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



 (Mark One)

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

                         Commission File Number 1-11871

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


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


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


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


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

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


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

<PAGE>

                                Explanatory Note



         The purpose of this  Amendment  No. 1 to the  Quarterly  Report on Form
10-Q/A is to restate the Company's  consolidated  condensed financial statements
for the three and six months  ended June 30, 2005 (the  "Financial  Statements")
and to modify the related disclosures.  Please see Note B and H to the Financial
Statements included in the amended Form 10-Q.

         The restatement arose from the Company's  determination that it had not
accounted for the embedded conversion option of the Convertible Secured Note and
the Series I  Convertible  Preferred  Stock  entered  into on April 12,  2005 as
embedded  derivatives.  The  Company has  determined  that the fair value of the
embedded derivatives should be recorded as a liability,  with any changes in the
fair value of the embedded  derivatives  between reporting dates as a derivative
loss or gain,  as  appropriate.  The  Company  has also shown the effects of the
reverse stock split effective August 29, 2005, and has also shown separately the
effect  of  dividends  accrued  to  preferred  stockholders  on loss per  share.
Subsequent  to the  reverse  stock  split,  the effect of  dividends  accrued to
preferred  stockholders  affected loss per share,  due to the reduced  number of
common shares outstanding.

         This amended Form 10-Q/A does not attempt to modify or update any other
disclosures  set forth in the original Form 10-Q,  except as required to reflect
the effects of the  restatement  as described  in Note B and H to the  Financial
Statements included in the amended Form 10-Q/A. Additionally,  this amended Form
10-Q/A,  except for the  restatement  information and the effects of the reverse
stock split, speaks as of the filing date of the original Form 10-Q and does not
update or discuss any other Company  developments after the date of the original
filing.  All information  contained in this amended Form 10-Q/A and the original
Form 10-Q is subject to updating and  supplementing  as provided in the periodic
reports that the Company has filed and will file after the original  filing date
with the Securities and Exchange Commission.


                                       i
<PAGE>
                      COMMODORE APPLIED TECHNOLOGIES, INC.

                                   FORM 10-Q/A

                                      INDEX


                                                                        Page No.
                                                                        --------

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

Item 1.       Financial Statements (Unaudited)

              Condensed Consolidated Balance Sheets -
                      June 30, 2005 and December 31, 2004......................1

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

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

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

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

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

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

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

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


                                       ii
<PAGE>

                         PART I - FINANCIAL INFORMATION


ITEM 1:  Financial Statements
         --------------------

              COMMODORE APPLIED TECHNOLOGIES, INC. AND SUBSIDIARIES

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                  (Dollars in Thousands, except per share data)
                                   (unaudited)
<TABLE>
<CAPTION>

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

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

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

</TABLE>


            See notes to condensed consolidated financial statements.


                                       1
<PAGE>


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


                                                             June 30,         December 31,
                          LIABILITIES AND                      2005               2004
                       STOCKHOLDERS' DEFICIT                -------------    -------------
                                                             (restated)
<S>                                                         <C>              <C>
Current Liabilities:
         Accounts payable                                   $       1,685    $       1,045
         Related party payable                                        255              253
         Line of credit                                               116                -
         Notes payable                                                261              258
         Embedded derivative liability                              8,651                0
         Other accrued liabilities                                  4,132            5,107
                                                            -------------    -------------

                  Total Current Liabilities                        15,100            6,663

Long Term Debt                                                      5,096            3,034
                                                            -------------    -------------

                   Total Liabilities                               20,196            9,697

Commitments and Contingencies                                          --               --

Stockholders' Deficit
         Convertible Preferred Stock, Series I & H
           Par value $0.001 per share,
           10% cumulative dividends, Series I,
           3%  cumulative dividends for Series H
            1,550,000  authorized, 1,190,302 shares
            and 1,001,200 shares issued and
           outstanding as of June 30, 2005
           and December 31, 2004, respectively.
           The shares had an aggregate liquidation
           value of $6,381 and $3,677 at June 30, 2005
           and December 31, 2004, respectively.                         1                1
         Common Stock, par value $0.001 per share,
           300,000,000 shares authorized, 7,819,185
           and 6,717,303 issued and outstanding,
           at June 30, 2005 and December 31, 2004,
           respectively.                                                8                7
         Additional Paid-in Capital                                68,843           67,503
         Accumulated Deficit                                      (86,211)         (76,576)
                                                            -------------    -------------
                                                                  (17,359)          (9,065)
         Treasury Stock, 171,875 shares                              (263)            (263)
                                                            -------------    -------------
                     Total Stockholders' Deficit                  (17,622)          (9,328)
                                                            -------------    -------------
         Total Liabilities and Stockholders' Deficit        $       2,574    $         369
                                                            =============    =============
</TABLE>

            See notes to condensed consolidated financial statements.

