Company's
common stock. The Company accrued  dividends on Preferred Stock Series H for the
three and  nine-month  periods ended  September 30, 2006, of $6,000 and $18,000,
respectively, which are included in Other Accrued Liabilities.

         During the three and nine month  periods  ended  September 30, 2006 the
Company  paid no  accrued  dividends  on the  accrued  balance  on the  Series I
Preferred  Stock.  The  balance of  dividends  accrued on the Series I Preferred
Stock as of December  31, 2005 and  September  30,  2006 is  $183,697,  which is
included in Other Accrued Liabilities.



                                       9
<PAGE>

Note E - Other Accrued Liabilities

Other accrued liabilities consist of the following:

                                                   September 30,    December 31,
                                                        2006            2005
                                                   -------------    ------------
                                                    (unaudited)       (audited)
        Compensation and employee benefits         $     2,114      $     1,987
        Accrued Interest                                 1,075              694
        Dividends Payable                                  670              361
        Subcontractors                                     650              724
        Loss Reserve                                       376              376
        Related parties advances                           185              185
        Other                                              110              123
                                                   -----------------------------
                                                   $     5,180      $     4,450
                                                   =============================

Note F - Segment Information

         The  Company  has  identified  two  reportable  segments  in  which  it
operates,  based on the guidelines set forth in SFAS No. 131. These two 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; and (ii) Commodore  Solutions,  Inc.,
which is commercializing technologies to treat mixed and hazardous waste.







                                       10
<PAGE>

         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.

Nine Months Ended September 30, 2006
(Dollars in Thousands)

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

Contract revenues                  $   6,343  $   6,343  $       --  $       --

Costs and expenses
  Cost of sales                        5,865      5,865          --          --
  General and administrative           1,111        250           4         857
  Depreciation and amortization           16         16          --          --
                                   ---------  ---------  ----------  -----------
     Total costs and expenses          6,992      6,131           4         857
                                   ---------  ---------  ----------  -----------

Income (loss) from operations           (649)       212          (4)       (857)

  Gain on settlement of
     note payable and
     accrued interest                    158         54          --         104
  Interest expense                      (477)        --          --        (477)
                                   ---------  ---------  ----------  -----------

Income (Loss) before income taxes       (968)       266          (4)     (1,230)
Income taxes                              --         --          --          --
                                   ---------  ---------  ----------  -----------
Net Income (Loss)                  $    (968) $     266  $       (4) $   (1,230)
                                   =========  =========  ==========  ===========

Total assets                       $   2,427  $   2,427  $       --  $       --

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





                                       11
<PAGE>

Three Months Ended September 30, 2006
(Dollars in Thousands)

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

Contract revenues                  $   2,281  $   2,281  $       --  $       --

Costs and expenses
  Cost of sales                        2,106      2,106          --          --
  General and administrative             345         45          --         300
  Depreciation and amortization            8          8          --          --
                                   ---------  ---------  ----------  -----------
     Total costs and expenses          2,459      2,159          --         300
                                   ---------  ---------  ----------  -----------
Income (Loss) from operations           (178)       122          --        (300)


Gain on settlement
  of payable and accrued interest          7         --          --           7
  Interest expense                      (167)        --          --        (167)
                                   ---------  ---------  ----------  -----------

Income (Loss) before income taxes       (338)       122          --        (460)
Income taxes                              --         --          --          --
                                   ---------  ---------  ----------  -----------
Net Income (Loss)                  $    (338) $     122  $       --  $     (460)
                                   =========  =========  ==========  ===========

Total assets                       $   2,427  $   2,427  $       --  $       --

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




                                       12
<PAGE>

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

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

Contract revenues                  $   8,259  $   8,173  $       86  $       --

Costs and expenses
  Cost of sales                        7,073      7,019          54          --
  General and administrative           1,637        603          16       1,018
  Depreciation and amortization           33         33          --          --
                                   ---------  ---------  ----------  -----------
     Total costs and expenses          8,743      7,655          70       1,018
                                   ---------  ---------  ----------  -----------
Income (loss) from operations           (484)       518          16      (1,018)

