Commodore Applied Technologies, Inc. Reports: Chairman's Letter 2004
NEW YORK, NY, Feb. 02, 2004 (MARKET WIRE via COMTEX) -- Commodore Applied Technologies, Inc. (OTC BB: CXII) Chairman and Chief Executive Officer today issued a Chairman's Letter to address the current and future business opportunities for the Company.
Chairman's Letter
The Year 2003 was a difficult year but resulted in the achievement of several major milestones in the repositioning of the Company. Going into 2003, the Company had a minimal engineering backlog, and had to drastically reduce operating costs, while at the same time, we completed the dissolution of the DRM Stock Purchase Agreement. We had to focus on the core competencies of the Company in order to survive.
In 2003:
1. We booked a significant sodium disposal contract in October 2003
with our partner, ToxCo Metals, in Oak Ridge, Tennessee.
2. We executed a waste processing agreement in November 2003 with
Envirocare of Utah, one of the nation's largest private hazardous
waste disposal companies.
3. We moved the operating offices of the Company from Albuquerque, NM,
to Richland, WA in order to be closer to our customers holding large
amounts of the waste streams we are uniquely qualified to process.
4. We appointed Mack Jones COO and President of the Company in April
2003. Mack is based in Richland, WA and will be a key component to
the current and future success of the Company.
However, we continue to rely on external cash sources to keep the company afloat, various debt restructurings, and the Company's executives are deferring up to 100% of their compensation and expenses.
My immediate barometer of success will be the establishment of positive cash flow; when we can confidently claim we are out of "intensive care." I expect that point will occur in early 2004. Let me discuss where we anticipate cash flow to come from.
Oak Ridge, TN Sodium. Oak Ridge National Laboratory had a test facility called the "Tower Shielding Facility," dating from the time that the U.S. was engaged in developing atomic powered aircraft. The aircraft project was dropped in the 1960s, and the Department of Energy ("DOE") now wishes to dismantle the facility and dispose of the radioactive sodium. The Company, along with its partner ToxCo Metals, has been selected to process the sodium. This project is being underway, with equipment being fabricated for shipment to the site.
EnviroCare of Utah. We were approached by EnviroCare in spring 2003 to treat "tail-end" liquid waste streams from another treatment technology. The Company negotiated for several months and in November 2003 signed a processing agreement. The Company will move a SET machine and provide the processing staff at EnviroCare's facilities located in Clive, Utah in the 1st quarter of 2004. EnviroCare has the only commercial site qualified to dispose mixed wastes in the United States. Financially, it is the most successful company in this sector of the industry, and as such, it is the envy of the low-level mixed waste ("LLMW") market competitors. We expect that our relationship with EnviroCare will grow as the Company can deliver existing and future clients (with their wastes) seeking the Company's SET technology at EnviroCare's doorstep. One of our Company's handicaps to the full commercialization of SET has been the fact that we have not had a fixed, permitted site at which to operate. With the EnviroCare relationship, the Company now has the site.
Potential Bookings in 2004. As I have reported to you earlier, Hanford, WA is one of the principal repositories of stored LLMW in the nation. Hanford is a federal site, located near Richland, Washington (part of the Tri-Cities area). As we repositioned the Company's business to focus on the processing of LLMW it became clear that we needed to be physically part of this community, hence the relocation of our offices. Hanford was one of the two principal sites in developing fissionable materials for the atomic bomb in WWII (the Manhattan Project). The other principal site is Oak Ridge, where we have a Commodore office. The DOE has placed the clean-up of Hanford's facilities as a top priority. There are many interested parties involved, ranging from the local city governments, the State of Washington, the US EPA, employees of contractors in the effort, etc. It is a tangle of special interests -- including local, state and federal government, and even several tribes of Native Americans. While serving as the Assistant Secretary of Energy, I had responsibility for Hanford and its operations. Although the Hanford operating budget was relatively low at that time, they were actually in a production mode -- completing the Fast Flux Test Facility ("FFTF") construction, generating plutonium, reprocessing fuel, generating electrical power, and performing applied research and development. During this time period the work force averaged 6000 people. Currently, Hanford no longer operates in a production mode, yet the workforce has tripled, as has the site's budget.