                                       2
<PAGE>


              COMMODORE APPLIED TECHNOLOGIES, INC. AND SUBSIDIARIES

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

<TABLE>
<CAPTION>

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

Loss from operations                                          (305)           (681)        (634)          (1,267)
                                                       -----------      ----------    ---------       ----------
Other expense:
         Interest expense                                     (202)            (97)        (350)            (180)
         Net loss on embedded derivative liability          (8,651)             --       (8,651)              --
                                                       -----------      ----------    ---------       ----------
                  Net other expense                         (8,853)            (97)      (9,001)            (180)
                                                       -----------      ----------    ---------       ----------
Loss before income taxes                                    (9,158)           (778)      (9,635)          (1,447)
         Income taxes                                           --              --           --               --
                                                       -----------      ----------    ---------       ----------
         Net loss                                      $    (9,158)     $     (778)   $  (9,635)      $   (1,447)
                                                       ===========      ==========    =========       ==========

         Dividends accrued to preferred stockholders            91              73          158              150

         Net loss applicable to common shareholders         (9,249)           (851)      (9,793)          (1,597)
                                                       ===========      ==========    =========       ==========
Loss per share - basic and diluted                     $     (1.24)     $    (0.13)   $   (1.39)      $    (0.26)
                                                       ===========      ==========    =========       ==========
Number of weighted average shares outstanding (000's)
    basic and diluted                                        7,442           6,362        7,021            6,196
                                                       ===========      ==========    =========       ==========
</TABLE>

            See notes to condensed consolidated financial statements.


                                       3
<PAGE>


              COMMODORE APPLIED TECHNOLOGIES, INC. AND SUBSIDIARIES

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

<TABLE>
<CAPTION>
                                                                          Six months ended
                                                                   June 30,           June 30,
                                                                     2005              2004
                                                                  -------------    ------------
                                                                  (restated)
<S>                                                               <C>              <C>
Cash flows from operating activities:
     Net loss                                                     $      (9,635)   $     (1,447)
     Adjustments to reconcile net loss to net cash used in
     operating activities:
         Depreciation and amortization                                       12             129
         Amortization of debt discount                                        -              15
         Loss on embedded derivative liability                             8,651              -
         Changes in assets and liabilities:
                Accounts receivable, net                                 (2,872)            (26)
                Prepaid assets                                              (15)             (4)
                Checks written in excess of cash                              -             (13)
                Accounts payable                                            640              (6)
                Other liabilities                                         2,408             500
                                                                  -------------    ------------
                  Net cash used in operating activities                    (811)           (852)

Cash flows from investing activities:
      Purchase of equipment                                                 (72)              -
                                                                  -------------    ------------
                  Net cash used in investing activities                     (72)              0

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

Increase (decrease) in cash                                                  17              21

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

</TABLE>

             See notes to condensed considated financial statements.

                                       4
<PAGE>

              COMMODORE APPLIED TECHNOLOGIES, INC. AND SUBSIDIARIES

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

                                  June 30, 2005


Note A - Basis of Presentation

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

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

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

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

         The  accompanying  financial  statements  have been prepared  under the
assumption  that  Applied  will  continue as a going  concern.  Such  assumption
contemplates  the  realization of assets and the  satisfaction of liabilities in
the normal course of business.  For the six months ended June 30, 2005,  and for
the years ended December 31, 2004,  2003, and 2002,  Applied  incurred losses of
$9,635,000,  $2,404,000;  $2,957,000; and $5,972,000,  respectively. The Company
has also  experienced net cash inflows  (outflows) from operating  activities of
($1,532,000),  ($955,000), and ($123,000) for the years ended December 31, 2004,
2003  and  2002  respectively.  The  financial  statements  do not  include  any
adjustments  that might be necessary  should  Applied be unable to continue as a
going concern.  Applied's  continuation as a going concern is dependent upon its
ability to generate  sufficient  cash flow to meet its  obligations  on a timely
basis,  to obtain  additional  financing as may be required,  and  ultimately to
attain profitability.  Potential sources of cash include new contracts, external
debt,  the sale of new shares of company  stock or  alternative  methods such as
mergers or sale transactions.  No assurances can be given, however, that Applied
will be able to obtain any of these potential sources of cash.