  Interest expense                    (1,009)        (5)         --      (1,004)

  Net gain (loss) on
     embedded derivative                (544)        --          --        (544)
                                   ---------  ---------  ----------  -----------

Income (loss) before income taxes     (2,037)       513          16      (2,566)

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

Net income (loss)                  $  (2,037) $     513  $       16  $   (2,566)
                                   =========  =========  ==========  ===========

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

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






                                       13
<PAGE>


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

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

Contract revenues                  $   3,900  $   3,900  $    3,900  $       --

Costs and expenses
  Cost of sales                        3,034      3,034          --          --
  General and administrative             694        373          --         321
  Depreciation and amortization           21         21          --          --
                                   ---------  ---------  ----------  -----------
     Total costs and expenses          3,749      3,428           0         321
                                   ---------  ---------  ----------  -----------
Income (loss) from operations            151        472           0        (321)
  Interest expense                      (432)        (5)         --        (427)
  Net gain (loss) on embedded
     derivative                           44         --          --          44
                                   ---------  ---------  ----------  -----------

Loss before income taxes                (237)       467           0        (704)

     Income taxes                         --         --          --          --
                                   ---------  ---------  ----------  -----------
Net income (loss)                  $    (237  $     467  $        0  $     (704)
                                   =========  =========  ==========  ===========

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


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







                                       14
<PAGE>

Note G - 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  5,967,755 and 6,079,463 shares of common stock
and preferred stock  convertible into 34,378,313 and 25,641,808 shares of common
stock as of September 30, 2006 and 2005, respectively,  were not included in the
computation  of  Diluted  EPS.  The  inclusion  of  the  options,  warrants  and
convertible  preferred stock would have been  anti-dilutive,  thereby decreasing
net loss per common share.

Note H - Contingencies

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

Note I - Subsequent Events

         On October  26,  2006,  Mr.  James M.  DeAngelis  submitted a letter of
resignation  as  Chief  Financial  Officer,  Chief  Administration  Officer  and
Treasurer of the Company  effective as of December 31, 2006. Mr.  DeAngelis will
continue  to serve the  Company  as a  Director  and as Senior  Vice  President,
Strategic Development for the Company in 2007, primarily focused on the investor
relations programs for the Company.

         On November 1, 2006, the Company  entered into an employment  agreement
with Ted R. Sharp to serve the  Company as Chief  Financial  Officer,  effective
January 1, 2007.  To provide for a period of  transition  from the current Chief
Financial Officer,  James M. DeAngelis,  who will resign that position effective
January 1, 2007,  Mr. Sharp began his  employment  on November 1 and will assume
full responsibility for the position on the effective date.





                                       15
<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  environmental  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  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,  formerly Advanced Sciences,  Inc., a subsidiary  acquired on
October 1, 1996, the Company has contracts with various government  agencies and
private  companies  in the U.S.  As some  government  contracts  are  funded  in
one-year increments,  there is a possibility for cut-backs, and such a reduction
would materially affect the operations.  However,  management  believes Advanced
Sciences'  existing  client  relationships  will allow the Company to obtain new
contracts in the future.

         The  Company  has  identified  two  reportable  segments  in  which  it
operates,  based  on  the  guidelines  set  forth  in the  Financial  Accounting
Standards Board's Statement of Financial Accounting Standards No. 131. These two
segments  are  as  follows:   Commodore  Advanced  Sciences,   Inc.   ("Advanced
Sciences"),  which primarily provides various engineering,  legal, sampling, and
public  relations  services to  government  agencies  on a cost plus basis;  and
Commodore Solutions, Inc. ("Solutions"),  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  at  September  30,  2006.  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 $564,429
in loans that are  currently due or are payable on demand as of August 21, 2006.
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 its  fiscal  2003,  2004  and 2005  financial  statements  contains  a "going
concern"  qualification  in which  they  express  substantial  doubt  about  the
Company's ability to continue in business.




                                       16
<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
employees  and  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 employees and 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 1999. 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.




