UNITED STATES SECURITIES AND EXCHANGE COMMISSION

                              WASHINGTON, DC 20549


                               AMENDMENT NO. 1 TO
                                   FORM 10-QSB


                Quarterly Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934

                  For the quarterly period ended March 31, 2005

                   Transition Report under Section 13 or 15(d)
                     of the Securities Exchange Act of 1934

             For the transition period from __________ to __________

                          COMMISSION FILE NO. 000-30191

                       KRONOS ADVANCED TECHNOLOGIES, INC.


             (Exact name of registrant as specified in its charter)



           NEVADA                                     87-0440410
--------------------------------       ---------------------------------------
(State of other jurisdiction of         (I.R.S. Employer Identification Number)
incorporation or organization)


     464 Common Street, Suite 301, Belmont, MA                       02478
  ----------------------------------------------                   --------
      (Address of principal executive offices)                    (Zip Code)


Registrant's telephone number, including area code:        (617) 993-9965
--------------------------------------------------      -------------------


(1) Registrant 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.
/X/ Yes // No

As of May 12, 2005, there were 71,186,345 shares outstanding of the issuer's
common stock.

<PAGE>

                                     PART I

FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

The following comprise our condensed (unaudited) consolidated financial
statements for the three and nine month periods ended March 31, 2005.






























                                       2

<PAGE>

                       KRONOS ADVANCED TECHNOLOGIES, INC.
                           CONSOLIDATED BALANCE SHEETS


                                              March 31,       June 30,
                                                2005            2004
                                             ------------   ------------
Assets                                       (Unaudited)

Current Assets
 Cash                                        $   187,774    $    69,063
 Accounts receivable, net                         48,929         97,544
 Prepaids and other                              222,865         71,050
                                             ------------   ------------
    Total Current Assets                         459,568        237,657
                                             ------------   ------------
Net Property and Equipment                         4,181          6,292
                                             ------------   ------------
Other Assets
 Intangibles                                   2,012,067      2,253,029
                                             ------------   ------------
    Total Other Assets                         2,012,067      2,253,029
                                             ------------   ------------
Total Assets                                 $ 2,475,816    $ 2,496,978
                                             ============   ============

                      Liabilities and Shareholders' Deficit

Current Liabilities
 Accrued expenses and payables
  to directors and officers                  $    16,837     $   36,258
 Accounts payable                                 98,102        272,544
 Accrued expenses                                438,945        312,346
 Deferred revenue                                   -             3,218
 Notes payable to directors and
  officers, current portion                      278,221         76,637
 Other notes payable, current portion          2,031,417        722,289
                                             ------------   ------------
    Total Current Liabilities                  2,863,522      1,423,292
                                             ------------   ------------
Long Term Liabilities
 Notes payable:
  Notes payable to directors and officers        145,693      1,063,266
  Other notes payable                          2,403,638      1,983,039
  Discount on notes payable                         -          (589,261)
                                             ------------   ------------
    Total Long Term Liabilities                2,549,331      2,457,044
                                             ------------   ------------
    Total Liabilities                          5,412,853      3,880,336
                                             ------------   ------------
Shareholders' Deficit
 Common stock, authorized 500,000,000
  shares of $.001 par value -
  71,186,345 and 61,323,845 shares
  outstanding on March 31, 2005 and
  June 30, 2004, respectively                     71,186         61,323
 Capital in excess of par value               22,959,327     18,578,019
 Accumulated deficit                         (25,967,550)   (20,022,700)
                                             ------------   ------------
    Total Shareholders' Deficit               (2,937,037)    (1,383,358)
                                             ------------   ------------
Total Liabilities and Shareholders' Deficit  $ 2,475,816    $ 2,496,978
                                             ============   ============

   The accompanying notes are an integral part of these financial statements.

                                       3

<PAGE>

                       KRONOS ADVANCED TECHNOLOGIES, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>

                                   Three months ended March 31,       Nine months ended March 31,
                                 -------------------------------     ------------------------------
                                    2005               2004              2005             2004
                                 ------------       ------------     ------------      ------------
                                 (Unaudited)        (Unaudited)      (Unaudited)       (Unaudited)
<S>                              <C>                <C>              <C>               <C>
Sales                            $    48,928        $   100,108      $   430,379       $   341,653

Cost of sales                         41,549             71,745          375,397           227,550
                                 ------------       ------------     ------------      ------------
Gross Profit                           7,379             28,363           54,982           114,103
                                 ------------       ------------     ------------      ------------

Selling, General and
 Administrative expenses
  Compensation and benefits          371,413            213,805          889,415           626,352
  Research and development            23,642             26,877           78,207            65,728
  Professional services              108,176             85,755           95,119           203,039
  Depreciation and amortization       98,931             72,046          297,206           213,090
  Insurance                           46,120             36,937          138,361           110,813
  Facilities                          23,859             23,897           67,792            68,607
  Other                               26,414             58,874          166,356           162,372
                                 ------------       ------------     ------------      ------------
 Selling, General and
  Administrative expenses            698,555            518,191        1,732,456         1,450,001
                                 ------------       ------------     ------------      ------------

Net Operating Loss                  (691,176)          (489,828)      (1,677,474)       (1,335,898)

Loss on Debt Restructuring              -                  -          (3,857,467)             -
Other Income                           1,012               -               1,415            22,000
Interest Expense                    (117,168)          (124,598)        (411,324)         (421,020)
                                 ------------       ------------     ------------      ------------

Net Loss                         $  (807,332)       $  (614,426)     $(5,944,850)      $(1,734,918)
                                 ============       ============     ============      ============

Net Loss Per Share
 - Basic and diluted             $     (0.01)       $     (0.01)     $     (0.09)      $     (0.03)
                                 ============       ============     ============      ============

Weighted average
 shares outstanding
 - Basic and diluted              71,578,502         58,988,534       67,612,904        56,627,368
                                 ============       ============     ============      ============
</TABLE>



   The accompanying notes are an integral part of these financial statements.

                                       4

<PAGE>


                       KRONOS ADVANCED TECHNOLOGIES, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS



                                      For the nine months ended March 31,
                                      -----------------------------------
                                           2005               2004
                                        ------------       -------------
                                        (Unaudited)        (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
 Net loss from operations               $(5,944,850)       $ (1,734,918)
 Adjustments to reconcile net loss to
 net cash used in operations
  Depreciation and amortization             297,206             213,090
  Common stock issued for
   compensation/services                       -                148,430
  Accretion of note discount                 92,965             191,438
  Loss on debt restructuring              3,857,467                -
 Change In
  Accounts receivable                        48,615              16,935
  Prepaid expenses and other assets          60,685             (19,577)
  Deferred revenue                           (3,218)           (130,533)
  Accounts payable                         (193,863)            (16,437)
  Accrued expenses and other liabilities    126,599              12,710
                                        ------------       -------------
    Net cash Used in Operations          (1,658,394)         (1,318,862)