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

                                       5
<PAGE>

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

         The  consolidated  financial  statements  include  the  accounts of the
Company  and  its  majority-owned  subsidiaries.  All  significant  intercompany
balances and transactions have been eliminated.  The preparation of consolidated
financial  statements  in conformity  with U.S.  generally  accepted  accounting
principles requires management to make estimates and assumptions that affect the
reported  amounts of assets and  liabilities  and the  disclosure  of contingent
assets and liabilities at the date of the financial  statements and the reported
amounts of revenues and expenses  during the reporting  period.  Actual  results
could differ from those estimates.

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

         B - Restatement of financial statements

         The  Company's  previously  issued  condensed   consolidated  financial
statements as of and for the three and six months ended June 30, 2005, have been
restated  to record the  accounting  of the  embedded  conversion  option of the
Convertible Secured Note and the Series I Convertible  Preferred Stock,  entered
into on April 11,  2005,  as  embedded  derivatives  with an increase to current
liabilities.  As a result of this  restatement  the Company  recorded  $8,651 of
additional  current  liability  related  to  the  fair  value  of  the  embedded
derivatives for the conversion features of the note and the preferred stock, and
an additional  expense of $8,651  recorded as loss for the derivative  valuation
for the three and six months ended June 30, 2005.

         The  following   table   summarizes  the  effect  of  the   restatement
reclassification adjustments on the financial statements as of and for the three
and six months ended June 30, 2005 (in thousands).



                                       6
<PAGE>
<TABLE>
<CAPTION>

                                                       Three Months Ended            Six Months Ended
                                                 ------------------------------------------------------------
                                                  June 30,       June 30,         June 30,         June 30,
                                                    2005           2005             2005             2005
                                                 (Restated)     (Previously      (Restated)      (Previously
                                                                 Reported)                        Reported)
                                                 -------------------------------------------------------------
<S>                                              <C>              <C>             <C>             <C>
Contract revenues                                $     2,733      $   2,733       $   4,359       $   4,359
Total costs and expenses                               3,038          3,038           4,993           4,993

LOSS FROM OPERATIONS                                    (305)          (305)           (634)           (634)

Other expense:
  Interest expense                                      (202)          (202)           (350)           (350)
  Net loss on embedded derivative liability           (8,651)            --          (8,651)             --
                                                 ------------ -------------- --------------- ---------------
NET LOSS                                         $   (9,158)      $    (507)      $  (9,653)       $   (984)
</TABLE>


<TABLE>
<CAPTION>
                                                                     Six Months Ended
                                                                        June 30, 2005
                                                               (Restated)        (Previously
                                                                                  Reported)
                                                              ------------ ------------------
                  <S>                                          <C>                <C>
                  Total current liabilities                    $   15,100         $   6,702
                  Total liabilities                                20,196            11,545
                  Accumulated deficit                             (86,211)          (77,560)
                  Total stockholders' deficit                     (17,622)           (8,708)

</TABLE>

         The fair value of the conversion features was calculated as of June 30,
2005, using the Black-Scholes pricing model, with the following inputs:

                  Dividend yield                        -
                  Volatility                           236%
                  Useful life (years)                 3.79
                  Risk-free interest rate             3.72%

Note C - Supplemental cash flow information

         During the three and six month periods ended June 30, 2005, 0 and 5,500
shares of Series E Preferred  Stock were  converted into 0 and 291,629 shares of
the Company's common stock, respectively. During the three and six month periods
ended June 30,  2005,  the Company  paid no  dividends on the Series E Preferred
Stock conversions. The Company accrued dividends on Preferred Stock Series E for
the  three  and  six-month  periods  ended  June  30,  2005,  of $0 and  $24,923
respectively, which is included in Other Accrued Liabilities.

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

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

                                       7
<PAGE>

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

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

Note D - Other Accrued Liabilities

         Other accrued liabilities consist of the following (in thousands):

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

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

                                       8
<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.