                                       17
<PAGE>

RESULTS OF OPERATIONS

Three and Nine Months Ended September 30, 2006 Compared to Three and Nine Months
Ended September 30, 2005

         Revenues were  $2,281,000  and $6,343,000 for the three and nine months
ended September 30, 2006 compared to $3,900,000 and $8,259,000 for the three and
nine months ended  September 30, 2005.  Such revenues  were  primarily  from the
Company's subsidiary ASI.

         In  the  case  of  Advanced  Sciences,  revenues  were  $2,281,000  and
$6,343,000, respectively, for the three and nine months ended September 30, 2006
as compared with $3,900,000 and $8,173,000, respectively, for the three and nine
months ended September 30, 2005. The decrease in revenues can be attributed to a
reduction  in the  overall  value of the open  environmental  sampling  and data
integration contract ("EDAM") work orders and overall, less work being performed
by Advanced  Sciences  during this period.  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
on a fixed rate and a lump sum basis.  Revenue under these contracts is recorded
as tasks under various work orders are completed and the client approved invoice
is submitted for payment.  Advanced Sciences has three major customers,  each of
which represents more than 10% of total revenue.  The combined revenue for these
three  customers was  $2,281,000  and  $6,343,000  respectively,  (100% of total
revenues) for the three and nine months ended  September 30, 2006. Cost of sales
was $2,106,000 and $5,865,000, respectively, for the three and nine months ended
September 30, 2006 compared to $3,034,000 and $7,019,000,  respectively, for the
three and nine months ended  September  30, 2005.  The decrease in cost of sales
can be attributed to a decrease in variable costs caused by the reduction in the
overall  value of open EDAM  contract  work orders and overall,  less work being
performed by Advanced Sciences during this period.

         The Company has  experienced a decrease in revenues of  $1,619,000  and
$1,916,000  for the three and nine  month  periods  ended  September  30,  2006,
respectively,  compared to the three and nine month periods ended  September 30,
2005, respectively. The decrease in revenues can be attributed to a reduction in
the overall value of the open EDAM  contract work orders and overall,  less work
being  performed  by  Advanced  Sciences  during  this  period.  The Company was
recently awarded a two-year  extension to the EDAM contract.  The EDAM extension
will run from  October 1, 2006  through  September  30,  2008.  There will be no
laboratory  management or data management  services as in first two years of the
EDAM contract, which had a small contribution margin to the Company, because the
Company's  client,  Bechtel  Jacobs,  LLC has decided to self  perform this work
scope during the two-year extension of the EDAM contract.

         In the case of Solutions,  revenues were $0 and $0,  respectively,  for
the three and nine months  ended  September  30,  2006 as  compared  with $0 and
$86,000,  respectively,  for three and nine months  ended  September  30,  2005.
Solution  had no  customers  during  the  three  and  nine-month  periods  ended
September 30, 2006.  Revenues,  when recognized,  are primarily from remediation
services  performed for engineering  and waste  treatment  companies in the U.S.
under a variety of contracts. Cost of sales was $0 and $0, respectively, for the

                                       18
<PAGE>

three and nine months  ended  September  30, 2006 as compared to $0 and $54,000,
respectively,  for the three and nine months ended  September 30, 2005. 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.

         General and administrative  expenses for continuing  operations for the
three and nine months ended  September  30, 2006 were  $345,000  and  $1,111,000
respectively,  as compared to $694,000  and  $1,637,000,  respectively,  for the
three and nine months  ended  September  30,  2005.  The decrease in general and
administrative expense of $349,000 and $526,000, respectively, for the three and
nine month periods  ended  September 30, 2006 as compared to the same periods in
the prior year is primarily  related to less travel and expense  account related
items  at the  corporate  level  in  addition  to less  use of  consultants  and
professional services at the corporate level.