CASH FLOWS FROM INVESTING ACTIVITIES
 Investment in patent protection            (54,134)           (104,760)
                                        ------------       -------------
Net cash Used in Investing Activities       (54,134)           (104,760)
                                        ------------       -------------

CASH FLOWS FROM FINANCING ACTIVITIES
 Issuance of common stock                 1,030,000           1,376,861
 Proceeds from short-term borrowings        100,000                -
 Repayments of short-term borrowings     (1,086,261)           (319,746)
 Proceeds from long-term borrowings       4,400,000                -
 Repayments from long-term borrowings    (2,400,000)               -
 Debt acquisition costs                    (212,500)               -
                                        ------------       -------------
Net cash Provided by Financing
 Activities                               1,831,239           1,057,115
                                        ------------       -------------
NET (DECREASE) INCREASE IN CASH             118,711            (366,507)

CASH
 Beginning of period                         69,063             641,178
                                        ------------       -------------
 End of period                          $   187,774        $    274,671
                                        ============       =============
Supplemental schedule of non-cash
investing and financing activities:

Interest paid in cash                   $   111,359        $      9,430
                                        ============       =============
Accounts payable/accrued expense
 converted to notes payable             $      -           $  1,139,903
                                        ============       =============


   The accompanying notes are an integral part of these financial statements.

                                       5

<PAGE>

                       KRONOS ADVANCED TECHNOLOGIES, INC.
               NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
                                   (UNAUDITED)

NOTE 1 - BASIS OF PRESENTATION

The accompanying  unaudited consolidated financial statements of Kronos Advanced
Technologies,  Inc.  (the  "Company")  have been  prepared  in  accordance  with
generally  accepted  accounting  principles for interim  financial  information.
Accordingly,  they do not  include  all the  information  and notes  required by
generally accepted accounting principles for complete financial  statements.  In
the opinion of  management,  all  adjustments  necessary  to present  fairly the
information  set forth  therein have been  included.  Operating  results for the
three and nine month periods ended March 31, 2005 are not necessarily indicative
of the results that may be experienced for the fiscal year ending June 30, 2005.

     These  consolidated  financial  statements are those of the Company and its
wholly-owned subsidiary. All significant inter-company accounts and transactions
have  been  eliminated  in  the  preparation  of  the   consolidated   financial
statements.

The accompanying consolidated financial statements should be read in conjunction
with the Kronos  Advanced  Technologies,  Inc.  Form  10-KSB for the fiscal year
ended June 30, 2004 filed on October 15, 2004.

NOTE 2 - REALIZATION OF ASSETS AND GOING CONCERN

The  accompanying  consolidated  financial  statements  have  been  prepared  in
conformity with accounting principles generally accepted in the United States of
America,  which contemplate  continuation of the Company as a going concern. The
Company has sustained  losses from  operations in recent years,  and such losses
have continued through the period ended March 31, 2005. In addition, the Company
has used, rather than provided, cash in its operations. The Company is currently
using its  resources  in its  efforts to raise  capital  necessary  to bring the
Kronos technology to market, and to provide for its working capital needs.

In view of the matters described in the preceding paragraph, recoverability of a
major portion of the asset amounts  shown in the  accompanying  balance sheet is
dependent upon continued  operations of the Company,  which in turn is dependent
upon the Company's  ability to meet its financing  requirements  on a continuing
basis, to maintain  present  financing and to succeed in its future  operations.
The consolidated financial statements do not include any adjustments relating to
the  recoverability  and classification of recorded asset amounts or amounts and
classification  of  liabilities  that might be  necessary  should the Company be
unable to continue in existence.

Management  has taken the  following  steps with  respect to its  operating  and
financial requirements,  which it believes are sufficient to provide the Company
with the ability to continue in existence:

HoMedics Licensing  Agreement.  In October 2002, Kronos Air Technologies,  Inc.,
and HoMedics  USA,  Inc.  executed a multiyear,  multi-million-dollar  Licensing
Agreement to bring Kronos' proprietary technology to the consumer. The agreement
provides  for  exclusive  North  American,  Australian  and New  Zealand  retail
distribution  rights for next generation  consumer air movement and purification
products based on the patented  Kronos  technology.  In August 2004, the Company
and HoMedics,  Inc. began preparing the Kronos-based consumer standalone product
line for mass production.  In February 2005, Kronos and HoMedics began expanding
product production beyond the initial prototypes and initiated increased product
testing to  complete  the  product  claims  platform.  The  initial  term of the
agreement  is three and one half years from the  initial  sale of  consumer  air
purification  products by  HoMedics,  which shall be no later than  December 31,
2006, with the option to extend the agreement for six additional  years.  Kronos
will be compensated  through an initial  royalty  payment and ongoing  quarterly
royalty  payments  based on a  percentage  of sales.  HoMedics  will pay minimum
royalty  payments of at least $2.0 million  during the initial term and on-going
royalty payments to extend the agreement.  Kronos will retain full rights to all
of its intellectual property.

US Navy SBIR.  In  November  2002,  Kronos was awarded by the U. S. Navy a Small
Business Innovation Research Phase II contract worth $580,000, plus an option of
$145,000. The Phase II contract (commercialization phase) is an extension of the
Phase I and the Phase I Option work that began in 2001.  It is intended that the
Kronos devices being  developed under this contract will be embedded in existing
HVAC systems in order to move air more efficiently than  traditional,  fan-based
technology.  During  Phase II,  Kronos  developed  and  produced  a set of fully
controlled  devices  that  represent  a "cell" of an advanced  distributive  air
management   system  with  medium  capacity   airflow  in  a  U.S.  Navy  unique
environment.  The "cell" has been designed to be easily  adjustable to a variety
of parameters such as duct size, airflow  requirements,  and air quality.  As of
March 31, 2005, the U. S. Navy had provided  Kronos with $580,000 in funding for
this  effort.  Kronos is  scheduled  to ship the  finished  product to  Northrop
Grumman for testing and evaluation in May 2005.

US Army SBIR Option.  In October 2003,  the U.S.  Army awarded  Kronos the Small
Business Innovation Research Phase II contract.  The contract is worth $369,000.
The contract is to develop Kronos'  proprietary  Electrostatic  Dehumidification
Technology  ("EDT").  Kronos  initiated  work  under  the Phase II  contract  in
December  2003. In December  2004,  the U.S. Army extended the first year of the
contract to February  2005.  In February  2005,  because the Army's focus was on
researching   a  specific   aspect  of  using  an   electrostatic   process  for
dehumidification  and did not share Kronos' vision for a broader application for
using the unique  aspects of EDT for  dehumidification,  the Army decided not to
pursue their Phase II option.  As of March 31, 2005, the U. S. Army had provided
Kronos with $275,000 in funding for this effort and another $49,000 was invoiced
by Kronos during the quarter ended March 31, 2005.