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

-------------------------------------------------------------------------------------------
                                                                                 Corporate
                                                                                 Overhead
                                              Total       ASI      Solution      and Other
<S>                                         <C>        <C>         <C>          <C>
Contract revenues                           $ 2,733    $ 2,664     $     69     $       --

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

     Interest income                             --         --           --             --
     Interest expense                          (202)        --           --           (202)
     Net loss on embedded
       derivative                            (8,651)        --           --         (8,651)
     Income taxes                                --         --           --             --
                                            -------    -------     --------     ----------
Net Income (Loss)                           $(9,158)   $    61     $     16     $   (9,235)
                                            =======    =======     ========     ==========

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

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

</TABLE>

                                       9
<PAGE>


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

<TABLE>
<CAPTION>

-------------------------------------------------------------------------------------------
                                                                                 Corporate
                                                                                 Overhead
                                              Total       ASI      Solution      and Other
<S>                                         <C>        <C>         <C>           <C>
Contract revenues                           $ 4,359    $ 4,273     $     86     $       --

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

     Interest income                             --         --           --             --
     Interest expense                          (350)        --           --           (350)
     Net loss on embedded
       derivative                            (8,651)                                (8,651)
     Income taxes                                --         --           --             --
                                            -------    -------     --------     ----------
Net Income (Loss)                           $(9,635)   $   105     $     16     $   (9,756)
                                            =======    =======     ========     ==========

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

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

</TABLE>

                                       10
<PAGE>



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

-------------------------------------------------------------------------------------------
                                                                                 Corporate
                                                                                 Overhead
                                              Total       ASI      Solution      and Other
<S>                                         <C>        <C>         <C>           <C>
Contract revenues                           $   112    $   112     $     --     $       --

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

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

Total assets                                $   168    $   143     $     11     $       14

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

</TABLE>

                                       11
<PAGE>


Six Months Ended June 30, 2004
(Dollars in Thousands)
<TABLE>
<CAPTION>

-------------------------------------------------------------------------------------------
                                                                                 Corporate
                                                                                 Overhead
                                              Total       ASI      Solution      and Other
<S>                                         <C>        <C>         <C>          <C>
Contract revenues                           $   294    $   254     $     40     $       --

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

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

Total assets                                $   168    $   143     $     11     $       14

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

</TABLE>

Note F - Net loss per common share

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

         Options and  warrants to purchase  6,100,297  and  6,168,515  shares of
common stock and preferred stock  convertible  into shares of common stock as of
June 30, 2005 and 2004,  respectively,  were not included in the  computation of
Diluted EPS.  Common stock  equivalents  from preferred stock  convertible  into
shares of common stock were also not included in the computation of Diluted EPS.
The inclusion of the options,  warrants and  convertible  preferred  stock would
have been anti-dilutive, thereby decreasing net loss per common share.


                                       12
<PAGE>

Note G - 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 H  - Derivative Liability Expense

         On April 11,  2005,  Applied,  through  the  issuance  of the  Series I
Preferred  and the  Amended  and  Restated  Shaar  Note,  recorded  an  embedded
derivative   liability  due  to  the  conversion   feature  of  these  financial
instruments  pursuant to EITF 00-19. Applied recorded a loss of ($8,651,000) and
($8,651,000)  of non-cash  income  (expense) for the three and six month periods
ended June 30, 2005,  respectively.  The fair value of the embedded  derivatives
consisting of conversion features included in a note payable and in the Series I
Convertible  Preferred  Stock is calculated  as of the reporting  date using the
Black-Scholes options pricing model. See Note B.

Note I  - Subsequent Events

Reverse Split of Applied Common Shares

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

         The Company has retroactively  reflected the reverse stock split in its
common share and loss per share information.

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


                                       13
<PAGE>

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

Overview

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

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

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

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

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

         The Company  currently  requires  additional  cash to sustain  existing
operations and to meet current obligations and ongoing capital requirements. The
Company's   current   monthly   operating   expenses  exceed  cash  revenues  by
approximately $80,000.  Currently, the Company is addressing this cash shortfall
through loans from The Shaar Fund,  Ltd.,  but The Shaar Fund,  Ltd. is under no

                                       14
<PAGE>

obligation  to continue to make such  advances  to the  Company.  If this lender
decided  to  discontinue  advances,  the  Company  would not be able to meet its
current  obligations.  In addition,  the Company owes $818,330 in loans that are
currently due or are payable on demand. Although the lenders on these loans have
not yet called the loans, the Company does not currently have the ability to pay
these loans absent additional financing.

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

CRITICAL ACCOUNTING POLICIES

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

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

Reserves for Doubtful Accounts

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

Valuation of Stock, Options and Embedded Derivatives

         We value and account for the issuance of equity  instruments,  embedded
or otherwise,  to  non-employees to acquire goods and services based on the fair
value of the goods and  services or the fair value of the equity  instrument  at
the time of issuance,  whichever is more reliably measurable.  The fair value of
stock  issued for goods or services  is  determined  based on the quoted  market
price on the date the commitment to issue the stock has occurred. The fair value
of stock options,  warrants,  and embedded  derivatives granted to non-employees
for goods or services is calculated on the date of grant using the Black-Scholes
options pricing model.