         In the case of Advanced Sciences,  general and administrative costs for
the three and  nine-month  periods  ended  September  30, 2006 were  $45,000 and
$250,000, respectively, compared to $373,000 and $603,000, respectively, for the
three and nine months ended  September 30, 2005.  This decrease is primarily due
to less administrative costs associated with the EDAM contract in Oak Ridge, TN.
Solution incurred general and administrative  costs of $0 and $4,  respectively,
for the three and nine-month  periods ended September 30, 2006 as compared to $0
and $16,000,  respectively, for the three and nine-month periods ended September
30, 2005.  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 nine months ended September 30, 2006
was $167,000 and $477,000, respectively, as compared to $432,000 and $1,009,000,
respectively, for the three and nine month periods ended September 30, 2005. The
decrease in interest  expense of $265,000 and  $532,000,  respectively,  for the
three and nine month  periods  ended  September 30, 2006 as compared to the same
periods in the prior year is primarily  related to the interest  expense related
to amortizing the debt discount related to the embedded derivative recognized in
2005.

OFF-BALANCE SHEET ARRANGEMENTS

         There are no  off-balance  sheet  arrangements,  such as  financing  or
variable interest entities,  that either have, or are reasonably likely to have,
a current or future material effect on financial condition, changes in financial
condition,  revenues or  expenses,  results of  operations,  liquidity,  capital
expenditures or capital resources.


LIQUIDITY AND CAPITAL RESOURCES

         At September  30, 2006 and December  31, 2005  Advanced  Sciences had a
$344,000 and $141,000 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  September  30,  2006.  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 $564,429

                                       19
<PAGE>

in loans that are  currently due or are payable on demand as of August 21, 2006.
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 report of our independent  registered public accounting firm on our
fiscal 2003, 2004 and 2005 consolidated  financial  statements contains a "going
concern" qualification in which they express substantial doubt about our ability
to continue in  business.  The Company  currently  requires  additional  cash to
sustain existing  operations and to meet current obligations and ongoing capital
requirements.

         For the three and nine month  periods  ended  September  30, 2006,  the
Company incurred a net loss of $338,000 and $968,000,  respectively, as compared
to a net loss of $237,000 and $2,037,000,  respectively,  for the three and nine
month periods ended  September 30, 2005. For the nine months ended September 30,
2006,  and for the years  ended  December  31,  2005,  2004,  and 2003,  Applied
incurred   losses  of  $968,000;   $2,714,000,   $2,404,000;   and   $2,957,000,
respectively.  The Company has also experienced net cash outflows from operating
activities of ($1,337,000),  ($1,532,000),  and ($955,000),  for the years ended
December 31, 2005, 2004 and 2003, respectively.

         For the three and nine month  periods  ended  September  30, 2006,  the
Company  issued no stock with  respect to accrued  dividends  pertaining  to the
Series I Preferred.  For the three and nine month  periods  ended  September 30,
2006,  the Company  converted no shares of Series J Preferred into shares of the
Company's  common  stock and issued no stock with  respect to accrued  dividends
pertaining to the Series J Preferred. For the three and nine month periods ended
September  30, 2006,  the Company  converted no shares of Series H Preferred and
issued no stock with  respect to accrued  dividends  pertaining  to the Series H
Preferred.

         The Company recently settled a note payable that was due and payable in
the  principal  amount of $254,000  to a vendor for  services  provided  from an
earlier  period in the three month period ended March 31, 2006.  The  settlement
resulted in the  recording of a short term note  payable,  0%  interest,  in the
principal  amount of $200,000 to the vendor.  The Company has made three of four
payments of $50,000 each on this short term Note payable at September  30, 2006.
The  settlement of this note payable to the vendor had the effect of recognizing
the reduction of a historical  recorded note payable by $54,000 (other income to
Advanced  Sciences) and the reduction of historical  accrued interest payable by
$97,000  (other income to Applied) which was recognized in the nine month period
ended September 30, 2006.  These income amounts are included in Other Income and
have not arisen from the Company's normal base of operations.

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

         For the three and nine month period ended September 30, 2006, no shares
of the Company's  Series J Preferred were converted into shares of the Company's
common stock.  For the three and nine month period ended September 30, 2006, the
Company accrued all dividends payable on the Series J Preferred Stock.