                                       6

<PAGE>

Cornell Equity and Equity Backed Financing. In October 2004, Kronos entered into
agreements  for up to $20.5 million in equity and equity  backed debt  financing
from  Cornell  Capital  Partners.  In October  2004,  Kronos  sold five  million
unregistered  shares of Kronos  common  stock for gross  proceeds  of  $500,000.
Cornell Capital Partners  committed to provide $4 million pursuant to two Equity
Backed  Promissory  Notes:  $2  million  was  funded  upon  the  filing  an SB-2
Registration  Statement and $2 million will be funded upon the SEC declaring the
Registration Statement effective.  Kronos executed a Standby Equity Distribution
Agreement  for up to $20  million  of  funding  which  Kronos  has the option to
drawdown  against  in  increments  as  large  as  $1.5  million  over  the  next
twenty-four months.

HoMedics  provided debt  financing.  In October 2004,  HoMedics agreed to extend
repayment  of Kronos debt and to provide an  additional  $1.0 million in funding
(refer to Note 10 - Commitments and Contingencies below).

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Accounting  Method.  The Company's  financial  statements are prepared using the
accrual method of accounting. The Company has elected a June 30 fiscal year end.

Reclassifications.   Certain  reclassifications  have  been  made  to  the  2004
financial statements in order to conform to the 2005 presentation. None of these
reclassifications  affected previously  reported financial position,  results of
operations or cash flows of the Company.

Principles  of  Consolidation.  The  consolidated  financial  statements  of the
Company  include  those of the Company and of each of its  subsidiaries  for the
periods  in  which  the  subsidiaries  were  owned/held  by  the  Company.   All
significant  intercompany  accounts and transactions have been eliminated in the
preparation of the consolidated financial statements.  At March 31, 2005, we had
only one subsidiary, Kronos Air Technologies, Inc.

Use of Estimates.  The  preparation of financial  statements in conformity  with
accounting  principles  generally  accepted  in the  United  States  of  America
requires  management to make estimates and assumptions  that affect the reported
amounts  of assets and  liabilities  and  disclosure  of  contingent  assets and
liabilities at the dates of the financial statements and the reported amounts of
revenues and expenses during the periods. Actual results could differ from those
estimates.

Concentrations  of Credit  Risk.  Financial  instruments  which can  potentially
subject the Company to  concentrations  of credit risk  consist  principally  of
trade  receivables.  The Company  manages its exposure to risk  through  ongoing
credit  evaluations of its customers and generally does not require  collateral.
The Company  maintains an allowance for doubtful  accounts for potential  losses
and does not  believe it is exposed to  concentrations  of credit  risk that are
likely to have a material adverse impact on the Company's  financial position or
results of operations.

Cash and Cash  Equivalents.  The Company  considers all highly liquid short-term
investments,  with a remaining maturity of twelve months or less when purchased,
to be cash equivalents.

Accounts  Receivable.  The  Company  provides an  allowance  for losses on trade
receivables based on a review of the current status of existing  receivables and
management's  evaluation of periodic aging of accounts.  Accounts receivable are
shown net of allowances  for doubtful  accounts of $0 at March 31, 2005 and June
30, 2004. The Company charges off accounts  receivable against the allowance for
losses when an account is deemed to be uncollectable.

Property  and   Equipment.   Property  and   equipment  are  recorded  at  cost.
Depreciation  is provided over the estimated  useful lives of the assets,  which
range from three to seven years. Expenditures for major renewals and betterments
that extend the  original  estimated  economic  useful  lives of the  applicable
assets are  capitalized.  Expenditures  for normal repairs and  maintenance  are
charged to expense as incurred. The cost and related accumulated depreciation of
assets sold or otherwise disposed of are removed from the accounts, and any gain
or loss is included in operations.

Intangibles.  The Company uses  assumptions in establishing  the carrying value,
fair  value and  estimated  lives of our  long-lived  assets and  goodwill.  The
criteria used for these evaluations include management's estimate of the asset's
continuing ability to generate positive income from operations and positive cash
flow in  future  periods  compared  to the  carrying  value  of the  asset,  the
strategic  significance  of any  identifiable  intangible  asset in our business
objectives,  as well as the  market  capitalization  of the  Company.  Cash flow
projections  used for  recoverability  and impairment  analysis use the same key
assumptions and are consistent with projections used for internal budgeting, and
for lenders and other third  parties.  If assets are  considered to be impaired,
the  impairment  recognized  is the  amount by which the  carrying  value of the
assets  exceeds  the  fair  value  of  the  assets.  Useful  lives  and  related
amortization  or  depreciation  expense are based on our  estimate of the period
that the assets will generate  revenues or otherwise be used by Kronos.  Factors
that would influence the likelihood of a material change in our reported results
include  significant  changes in the asset's  ability to generate  positive cash
flow,  loss of legal  ownership or title to the asset, a significant  decline in
the economic and competitive environment on which the asset depends, significant
changes in our strategic business objectives, and utilization of the asset.

Income Taxes.  Income taxes are accounted for in accordance  with the provisions
of SFAS No. 109.  Deferred tax assets and  liabilities  are  recognized  for the
future tax  consequences  attributable  to  differences  between  the  financial
statement  carrying  amounts  of  existing  assets  and  liabilities  and  their
respective  tax bases.  Deferred tax assets and  liabilities  are measured using
enacted  tax rates  expected  to apply to  taxable  income in the years in which
those temporary  differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.  Valuation allowances are
established,  when  necessary,  to reduce  deferred  tax  assets to the  amounts
expected to be realized, but no less than quarterly.

                                       7

<PAGE>

Research and Development Expenses. Costs related to research and development are
charged to research and development expense as incurred.

Earnings (Loss) Per Share. Basic earnings (loss) per share is computed using the
weighted average number of shares outstanding. Diluted earnings (loss) per share
is computed using the weighted average number of shares outstanding adjusted for
the  incremental  shares  attributed  to  outstanding  options  and  warrants to
purchase common stock, when their effect is dilutive.

Revenue  Recognition.  The Company  recognizes  revenue in accordance with Staff
Accounting Bulletin (SAB) 104, which requires evidence of an agreement, delivery
of the product or services at a fixed or  determinable  price,  and assurance of
collection within a reasonable period of time. Further,  Kronos Air Technologies
recognizes revenue on the sale of the  custom-designed  contract sales under the
percentage-of-completion  method of accounting in the ratio that costs  incurred
to date bear to estimated total costs. For uncompleted contracts where costs and
estimated profits exceed billings, the net amount is included as an asset in the
balance  sheet.  For  uncompleted  contracts  where  billings  exceed  costs and
estimated  profits,  the net amount is included  as a  liability  in the balance
sheet.  Sales are reported net of applicable  cash  discounts and allowances for
returns. Revenue from government grants for research and development purposes is
recognized as revenue as long as the Company determines that the government will
not be the sole or  principal  expected  ultimate  customer for the research and
development activity or the products resulting from the research and development
activity.  Otherwise,  such  revenue is recorded  as an offset to  research  and
development  expenses in accordance with the Audit and Accounting Guide,  Audits
of Federal Government Contractors. In either case, the revenue or expense offset
is not  recognized  until  the  grant  funding  is  invoiced  and  any  customer
acceptance provisions are met or lapse.