Revenue Recognition

         Substantially all the Company's current revenues consist of engineering
and scientific  services performed for the U.S. Government and prime contractors
that  serve the U.S.  Government  under a variety  of  contracts,  most of which
provide for unit prices.  Revenue  under unit price  contracts are recorded when
the services are provided.

         Most of the Company's  historical  contracts provided for reimbursement
of costs plus fixed  fees.  Direct  and  indirect  contract  costs  incurred  in
reimbursement  plus cost contracts are subject to audit by the Defense  Contract
Audit Agency  ("DCAA").  Management  does not expect these audits to  materially

                                       15
<PAGE>

affect the financial statements and have established  appropriate  allowances to
cover potential  audit  disallowances.  Contract  revenues have been recorded in
amounts  which are expected to be realized upon final  settlement.  The DCAA has
audited the Company's contracts through 1996. An allowance for doubtful accounts
and  potential  disallowances  has been  established  based upon the  portion of
billed and unbilled receivables that management believes may be uncollectible.

RESULTS OF OPERATIONS

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

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

         In  the  case  of  ASI,   revenues  were   $2,664,000   and  $4,273,000
respectively  for the three and six months ended June 30, 2005 as compared  with
$112,000 and $254,000 for the three and six months ended June 30, 2004. Advanced
Sciences has experienced a significant  increase in revenue as the result of the
September  2004 award of the eDAM  contract in Oak Ridge,  TN and overall,  more
work being performed by Advanced  Sciences.  The revenues from Advanced Sciences
consisted of engineering and scientific services performed for the United States
government under a variety of contracts, most of which provide for reimbursement
of cost plus fixed fees. Revenue under cost-reimbursement  contracts is recorded
under the  percentage  of  completion  method as costs are  incurred and include
estimated  fees in the  proportion  that  costs to date bear to total  estimated
costs. Advanced Sciences has three major customers,  two of which represent more
than 10% of total revenue each. The combined  revenue for these three  customers
was  $2,664,000 and $4,273,000  respectively,  (100% of total  revenues) for the
three and six  months  ended June 30,  2005.  Cost of sales was  $2,578,000  and
$3,966,000  respectively  for the  three  and six  months  ended  June 30,  2005
compared  to $166,000  and  $244,000  respectively  for the three and six months
ended June 30,  2004.  The  increase  in cost of sales can be  attributed  to an
increase in variable  costs caused by the eDAM  contract and overall,  more work
being performed by Advanced Sciences.

         In the case of Commodore  Solution,  Inc.  ("Solution"),  revenues were
$69,000 and $86,000,  respectively,  for the three and six months ended June 30,
2005 as compared  with $0 and  $40,000,  respectively,  for three and six months
ended  June 30,  2004.  Solution  had one major  customer  during  the three and
six-month  periods ended June 30, 2005 which  accounted for $69,000 and $86,000,
respectively,  or 100% of the total  revenues  for the  period.  Revenues,  when
recognized,  are primarily from remediation  services  performed for engineering
and waste treatment companies in the U.S. under a variety of contracts.  Cost of
sales was $53,000 and $54,000,  respectively, for the three and six months ended
June 30, 2005 as compared to $89,000 and $263,000 respectively for the three and
six  months  ended  June  30,  2004.  The  cost  of  sales,  when  incurred,  is
attributable to sales and marketing expenses for the SET technology. Anticipated
losses on engagements, if any, will be provided for by a charge to income during
the period such losses are first identified.

         For the three and six months ended June 30, 2005, the Company  incurred
research and development costs of $0 and $0, respectively, as compared to $1,000
and  $7,000  respectively  for the three and six  months  ended  June 30,  2004.

                                       16
<PAGE>

Research and development costs include salaries,  wages, and other related costs
of personnel engaged in research and development  activities,  contract services
and materials,  test equipment and rent for facilities  involved in research and
development  activities.  Research  and  development  costs  are  expensed  when
incurred,  except those costs related to the design or  construction of an asset
having an economic useful life are  capitalized,  and then  depreciated over the
estimated  useful life of the asset.  The decrease in research  and  development
expense is due to the continued commercialization focus of the Company.