         For the Year ended December 31, 2005, the Company issued 439,206 shares
of the  Company's  common  stock  upon  conversion  of 7,000  shares of Series I
Preferred by the holders  thereof.  For the three and nine month  periods  ended

                                       20
<PAGE>

September  30,  2006,  the  Company  issued no stock  with  respect  to  accrued
dividends pertaining to the Series I Preferred. The Company accrued dividends on
the Series I Preferred for the three and nine month periods ended  September 30,
2006, of $183,696, which is included in Other Accrued Liabilities.

         For the three and nine month  periods  ended  September  30, 2006,  the
Company  converted  no shares of Series H  Preferred  and  issued no stock  with
respect to accrued dividends pertaining to the Series H Preferred. For the three
and nine month periods ended  September 30, 2006,  the Company paid no dividends
on the Series H Preferred  Stock.  The  Company  accrued  dividends  on Series H
Preferred for the three and nine month period ended September 30, 2006 of $6,000
and $18,000, which is included in Other Accrued Liabilities.

         For the three and nine month  periods  ended  September  30, 2006,  the
Company  converted  no shares of Series J  Preferred  and  issued no stock  with
respect to accrued dividends pertaining to the Series J Preferred. For the three
and nine month periods ended  September 30, 2006,  the Company paid no dividends
on the Series J Preferred.  The Company accrued  dividends on Series J Preferred
for the three and nine month  period  ended  September  30,  2006 of $97,076 and
$291,226, which is included in Other Accrued Liabilities.

         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.  The current  principal  balance of the Weiss Group Note is
$252,397 and is due and payable as of September  30, 2006 and remains  unpaid as
of November 14, 2006.

         Mr. Blum, a director of the Company,  provided cash installments in the
form of a loan to the Company  through  February 2004 (the "Blum Demand  Note").
The Blum  Demand  Note bears  interest at 9% per annum and is payable on demand.
The  current  principal  balance  of the  Blum  Demand  Note is  $312,032  as of
September 30, 2006 and remains unpaid as of November 14, 2006.

         On  September  5, 2006,  The Aurelius  Consulting  Group  ("Aurelius"),
received 220,000 shares of the Company's unregistered common stock in connection
with the execution of a one year consulting  agreement  between Aurelius and the
Company (the "IR  Agreement") to provide  investment  relations  services to the
Company. The 220,000 shares of restricted common stock were accepted by Aurelius
as partial  payment for the first six months of the IR Agreement.  An additional
120,000  shares  of the  Company's  unregistered  common  stock  will be due and
payable  to  Aurelius  on or about  March 5,  2007 as  partial  payment  for the
remaining  six months of the IR Agreement.  The Company pays Aurelius $4,000 per
month  in cash for the  balance  of the  investment  relations  services  to the
Company as per terms and  conditions of the IR Agreement.  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 current principal balance of the New Shaar Note is $6,193,233 as of
September 30, 2006 and remains unpaid as of November 14, 2006.

         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

                                       21
<PAGE>

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.

         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  $39,000,000  as of December 31,  2005,  which expire in the years
2010 through  2025.  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,

                                       22
<PAGE>

expansion and other events to differ  materially from those expressed or implied
in such forward-looking statements. Any such forward-looking statements would be
subject  to a number  of  assumptions  regarding,  among  other  things,  future
economic, competitive and market conditions generally. Such assumptions would be
based on facts and conditions as they exist at the time such statements are made
as  well  as  predictions  as to  future  facts  and  conditions,  the  accurate
prediction of which may be difficult and involve the assessment of events beyond
the Company's control.

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

         o    the  Company's  critical  need  for  additional  cash  to  sustain
              existing  operations  and meet  existing  obligations  and capital
              requirements (the Company's  auditor's opinion on our fiscal 2003,
              2004 and 2005  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

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<PAGE>

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

         As required by Rule  13a-15(b)  under the Exchange Act, we conducted an
evaluation,  under the  supervision  of our Chief  Executive  Officer  and Chief
Financial  Officer,   of  the  effectiveness  of  our  disclosure  controls  and
procedures as of September 30, 2006. Based on their  evaluations as of September
30, 2006, 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.