Stock,  Options and  Warrants  Issued for  Services.  Issuances of shares of the
Company's stock to employees or  third-parties  for  compensation or services is
valued using the closing market price on the date of grant for employees and the
date services are completed for non-employees. Issuances of options and warrants
of the Companies stock are valued using the Black-Scholes option model.

Stock Options.  Statement of Financial  Accounting Standards No. 148 "Accounting
for Stock-Based  Compensation-Transition  and  Disclosure,  an Amendment of FASB
Statement No. 123," amends the disclosure requirements of Statement of Financial
Accounting Standards No. 123,  "Accounting for Stock-Based  Compensation" ("SFAS
123"),  to  require  more  prominent  disclosures  in both  annual  and  interim
financial statements regarding the method of accounting for stock-based employee
compensation and the effect of the method used on reported results.

The Company  accounts for  stock-based  compensation  to employees and directors
using the intrinsic  value method of accounting as prescribed  under  Accounting
Principles  Board  Opinion  (APB)  No.  25,  "Accounting  for  Stock  Issued  to
Employees"  and  related  Interpretations.  Under the  intrinsic  value  method,
because the exercise  price of the Company's  employee  stock options equals the
market price of the underlying  stock on the date of the grant,  no compensation
expense is recognized in the Company's Consolidated Statements of Operations.

RECENT  ACCOUNTING  PRONOUNCEMENTS - In December 2004, the FASB issued Statement
123r (revised  2004) which is a revision of FASB  Statement No. 123,  Accounting
for  Stock-Based  Compensation.  This  Statement  supersedes APB Opinion No. 25,
Accounting  for  Stock  Issued  to  Employees,  and its  related  implementation
guidance.   This  Statement   establishes   standards  for  the  accounting  for
transactions  in which an entity  exchanges its equity  instruments for goods or
services.  It also addresses  transactions in which an entity incurs liabilities
in  exchange  for  goods or  services  that are  based on the fair  value of the
entity's  equity  instruments  or that may be settled by the  issuance  of those
equity   instruments.   This  Statement  focuses  primarily  on  accounting  for
transactions in which an entity obtains employee services in share-based payment
transactions.  This  Statement  requires a public  entity to measure the cost of
employee services received in exchange for an award of equity  instruments based
on the grant-date fair value of the award (with limited  exceptions).  That cost
will be  recognized  over the period  during  which an  employee  is required to
provide service in exchange for the award--the requisite service period (usually
the vesting period).  The Company files as a small business issuer and must meet
the  requirements  of this Statement for  accounting  periods after December 15,
2005.  Adoption  of FASB 123r will have a  significant  impact on the  financial
statements of the Company through the expensing of stock option grants.


NOTE 4 -- INCOME TAXES

The  composition of deferred tax assets and the related tax effects at March 31,
2005 and June 30, 2004 are as follows:


                                               March 31, 2005
                                                (Unaudited)     June 30, 2004
                                                -------------   -------------
Benefit from carryforward of capital and
 net operating losses                           $  5,674,537    $  4,841,083
Other temporary differences                          156,740         156,740
Less:
  Valuation allowance                             (5,831,277)     (4,997,823)
                                                -------------   -------------
Net deferred tax asset                          $       -       $       -
                                                =============   =============

                                       8

<PAGE>

The other  temporary  differences  shown above relate  primarily  to  impairment
reserves  for  intangible  assets,  and accrued and deferred  compensation.  The
difference  between the income tax  benefit in the  accompanying  statements  of
operations and the amount that would result if the U.S.  Federal  statutory rate
of 34% were applied to pre-tax loss is as follows:

<TABLE>
<CAPTION>

                                                         March 31, 2005
                                                           (Unaudited)                June 30,2004
                                                   ---------------------------  ----------------------------
                                                                      % of                         % of
                                                        Amount    Pre-Tax Loss      Amount      Pre-Tax Loss
                                                   -------------  ------------  --------------  ------------
<S>                                                <C>                  <C>    <C>                    <C>
Benefit for income tax at federal statutory rate   $  2,017,731         34.0 %  $     848,265          34.0%
Benefit for income tax at state statutory rate          118,690          2.0 %         49,728           1.9%
Non-deductible expenses                              (1,302,968)       (22.0)%       (123,348)        (4.9)%
Increase in valuation allowance                        (833,453)       (14.0)%       (774,645)       (31.0)%
                                                   -------------  ------------  --------------  ------------
                                                   $       -              0.0%  $        -              0.0%
                                                   =============  ============  ==============  ============
</TABLE>

The non-deductible expenses shown above related primarily to the amortization of
intangible  assets and to the accrual of stock  options for  compensation  using
different valuation methods for financial and tax reporting purposes.

At March 31, 2005, for federal income tax and alternative  minimum tax reporting
purposes,  the Company has  approximately  $13.4  million of unused  Federal net
operating  losses,  $2.3  million of capital  losses and $9.7  million of unused
State net operating  losses  available  for  carryforward  to future years.  The
benefit from  carryforward  of such losses will expire in various  years between
2006 and 2025 and could be  subject  to  limitations  if  significant  ownership
changes occur in the Company.

NOTE 5 - SEGMENTS OF BUSINESS

The  Company  operates  principally  in one  segment of  business:  The  Company
licenses,  manufactures  and distributes air movement and  purification  devices
utilizing  the Kronos  technology.  For the nine months ended March 31, 2005 and
the fiscal year ended June 30, 2004, the Company operated only in the U.S.

NOTE 6 - NET LOSS PER SHARE

Weighted average shares  outstanding used in the net loss per share  calculation
were  67,612,904  and  56,627,368  for the nine months  ended March 31, 2005 and
2004, respectively.

As of March 31,  2005,  there were  outstanding  options to purchase  12,813,812
shares of the  Company's  common  stock and  outstanding  warrants  to  purchase
42,300,000 shares of the Company's common stock. These options and warrants have
been  excluded  from the  earnings  per  share  calculation  as their  effect is
anti-dilutive. As of March 31, 2004, there were outstanding options and warrants
to purchase  13,216,782 and 15,792,342  shares,  respectively,  of the Company's
common  stock.  These  options  have been  excluded  from the earnings per share
calculation as their effect is anti-dilutive.

NOTE 7 - NOTES PAYABLE

The  Company  had the  following  obligations  as of March 31, 2005 and June 30,
2004,


                                         March 31, 2005       June 30, 2004
                                           (Unaudited)
                                        ---------------       ---------------
 Obligation to HoMedics (1)             $    2,400,000        $   2,400,000
 Discount on obligation to HoMedics               -                (589,261)
 Obligation to Cornell (2)                   2,000,000                 -
 Obligation to current employees (3)           423,913            1,139,903
 Obligation for finance leases (4)              35,056               50,328
 Obligation to Fusion Capital (5)                 -                 200,000
 Obligations to others                            -                  55,000
                                        ---------------       ---------------
                                             4,858,969            3,255,970
Less:
 Current portion                             2,309,638              798,926
                                        ---------------       ---------------
 Total long term obligations net of
     current portion                    $    2,549,331        $   2,457,044
                                        ===============       ===============

                                       9

<PAGE>

(1)  This note has a 5 year  term and bears  interest  at 6%. In  October  2004,
     HoMedics  agreed to extend  repayment  of this  note.  This note was issued
     along  with  warrants  for the  purchase  of  13.6  million  shares  of the
     Company's common stock. As a result,  the note was recorded with a discount
     of $893,000 that was being  amortized  against  earnings using the interest
     rate  method of  amortization.  In October  2004,  the note was  amended to
     extend payment terms (refer to Note 10 - Commitments and Contingencies). As
     a result,  the discount on the  obligation  was expensed in full during the
     quarter ended December 31, 2004.