Enough of my reminiscing. Business is business. We have moved our business operations to Hanford for two significant purposes:
a) To treat the large amounts of waste sodium as a result of the FFTF
decommissioning; and
b) To treat a portion of the vast amounts of mixed wastes stored
in Hanford.
a) FFTF. Recall that elemental sodium is an input reagent,
along with anhydrous liquid ammonia, for the treatment of
LLMW and other toxic wastes in the Company's SET Process.
However, another application of SET is to treat sodium
(elemental) itself.
We can convert elemental sodium to a variety of useful or
disposable compounds. Elemental sodium must be converted
into a stable compound (sodium and water/moisture is
explosive!).
One of the worst nuclear reactor incidents in history was
the Soviet BN 300 explosion where water came in contact with
sodium in the reactor's heat transport system; the explosive
event was large enough to be detected by our US satellites.
FFTF has over 2 million pounds of elemental sodium which must
be removed and treated as part of the FFTF de-activation program.
The total estimated cost of the de-activation program (DOE
estimate) is $500 million, and the sodium treatment component is
a significant part of that number. The DOE is treating the
entire project as a Small Business set-aside. The Company will
soon be announcing our teaming arrangements for pursuing the
sodium treatment element of the overall FFTF decommissioning
effort. Competing technologies for treating sodium involve a
water-sodium reaction, and are confined to converting sodium to
sodium hydroxide, while SET can convert it to a variety of
compounds or, in many instances, we can use the "waste" sodium
directly to treat mixed wastes and toxic wastes -- as we did
for Los Alamos Laboratory last year. For the FFTF project, we
believe SET offers a cheaper, safer, more versatile, and faster
process than its competitors' processes, and it can indeed use
the elemental sodium to treat LLMW.
b) Treatment of mixed wastes at Hanford. Hanford had planned to
rely heavily on a local Richland company, Allied Technology
Group, for the thermal treatment of its organic LLMW. However,
ATG's equipment could not be made to perform, and ultimately the
company went bankrupt in 2002. ATG was purchased by a group of
local investors, Pacific EcoSolutions ("PECOS") in 2003. A
natural progression we have been pursuing is to substitute the
proven SET technology for the failed thermal technology. We
are in active discussions with the management of PECOS on this
subject. The goal is to make PECOS the local treatment site of
choice for the local Hanford wastes. In steady state operations,
this could mean an annual processing volume that is very
attractive to the Company.
Oak Ridge engineering procurements. There are two such procurements in the solicitation phase: environmental sampling, which we are bidding teamed with SAIC, and facilities inspection work concomitant to the decommissioning of K-25; both procurements are on the Oak Ridge reservation. These contracts are multi-million dollar efforts, and are expected to be awarded early in 2004. Oak Ridge, like Hanford, also has a problem with reliable and economic treatment of LLMW. The Company's success at EnviroCare and Hanford could help us step into the LLMW processing market in Oak Ridge.
Chemical Weapons Destruction. We have not lost sight of SET's attributes in this arena, although we terminated active pursuit several years ago when we dismantled the Teledyne-Commodore LLC, and broke away from the US Army ACWA program. The US Army, the client then and now, desired incineration at fixed sites. The National Security Establishment, since the events of 9/11, seeks portable, rapid deployment chemical weapon destruction solutions, so they can be loaded onto aircraft and set up in weeks rather than a year or more to construct incineration facilities. This aspect of SET application may be back on the front burner in 2004.
Finally, you must understand by now that I am conservative on financial projections for the future of the Company. We have been in, and are now, in a difficult repositioning phase. But, conservatively put, I believe the future of this company is very bright -- it had to go through a gut wrenching survival period where we got back to fundamentals -- allowing us to take the SET product to a focused market target. We hope our stock value will reflect our progress as we capture the various business opportunities I have outlined.
All of the management team is completely dedicated to making Commodore a huge success.
Shelby T. Brewer
Chairman & Chief Executive Officer
Commodore Applied Technologies, Inc. is a diverse technical solutions company focused on high-end environmental markets. The Commodore family of companies includes subsidiaries Commodore Solution Technologies and Commodore Advanced Sciences. The Commodore companies provide technical engineering services and patented remediation technologies designed to treat hazardous waste from nuclear and chemical sources. More information is available on the Commodore web site at www.commodore.com.