         General and administrative  expenses for continuing  operations for the
three  and  six  months  ended  June  30,  2005  were   $401,000  and  $961,000,
respectively,  as compared to $472,000 and $918,000  respectively  for the three
and six months  ended June 30, 2004.  This  difference  is primarily  due to the
deferred  salaries for the executives of the Company for the three and six-month
periods ended June 30, 2005,  the addition of a full time  accounting  employee,
and fees associated with a marketing consultant for the SET technology.

         In the case of Advanced Sciences,  general and administrative costs for
the three and  six-month  periods ended June 30, 2005 were $19,000 and $190,000,
respectively,  compared to $19,000 and $121,000  respectively  for the three and
six months ended June 30, 2004. This increase is primarily due to the additional
administrative  costs  associated  with  the eDAM  contract  in Oak  Ridge,  TN.
Solution  incurred  general  and   administrative   costs  of  $0  and  $16,000,
respectively,  for the  three  and  six-month  periods  ended  June 30,  2005 as
compared  to  $71,000  and  $151,000  respectively  for the three and  six-month
periods ended June 30, 2004. This decrease was primarily due to the reassignment
of a Solution's  employee to CASI field work on the eDAM  contract in Oak Ridge,
TN.

         Interest  expense for the three and six months  ended June 30, 2005 was
$202,000  and  $350,000,  respectively,  as compared  to $97,000  and  $180,000,
respectively,  for the three and six month  periods  ended  June 30,  2004.  The
increase in interest  expense of $105,000 and  $170,000,  respectively,  for the
three and six month  periods  ended  June 30,  2005 is  primarily  related to an
increase in cash interest costs  associated  with a higher notes payable balance
and a higher line of credit balance compared to the prior year.

         On April 11,  2005,  Applied,  through  the  issuance  of the  Series I
Preferred  and the  Amended  and  Restated  Shaar  Note,  recorded  an  embedded
derivative   liability  due  to  the  conversion   feature  of  these  financial
instruments  pursuant to EITF 00-19. Applied recorded a loss of ($8,651,000) and
($8,651,000)  of non-cash  income  (expense) for the three and six month periods
ended June 30, 2005,  respectively.  The fair value of the embedded  derivatives
consisting of conversion features included in a note payable and in the Series I
Convertible  Preferred  Stock is calculated  as of the reporting  date using the
Black-Scholes options pricing model.

LIQUIDITY AND CAPITAL RESOURCES

         At June 30, 2005 and December 31, 2004 Advanced Sciences had a $116,000
and $17,000 outstanding balance, respectively, on its revolving line of credit.

         The Company  currently  requires  additional  cash to sustain  existing
operations and to meet current obligations and ongoing capital requirements. The
Company's   current   monthly   operating   expenses  exceed  cash  revenues  by
approximately  $80,000 at June 30, 2005.  Currently,  the Company is  addressing
this cash shortfall  though loans from The Shaar Fund, Ltd., but The Shaar Fund,
Ltd. is under no obligation to continue to make such advances to the Company. If

                                       17
<PAGE>

this lender  decided to discontinue  advances,  the Company would not be able to
meet its current  obligations.  In addition,  the Company owes $818,330 in loans
that are  currently  due or are payable on demand as of June 30, 2005.  Although
the lenders on these loans have not yet called the loans,  the Company  does not
currently have the ability to pay these loans absent additional financing.

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

         For the three and six month  periods  ended June 30, 2005,  the Company
incurred  a net loss of  $507,000  and  $984,000  as  compared  to a net loss of
$778,000 and $1,447,000 for the three-month  period ended June 30, 2004. For the
six month period ended June 30, 2005, and for the years ended December 31, 2004,
2003,  and  2002,   Applied  incurred  losses  of  ($9,635,000),   ($2,404,000),
($2,957,000),  and ($5,972,000)  respectively.  The Company has also experienced
net  cash  inflows   (outflows)  from  operating   activities  of  ($1,532,000),
($955,000),  and ($123,000) for the years ended December 31, 2004, 2003 and 2002
respectively.

         During the three and six month periods ended June 30, 2005, the Company
converted (i) 0 and 5,500,  respectively,  shares of Series E Preferred;  (ii) 0
shares of Series F Preferred; and (iii) 5,000 and 5,000, respectively, shares of
Series I  Preferred,  for  310,174  and  601,802,  respectively,  shares  of the
Company's  common stock for the three and six month periods ended June 30, 2005.
For the three and six month periods ended June 30, 2005,  the Company  converted
no shares of Series H  Preferred  and  issued no stock  with  respect to accrued
dividends pertaining to the Series H Preferred.