(2)  This note has less than a one year term and bears interest at 12%. Payments
     on the note begin upon a Registration Statement being declared effective by
     the SEC.

(3)  These notes bear interest at the rate of 12% and are due December 31, 2006.

(4)  See Note 8 below.

(5)  This is a non-interest  bearing demand  obligation and was only outstanding
     until Fusion Capital  purchased  enough stock from the Company to eliminate
     the advance  position.  In November  2004,  Fusion  Capital  purchased  two
     million  shares of the  Company's  Common  Stock to  eliminate  the advance
     position.

NOTE 8 - CAPITAL LEASES

The Company entered into a capital lease for the purpose of purchasing equipment
used in the research and product  development  center.  Certain  officers of the
Company personally  guaranteed the capital lease if the Company does not fulfill
its terms of the lease  obligations.  The leases  are for 36 months and  contain
bargain  purchase  provisions  so that the Company can purchase the equipment at
the end of each  lease.  The  following  sets  forth the  minimum  future  lease
payments  and  present  values of the net  minimum  lease  payments  under these
capital leases:

Minimum Future Lease Payments and Present Values of the Net Minimum Lease


Payments

Period ended March 31,
-----------------------------------
     2005                                         $ 36,337
     2006                                            3,887
                                                  ---------
 Total minimum lease payments                       40,224
Less:  Executory costs                                -
                                                  ---------
 Net minimum lease payments                         40,224
Less:  Imputed interest                             (5,168)
                                                  ---------
 Present value of net minimum lease payments      $ 35,056
                                                  =========

Of  the  equipment  that  was  purchased  using  capital  leases,   $10,650  was
capitalized  and  the  remaining  $65,782  was  expensed  through  research  and
development  and cost of sales.  In the three and nine  months  ended  March 31,
2005,  the Company paid $6,047 and $22,016 in principal and $1,745 and $6,744 in
interest on capital  leases,  respectively.  In the three and nine months  ended
March 31, 2004,  the Company paid $5,316 and $15,018 in principal and $3,769 and
$12,234 in interest on capital leases, respectively.

NOTE 9 - CONSULTING AGREEMENTS

On October 31, 2003, the Company  entered into a 10-month  consulting  agreement
with Joshua B.  Scheinfeld and Steven G. Martin,  principals of Fusion  Capital,
for consulting services with respect to operations, executive employment issues,
employee  staffing,  strategy,  capital structure and other matters as specified
from time to time.  As  consideration  for their  services,  the Company  issued
360,000  shares  of its  common  stock.  In  accordance  with  EITF  96-18,  the
measurement date was established as the contract date of October 31, 2003 as the
share grant was  non-forfeitable  and fully  vested on that date.  The stock was
valued on that date at $0.22 a share (the closing price for the Company's common
stock on the  measurement  date).  The stock  issuance  has been  recorded  as a
prepaid  consulting fee and was amortized to  Professional  Fee Expense  ratably
over the ten month term of the contract. Under this contract, expenses of $0 and
$12,586  were  recorded  for the three and nine  months  ended  March 31,  2005,
respectively.

                                       10

<PAGE>

NOTE 10 - COMMITMENTS AND CONTINGENCIES

In October  2004,  HoMedics  agreed to extend  repayment  of Kronos  debt and to
provide an  additional  $1 million in  funding.  HoMedics  has agreed to provide
Kronos with an  additional  $1 million in  financing - $925,000 in secured  debt
financing  and  $75,000  for the  purchase  of  additional  26,507,628  ten year
warrants  exercisable at $0.10 per share.  HoMedics  increased  their  potential
equity  position  in  Kronos to 30% of Kronos  common  stock on a fully  diluted
basis.  The  $925,000  will  be paid  to  Kronos  upon  Kronos  achieving  three
milestones: (i) $175,000 shall be funded upon delivery and successful testing of
electronic  boards  and  power  supplies  from  Kronos'  contract  manufacturing
partner,  (ii) $250,000  shall be funded upon  obtaining  tooling of the current
prototype   configuration   and  device  testing  and  performing  to  HoMedics'
specifications,  and (iii)  $500,000  shall be funded upon the  initial  sale of
Kronos-based air purifiers by HoMedics. In addition, quarterly debt payments and
the maturity date for existing debt have been extended.  Quarterly  payments due
on the  outstanding  $2.4  million in  secured  debt  financing,  which had been
scheduled to begin in August 2004,  will be due the earlier of Kronos receipt of
royalty payments from HoMedics sale of Kronos-based air purification products or
two years.  The maturity date of the $2.4 million in debt has been extended from
May 2008 to October of 2009;  the  maturity  date on the  $925,000  will also be
October 2009.  The interest rate will remain at 6% for the $2.4 million in debt;
the rate will also be 6% on the additional debt. In conjunction with the October
2004 agreements, Kronos issued HoMedics a warrant to buy 26. 5 million shares of
Kronos  common  stock.  As a result  of this  debt  restructuring,  the  Company
recognized a loss of $3,857,467  which represents the  reacquisition  price less
the net carrying value of the debt  restructuring.  The  reacquisition  price is
made up of $2,400,000  which is the amount of the new debt and $3,361,161  which
represents the value of the warrants  using the  Black-Scholes  method.  The net
carrying value is the $2,400,000 which is the old debt less the unamortized debt
discount of $496,296.

In October  2004,  Kronos  entered into  agreements  for up to $20.5  million in
equity and equity  backed debt  financing  from  Cornell  Capital  Partners.  In
October 2004, Kronos sold 5 million  unregistered  shares of Kronos common stock
for gross  proceeds of $500,000 to Cornell  Capital  Partners.  Cornell  Capital
Partners  committed  to  provide  $4  million  pursuant  to  two  Equity  Backed
Promissory Notes, which is to be funded as follows: $2 million was funded upon
the filing of an SB-2 Registration  Statement and $2 million will be funded
upon the SEC declaring the Registration  Statement effective.  Kronos executed a
Standby  Equity  Distribution  Agreement for $20 million of funding which Kronos
has the option to drawdown  against in  increments as large as $1.5 million over
the next twenty four months.  Kronos  received  $0.5 million in funding upon the
amendment of the HoMedics  debt  financing and $2 million upon filing of an SB-2
Registration Statement.  Kronos expects to receive an additional $2 million over
the next 30 - 60 days under these agreements.