         Management has taken steps to correct any material weaknesses that were
identified  in  Company's  fiscal  2005 10K report  filed  April 18, 2006 ("2005
Annual  Report") on form 10K for the period ended December 31, 2005 with respect
to  analyzing  debt  and  equity  instruments  to  identify  potential  embedded
derivatives and any required  accounting  entries and disclosures  pertaining to
embedded derivatives.



                                       24
<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 1A. Risk Factors

         Investing  in our  securities  involves a material  degree of risk.  In
addition to the other information set forth in this report, you should carefully
consider  the risk  factors  discussed  in Item 1A,  Risk  Factors in our Annual
Report on Form 10-K for the year ended December 31, 2005, which could materially
affect our business,  financial condition or future results. The risks described
in our  Annual  Report on Form 10-K are not the only  risks  facingour  Company.
Additional  risks  and  uncertainties  not  currently  known  to us or  that  we
currently  deem to be  immaterial  also  may  materially  adversely  affect  our
business, financial condition and/or operating results.


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.




                                       25
<PAGE>

ITEM 6.  Exhibits and Reports on Form 8 - K

         (a)  Exhibits.

              1.     31.1  -  Certification  Pursuant  to  Section  302  of  the
                     Sarbanes-Oxley Act of 2002

              2.     31.2  -  Certification  Pursuant  to  Section  302  of  the
                     Sarbanes-Oxley Act of 2002

              3.     32.1 - Certification Pursuant to 18 U.S.C. Section 1350, as
                     Adopted Pursuant to Section 906 of the  Sarbanes-Oxley  Act
                     of 2002

              4.     32.2 - Certification Pursuant to 18 U.S.C. Section 1350, as
                     Adopted Pursuant to Section 906 of the  Sarbanes-Oxley  Act
                     of 2002

         (b)  Reports on Form 8-K.

              1.     The  Company  filed a Current  Report  on Form  8-K,  dated
                     August 14, 2006,  regarding a press  release  issued by the
                     Company   announcing  that  its  wholly  owned  subsidiary,
                     Commodore Advanced Sciences,  Inc., was awarded an Advanced
                     Remediation   Demonstration   Phase  1   contract   by  the
                     Department of Energy's Environmental  Management Office for
                     the  separation of radioactive  (surrogate)  and RCRA heavy
                     metals from sludges and other waste matrices.

              2.     The  Company  filed a Current  Report  on Form  8-K,  dated
                     August 23, 2006,  regarding a press  release  issued by the
                     Company announcing its second quarter 2006 earnings.

              3.     The  Company  filed a Current  Report  on Form  8-K,  dated
                     September 21, 2006  regarding a press release issued by the
                     Company   announcing  that  it  wholly  owned   subsidiary,
                     Commodore Advanced  Sciences,  Inc., has been awarded a two
                     year option  extension  to the  environmental  sampling and
                     data  integration  contract by Bechtel Jacobs Company,  LLC
                     (BJC) of Oak Ridge,  TN. The  contract  option  extends the
                     contract through September 2008.

              4.     The  Company  filed a Current  Report  on Form  8-K,  dated
                     October 31, 2006,  announcing that on October 26, 2006, Mr.
                     James M.  DeAngelis  submitted a letter of  resignation  as
                     Chief Financial Officer,  Chief Administration  Officer and
                     Treasurer of the Company effective as of December 31, 2006.
                     Mr.  DeAngelis  will  continue  to serve the  company  as a
                     Director   and  as   Senior   Vice   President,   Strategic
                     Development for the Company in 2007,  primarily  focused on
                     the investor relations programs for the Company.

              5.     The  Company  filed a Current  Report  on Form  8-K,  dated
                     November 02, 2006, announcing that on November 1, 2006, the
                     Company  entered into an employment  agreement  with Ted R.
                     Sharp to serve  the  Company  as Chief  Financial  Officer,
                     effective  January  1,  2007.  To  provide  for a period of
                     transition from the current Chief Financial Officer,  James
                     M.  DeAngelis,  who  will resign  that  position  effective
                     January 1, 2007, Mr. Sharp began his employment on November
                     1 and will assume full  responsibility  for the position on
                     the effective date.


                                       26
<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, 2006            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)






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