         In November  2000, the Company  completed  $500,000 in financing in the
form of a loan (the  "Weiss  Group  Note") from a group of four  investors.  The
Weiss  Group Note  bears  interest  at 12% per annum and was due and  payable on
February  12,  2001.  All holders of the Weiss Group Note have  granted  payment
extensions  to the Company  until  January 15, 2005 in exchange for warrants for
125,000 shares of the Company's  common stock at an exercise price of $0.57. The
current  principal  balance of the Weiss  Group Note is  $252,397 as of June 30,
2005 and remains unpaid as of August 22, 2005.

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

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

         On May 23, 2001, a private investor purchased $250,000 of the Company's
common  stock at the market  price.  The  Company  issued the  private  investor
1,973,077  shares  of common  stock of the  Company  as a result  of the  equity
purchase.  In connection with the purchase of the shares of the Company's common
stock,  the  Company  issued the  private  investor a 2-year  warrant for 25,000

                                       18
<PAGE>

shares of the  Company's  common stock at an exercise  price of $4.40 per share.
The Company  re-priced  this warrant in November  2003 to $0.57 and extended the
expiration date of this warrant to November 19, 2005. The Company  believes that
this transaction is exempt from the registration  requirements of the Securities
Act under  Section  4(2)  thereof  as a  transaction  not  involving  any public
offering of securities.  The private investor exercised this warrant on April 7,
2004 and received 25,000 shares of the Company's common stock.

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

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

         On October 2, 2002,  Mr.  Bentley Blum, a Director of the Company,  had
previously loaned the Company with $125,000 of cash installments over the period
of one year (the "Blum Loan").  The Company  elected to convert the Blum Loan to
the  Company's  common stock using the  conversion  feature of the 5-day average
closing price of the Company's common stock prior to October 2, 2002. On October
2, 2002,  Blum  issued a  conversion  notice  for  $125,000  of the  outstanding
principal of the Blum Loan into 125,000  shares.  Mr. Blum  continued to provide
cash  installments  in the form of a loan to the Company  through  February 2004
(the "Blum Demand  Note").  The Blum Demand Note bears  interest at 9% per annum
and is payable on demand.  The current principal balance of the Blum Demand Note
is $312,032 as of June 30, 2005 and remains unpaid as of August 22, 2005.

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

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

                                       19
<PAGE>

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

         a)   The conversion feature shall be exercisable immediately.
         b)   The conversion price of the Series I Preferred shall be determined
              by the average  closing  price of  Company's  common  stock in the
              previous 10 trading  days,  but in no event  shall the  conversion
              price be more than $0.57 per share.
         c)   If the Company's  common stock is not listed on an exchange at the
              time of the conversion,  then the conversion  price will be 50% of
              the market price at that time.
         d)   The Series I Preferred shall have a non-cumulative annual dividend
              of 10%, payable in cash or shares of the Company's common stock at
              the Company's election.
         e)   Dividend will be paid  quarterly  commencing  May 15, 2005, to the
              Holders  of  record of shares  of the  Series I  Preferred  Stock.
              Dividends  until  February  14, 2006 shall accrue but shall not be
              payable until February 15, 2006.
         f)   The Company will reserve  3,750,000 shares of its common stock for
              the conversion of the Series I Preferred.

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

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

         On April 12, 2005 Shaar executed a purchase agreement ("Milford Capital
Purchase Agreement") to Milford Capital & Management ("Milford").  In accordance
with the terms of the Milford  Capital  Purchase  Agreement,  Shaar  purchased a
secured promissory note of the Company,  initially issued to Milford on June 13,
2001, in the original  principal  amount of $500,000,  which had an  outstanding
principal  balance on March 31, 2005 of $188,149 ("Old Milford Note"),  together
with (i) all interest,  additional  obligations,  forbearance  fees,  exit fees,
penalties  and other  amounts  due and  payable  from  time to time  under or in
connection  with  the Old  Milford  Note,  and (ii) the  Forbearance  Amount  in
connection  with the  Forbearance  Agreement,  dated  January 30, 2004,  between
Milford and the Company, and Shaar in which Shaar agreed to forgive payment from
the Company to Shaar of $300,000  of accrued and unpaid  dividends  on shares of
the  Company's  Series E  Preferred  held by Shaar  ("Forgiven  Dividends")  and
consented  to the  transfer of the dollar  value of the  Forgiven  Dividends  to
Milford as part of the  forbearance fee payable to Milford under the Forbearance
Agreement of 2004.