Employment Agreements

The Company  entered into an Employment  Agreement  with its President and Chief
Executive Officer, Daniel Dwight, effective as of February 11, 2001. The initial
term of the  Employment  Agreement  was for two  years  and the  agreement  will
automatically  renew for  successive one year terms unless written notice within
three  months of the end of the renewal  term is received by either  party.  The
Board of Directors renewed the Employment Agreement on August 13, 2003 and again
on August 15, 2004. The Employment Agreement provides for base cash compensation
of $180,000 per year and eligibility for annual incentive bonus  compensation in
an amount  equal to annual  salary  based on the  achievement  of certain  bonus
objectives.

The  Company  entered  into an  Employment  Agreement  with its Chief  Operating
Officer,  Richard  Tusing,  effective as of January 1, 2003. The initial term of
the  Employment  Agreement  is for two  years and will  automatically  renew for
successive  one year terms unless  written notice within three months of the end
of the initial term or any subsequent  renewal term is received by either party.
The Board of Directors renewed the Employment  Agreement on October 1, 2004. The
Employment Agreement provides for base cash compensation of $160,000 per year.

NOTE 11 - SUBSEQUENT EVENTS

In April 2005, Kronos received formal notification from the United States Patent
and Trademark  Office  indicating  that its application  entitled  Electrostatic
Fluid  Accelerator  Design Geometries has been examined and allowed for issuance
as a  U.  S.  patent.  The  patent  addressed  the  placement,  utilization  and
geometries  of the  electrodes  in Kronos based  devices,  which impacts the air
flow. The patent provides protection for key aspects of Kronos' technology until
2022.

In April 2005,  Spencer Browne, a Member of the Kronos Board of Directors passed
away. Mr. Browne had served as a Board Member since August 2003.

                                       11

<PAGE>

ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

INTRODUCTORY STATEMENTS

FORWARD LOOKING STATEMENTS AND ASSOCIATED RISKS

FORWARD-LOOKING   STATEMENTS  AND  ASSOCIATED   RISKS.   THIS  FILING   CONTAINS
FORWARD-LOOKING   STATEMENTS,   INCLUDING  STATEMENTS  REGARDING,   AMONG  OTHER
THINGS:(A) OUR PROJECTED SALES AND PROFITABILITY, (B) OUR GROWTH STRATEGIES, (C)
ANTICIPATED  TRENDS IN OUR INDUSTRY,  (D) OUR FUTURE  FINANCING  PLANS,  (E) OUR
ANTICIPATED  NEEDS FOR  WORKING  CAPITAL,  AND (F) THE  BENEFITS  RELATED TO OUR
OWNERSHIP  OF KRONOS  AIR  TECHNOLOGIES,  INC.  IN  ADDITION,  WHEN USED IN THIS
FILING,  THE WORDS "BELIEVES,"  "ANTICIPATES,"  "INTENDS," "IN ANTICIPATION OF,"
"EXPECTS,"  AND SIMILAR WORDS ARE INTENDED TO IDENTIFY  CERTAIN  FORWARD-LOOKING
STATEMENTS.   THESE   FORWARD-LOOKING   STATEMENTS  ARE  BASED  LARGELY  ON  OUR
EXPECTATIONS  AND ARE  SUBJECT TO A NUMBER OF RISKS AND  UNCERTAINTIES,  MANY OF
WHICH ARE BEYOND OUR CONTROL.  ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THESE
FORWARD-LOOKING  STATEMENTS AS A RESULT OF VARIOUS FACTORS,  INCLUDING,  WITHOUT
LIMITATION,  THE RISKS OUTLINED UNDER "FACTORS  AFFECTING  KRONOS'  BUSINESS AND
PROSPECTS"  AND MATTERS  DESCRIBED IN THIS FILING  GENERALLY.  IN LIGHT OF THESE
RISKS AND  UNCERTAINTIES,  THERE CAN BE NO  ASSURANCE  THAT THE  FORWARD-LOOKING
STATEMENTS  CONTAINED IN THIS FILING WILL IN FACT OCCUR. WE DO NOT UNDERTAKE ANY
OBLIGATION   TO  PUBLICLY   RELEASE  THE  RESULTS  OF  ANY  REVISIONS  TO  THESE
FORWARD-LOOKING  STATEMENTS  THAT MAY BE MADE TO REFLECT  ANY  FUTURE  EVENTS OR
CIRCUMSTANCES.

GENERAL

Kronos Advanced Technologies,  Inc. is an application  development and licensing
company that has developed and patented  technology that  fundamentally  changes
the  way  air  is  moved,   filtered   and   sterilized.   Kronos  is   pursuing
commercialization of its proprietary  technology in a limited number of markets;
and if we are successful,  we intend to enter additional  markets in the future.
To date, our ability to execute our strategy has been  restricted by our limited
amount of capital.

Technology Description and Benefits

The Kronos  technology  combines high voltage  electronics  and  electrodes.  By
combining these technologies,  a Kronos-based device can both move and clean air
without  any  moving   parts.   Kronos   devices  are   versatile,   energy  and
cost-efficient and capable of multiple design forms. As a result, Kronos devices
have the immediate  potential to be used as a standalone product or to replace a
range of heating,  ventilation  and air  conditioning  products for  residential
usage to high efficiency  particulate  air filtration  systems for operating and
manufacturing clean rooms.

The  proprietary  Kronos  technology  involves the  application  of high voltage
management  across paired  electrical grids to create an ion exchange that moves
and purifies air. Kronos  technology has numerous valuable  characteristics.  It
moves  air  and  gases  at high  velocities  while  removing  odors,  smoke  and
particulates and killing  pathogens,  including  bacteria,  mold and spores. The
technology  is  cost-effective   and  is  more  energy  efficient  than  current
alternative fan and filter  (including HEPA filter and ultraviolet  light based)
technologies.  Although no commercial  products using the Kronos technology have
been sold to date,  in August  2004,  the  Company  and its  strategic  consumer
products partner,  HoMedics,  initiated the transition to mass production of the
Kronos-based consumer standalone product line.

A number of the scientific  claims of the Kronos  technology have been tested by
the U. S.  government and a few  multi-national  companies,  including the U. S.
Department  of  Energy,  the U. S.  Department  of  Defense,  General  Dynamics,
Underwriters Laboratory, and Intel.

Independent  laboratory testing has verified the purification  capability of the
Kronos technology. Tests conducted at MicroTest Laboratories, LMS Industries and
New  Hampshire  Materials  Laboratory  demonstrated  HEPA  Clean Room Class 1000
quality  particulate  reduction,  removal of over 99.97% of 0.1 micron and above
size particles,  and up to 95% reduction of hazardous gases,  including numerous
contaminants found in cigarette smoke.  Intertek,  one of the global leaders for
testing electrical and electronic products,  performed tobacco smoke elimination
tests  in  accordance  with  ANSI/AHAM  AC-1-1988  standard  entitled  "American
National  Standard  Method  for  Measuring  Performance  of  Portable  Household
Electric  Cord-Connected  Room Air Cleaners." The test  demonstrated a Clean Air
Delivery  Rate  (CADR) for the Kronos air  purifier of over 300.  These  results
place the Kronos device in one of the highest categories of particulate cleaning
for standalone devices.

Market Segmentation

Kronos'  business  development  strategy  is to  sell  and  license  the  Kronos
technology to six distinct market  segments:  (1) air movement and  purification
(residential,  health care,  hospitality,  and commercial  facilities);  (2) air
purification for unique spaces (cleanrooms,  airplanes,  automotive,  and cruise
ships);  (3) specialized  military  (naval  vessels,  closed vehicles and mobile
facilities);  (4) embedded cooling and cleaning  (electronic devices and medical
equipment);  (5)  industrial  scrubbing  (produce  storage  and diesel and other
emissions);  and  (6)  hazardous  gas  destruction  (incineration  and  chemical
facilities).

Kronos' focus is on the first four of these market  segments which are described
in more  detail  below.  Kronos is  currently  developing  products  for the air
movement and purification,  air purification for unique spaces,  and specialized
military  markets  through  specific  customer  contracts.  Kronos is  currently
undertaking  research and development in the embedded micro cooling market using
Company funds and a third party grant.  These  contracts and grant are described
in more detail in the Technology  Application and Product Development section of
this filing.

                                       12

<PAGE>

     o    Air Movement and Purification.  Indoor air pollution,  including "sick
          building syndrome" and "building related illness," is primarily caused
          by  inadequate  ventilation,  chemical  contaminants  from  indoor and
          outdoor  sources and biological  contaminants.  There is also a demand
          for  smaller  devices  that move,  heat and  deodorize  the indoor air
          stream. The addressable air movement and purification  segment is made
          up of four principal target markets: (1) residential, (2) health care,
          (3) hospitality and (4) commercial.

     o    Air  Purification  for  Unique  Spaces.  Electronics,   semiconductor,
          pharmaceutical,  aerospace, medical and many other producers depend on
          cleanroom  technology.  As products such as electronic  devices become
          smaller, the chance of contamination in manufacturing  becomes higher.
          For  pharmaceutical   companies,   clean,  safe  and  contaminant-free
          products are  imperative to  manufacturing  and  distributing a viable
          product.  Other  potential  applications  for  the  Kronos  technology
          include closed  environments such as aircraft,  cruise ships and other
          transportation  modes that  require  people to  breathe  contaminated,
          re-circulated  air for  extended  periods.  Kronos is  building on its
          product  development effort with its strategic partner in the business
          jet market and the U.S.  military  to serve other  closed  environment
          applications.

     o    Specialized  Military.  Military  personnel  face  the  worst  of  all
          possible worlds:  indoor air pollution,  often in very confined spaces
          for extended periods,  combined with the threat of biological warfare,
          nuclear  fallout,  and other  foreign  elements.  We believe  that the
          military market segment offers Kronos a unique opportunity to leverage
          the  technical  and funding  resources of the U. S. military to expand
          Kronos'  ability to develop  and produce  Kronos-based  air movers and
          purifiers for applications  that require these products to be embedded
          into ventilation systems to address the needs of military personnel.

     o    Embedded  Cooling.  Heat generation is becoming a major  bottleneck in
          high density electronics.  We believe that the embedded cooling market
          segment   offers  Kronos  a  near  term   opportunity  to  develop  an
          alternative  to fans for air movement  and cooling  inside of personal
          computers , servers and medical  diagnostic  equipment and a long term
          opportunity  to develop micro channel  cooling  solutions for a future
          generation microchips.

Technology Application and Product Development

To best serve  Kronos'  targeted  market  segments,  our  Company is  developing
specific product applications across two distinct product application platforms.
A Kronos  device can be either used as a standalone  product or can be embedded.
Standalone  products  are  self-contained  and only require the user to plug the
Kronos device into a wall outlet to obtain air filtration for their home, office
or hotel  room.  Embedded  applications  of the Kronos  technology  require  the
technology be added into another  system such as a building  ventilation  system
for more efficient air movement and filtration or into an electrical device such
as computer or medical equipment to replace the cooling fan.

                               Standalone Platform

     o    Consumer Products. In October 2002, Kronos Air Technologies, Inc., and
          HoMedics USA, Inc.  executed a Licensing  Agreement  granting HoMedics
          certain  rights  with  respect  to  the  distribution  of  the  Kronos
          proprietary  technology  to the consumer.  The agreement  provides for
          exclusive   North   American,   Australian   and  New  Zealand  retail
          distribution  rights for next  generation  consumer  air  movement and
          purification  products  based on the patented  Kronos  technology.  In
          August 2004, the Company and HoMedics initiated the transition to mass
          production  of the  Kronos-based  consumer  standalone  product  line.
          Preparing  to meet these goals  entails  the use of Kronos'  technical
          resources  and  HoMedics'   product   development  and   international
          production expertise. Select third party vendors, including experts in
          electronics,  software and gas sensors, are integral resources in this
          process.  While  HoMedics  is  managing  production  of  the  finished
          product,  Kronos is managing the production of our  proprietary  power
          supply and related circuitry.

          We believe the Company has successfully completed the development of a
          Kronos-based  consumer  standalone  air purifier that is an efficient,
          high quality  product which is cost effective and easy to operate.  In
          August 2004, the Company and HoMedics initiated the transition to mass
          production of the Kronos-based  consumer  standalone  product line. In
          October 2004,  Kronos received its first shipment of electronics  from
          Flextronics  International USA, Inc. In November,  Kronos successfully
          tested the technical hardware and related power supplies  manufactured
          by Flextronics, including the successful incorporation of gas sensors.
          The gas  sensors  were  developed  in  conjunction  with a leading gas
          sensing technology supplier for Kronos' unique operating requirements.
          In February  2005,  Kronos and  HoMedics  began  expanding  production
          development  beyond the initial  prototypes  and  initiated  increased
          product testing to complete the product claims platform.  In March and
          April 2005,  Kronos modified the HoMedics design and ordered prototype
          production  devices  from Kronos'  preferred  vendor along with select
          components from HoMedics  preferred  vendors.  Kronos is continuing to
          prepare  for  mass  production  of the  electronics  for  each  of the
          products in the air purification product line. Kronos expects begin to
          receive larger  quantities of electronics  and gas sensors in May 2005
          for installation and testing in the prototype production devices.

          The initial term of the agreement is three and one half years from the
          initial sale of consumer air purification products by HoMedics,  which
          shall be no later than  December 31,  2006,  with the option to extend
          the  Licensing   Agreement  for  six  additional  years.   Kronos  was
          compensated  through  an  initial  royalty  payment  and will  receive
          ongoing  quarterly  royalty  payments  based on a percentage of sales.
          HoMedics  will pay  minimum  royalty  payments  of at least $2 million
          during the  initial  three and a half year term and  on-going  royalty
          payments to extend the agreement. Kronos will retain the rights to all
          of its intellectual property.