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

                                       20
<PAGE>


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

         a)   The New Shaar  Convertible  Note bears an interest rate of 10% per
              annum,  which is payable in cash or shares of the Company's common
              stock at the Company's election.
         b)   Interest  shall  accrue  on the  principal  amount  for a one year
              period  ("Deferral  Period").  On March 22, 2006, the Company will
              make a single lump sum payment to the holder in an amount equal to
              all interest that accrued during the Deferral Period
         c)   Beginning  April 15, 2006, and monthly  thereafter on the 15th day
              of each month until March 22, 2009 ("Maturity  Date"), the Company
              shall pay to Shaar all  accrued  and  unpaid  interest  ("Interest
              Payments")on the principal balance of the note accruing during the
              prior month.
         d)   On the  Maturity  Date,  the Company  shall make a single lump sum
              payment to Shaar equal to the outstanding principal balance of the
              New Shaar  Convertible Note ("Principal  Balance"),  together with
              all accrued and unpaid interest.
         e)   At the option of Shaar, the outstanding  Principal  Balance may be
              converted,  either  in  whole  or in  part,  into  shares  of  the
              Company's common stock.
         f)   The conversion price of the payment of the Principal Balance,  the
              Deferral Period,  and the Interest Payments shall be determined by
              the average  closing  price of  Company's  common  stock in the 10
              trading days preceding the conversion date,, but in no event shall
              the  conversion  price be more than  $0.57 per share  ("Conversion
              Price").
         g)   If the Company's  common stock is not listed on an exchange at the
              time of the conversion,  then the conversion  price will be 50% of
              the market price at that time.
         h)   The New Shaar  Convertible  Note may not be prepaid by the Company
              prior to the Maturity Date.

         On April 11,  2005,  Applied,  through  the  issuance  of the  Series I
Preferred  and the  Amended  and  Restated  Shaar  Note,  recorded  an  embedded
derivative   liability  due  to  the  conversion   feature  of  these  financial
instruments  pursuant to EITF 00-19. Applied recorded a loss of ($8,651,000) and
($8,651,000)  of non-cash  income  (expense) for the three and six month periods
ended June 30, 2005,  respectively.  The fair value of the embedded  derivatives
consisting of conversion features included in a note payable and in the Series I
Convertible  Preferred  Stock is calculated  as of the reporting  date using the
Black-Scholes options pricing model.

         The current principal balance of the New Shaar Note is $4,846,233 as of
June 30, 2005 and remains unpaid as of August 22, 2005.

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

                                       21
<PAGE>

         On April  27,  2005,  a  private  investor  purchased  $100,000  of the
Company's  unregistered common stock at the market price. The Company issued the
private investor  10,000,000 shares of unregistered  common stock of the Company
as a result of the equity  purchase.  In  connection  with the  purchase  of the
shares of the Company's  common stock, the Company issued the private investor a
3-year warrant for 4,000,000 shares of the Company's common stock at an exercise
price of $0.01 per share.  The Company  believes that this transaction is exempt
from the  registration  requirements  of the  Securities  Act under Section 4(2)
thereof as a transaction not involving any public offering of securities.

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

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

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

NET OPERATING LOSS CARRYFORWARDS

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


                                       22
<PAGE>

FORWARD-LOOKING STATEMENTS

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

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

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

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

                                       23
<PAGE>



ITEM 3.  Quantitative and Qualitative Disclosures About Market Risk
         ----------------------------------------------------------

         Not applicable.

ITEM 4.  Controls and Procedures
         -----------------------

         (a) Evaluation of disclosure controls and procedures

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

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

         (b) Changes in internal controls

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


                                       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 2.  Change in Securities

         Not applicable

ITEM 3.  Defaults among Senior Securities

         Not applicable.

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

         Not applicable.

ITEM 5.  Other Events

         Not applicable.

ITEM 6.  Exhibits and Reports on Form 8 - K

         (a) Exhibits -

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

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

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

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


         (b) Reports on Form 8-K.

         1.   The  Company  filed a Current  Report  on Form 8-K,  dated May 15,
              2005, announcing its March 31, 2005 Quarterly earnings.

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

                                       25
<PAGE>

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


                                       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 22, 2005       COMMODORE APPLIED TECHNOLOGIES, INC.
                                      (Registrant)


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


                                       27