                                       13

<PAGE>

          HoMedics  commitment  includes  funding a  marketing  and  advertising
          campaign to promote the  Kronos-based  product line. The products will
          be  distributed  by HoMedics.  HoMedics  currently  distributes  their
          products through major domestic retailers,  including  Wal-Mart,  Home
          Depot, Sears, Bed Bath & Beyond, and Linens 'N Things.

     o    Commercial  Products.  In addition,  Kronos is seeking to leverage its
          consumer product development work to market and sell a commercial line
          of standalone air purifiers.  This commercial line of Kronos-based air
          purifiers  will target to address  the  specific  air quality  issues,
          including odors, bacteria and viruses,  found in most nursing home and
          assisted living, healthcare and other commercial facilities. Kronos is
          using the new research and product  development  personnel,  equipment
          and software  acquired with the Cornell  investment  proceeds to build
          demonstration products, which the Company intends to install in select
          nursing  home,  assisted  living and  hospitality  facilities in North
          America for demonstrating the benefits of the Kronos technology to the
          commercial marketplace.

     o    Other  Standalone  Products.  Utilizing our recently  expanded product
          development   resources,   Kronos   completed   the  initial   design,
          development  and  production  of a  series  of  small  multifunctional
          devices that can be used as space heaters,  disinfectors,  deodorizers
          and/or fans. Based on the proprietary Kronos technology, these devices
          are currently  undergoing testing and evaluation.  Kronos is assessing
          potential strategic partners for manufacturing, marketing, selling and
          distributing these Kronos-based products.

                                Embedded Platform

     o    Military  Products.  The U. S. Department of Defense and Department of
          Energy have  provided  Kronos with  various  grants and  contracts  to
          develop,   test  and  evaluate  the  Kronos  technology  for  embedded
          applications.  Kronos has developed several  commercial and industrial
          applications,  including  the  retrofit  of  berthing  fan systems and
          embedded air movement systems for U. S. Navy Aegis Class destroyers.

          U.S. Navy SBIR  Contracts.  In November  2002,  the U. S. Navy awarded
          Kronos a Small  Business  Innovation  Research Phase II contract worth
          $580,000,   plus  an  option  of  $145,000.   The  Phase  II  contract
          (commercialization phase) is an extension of the Phase I and the Phase
          I Option  work that  began in 2001.  It is  intended  that the  Kronos
          devices  developed  under this  contract  will be embedded in existing
          HVAC systems in order to move air more efficiently  than  traditional,
          fan-based  technology.  Kronos has completed production of an advanced
          air management  system and is awaiting  product testing and evaluation
          by Northrop Grumman.

          During Phase II,  Kronos  developed  and  produced a fully  controlled
          device  that  represents  a "cell"  of an  advanced  distributive  air
          management  system with medium capacity airflow in a U. S. Navy unique
          environment. The "cell" has been designed to be easily adjustable to a
          variety of parameters such as duct size, airflow requirements, and air
          quality.  The goal of this development work is to significantly reduce
          or replace  altogether the current HVAC air handling  systems on naval
          ships.  During  the  term  of  the  contract,  Kronos  designed  a new
          generation   power  supply,   improved  the  efficiency  of  the  core
          technology  to allow for increased  air movement and  filtration,  and
          initiated  selection with the U. S. Navy of the specifications for the
          commercial products.  Kronos is scheduled to ship the finished product
          to Northrop  Grumman for testing  and  evaluation  in May 2005.  As of
          March 31, 2005,  the U. S. Navy had provided  Kronos with  $580,000 in
          funding for this effort.

          As part of its air management system, Kronos has developed and intends
          to test the air  filtration  mechanism  capable of  performing to HEPA
          quality  standards.  We believe  that  Kronos  devices  could  replace
          current  HEPA  filters  with a  permanent,  easily  cleaned,  low-cost
          solution. Among the technical advantages of the Kronos technology over
          HEPA filters is the ability of the  Kronos-based  devices to eliminate
          the energy  burden on air handling  systems,  which must generate high
          levels  of  backpressure  necessary  to move  air  through  HEPA-based
          systems.  Kronos-based  devices  enhance the air flow while  providing
          HEPA level filtration.

          We believe  that  during the option  portion of the  contract,  Kronos
          technology's  ability to kill  bacteria  and other  pathogens  will be
          confirmed  and  expanded  to a  wide  range  of  pathogens  for  space
          disinfection  and  bio-terrorist   attacks.   We  believe  the  Kronos
          technology can kill all or most airborne pathogens regardless of their
          nature, genetic structure, robustness, or method of delivery.

          Kronos  is  pursuing  Phase III  (production  phase)  support  for the
          Kronos-based   advanced   distributive  air  management  system  being
          developed under Phase II. Kronos is working with Northrop  Grumman and
          others in this regard.

          U.S.  Army SBIR  Contracts.  In August  2003,  Kronos was  awarded the
          option on its U. S. Army Small  Business  Innovation  Research Phase I
          contract bringing the value of the Phase I contract award to $120,000.
          In October  2003,  the U.S.  Army  awarded  Kronos the Small  Business
          Innovation  Research  Phase II  contract.  The contract is worth up to
          $369,000. The contract is to develop Kronos' proprietary Electrostatic
          Dehumidification  Technology ("EDT").  Kronos initiated work under the
          Phase II contract in December  2003. In December  2004, the U. S. Army
          extended  the first  year of the  contract  until  February  2005.  In
          February 2005,  because the Army's focus was on researching a specific
          aspect of using an electrostatic  process for dehumidification and did
          not  share  Kronos'  vision  for a broader  application  for using the
          unique  aspects of EDT for  dehumidification,  the Army decided not to
          pursue their Phase II option. Kronos believes EDT is a viable solution
          for commercial  dehumidification  and will seek one or more commercial
          partners to work with us to exploit  the  benefits of EDT. As of March
          31, 2005, the U. S. Army had provided  Kronos with $275,000 in funding
          for this effort  under the Phase II contract  and another  $49,000 was
          invoiced by Kronos during the quarter ended March 31, 2005.

                                       14

<PAGE>

          Kronos is seeking to leverage  its  military  application  development
          work with the U. S. Navy to  develop  and  produce  air  handlers  and
          purifiers for commercial and industrial facilities. A future potential
          commercial  line of  Kronos-based  air  handlers and  purifiers  would
          attempt to address the specific air quality issues, including bacteria
          and  other  germs,  found  in large  enclosed  spaces  such as  office
          buildings and multi-dwelling  residential  complexes,  while providing
          more efficient air movement.

     o    Transportation  Products.  In January 2003,  Kronos  extended its work
          into  the  transportation   industry  by  signing  a  Development  and
          Acquisition  Agreement with a premier business jet  manufacturer.  The
          Agreement was the direct result of initial prototype  development work
          performed by the Kronos  Research Team with input from the customer in
          2002. The Kronos devices being  designed and  manufactured  under this
          contract  will  need  to  meet  all FAA  safety  standards,  including
          environmental,  flammability and  electromagnetic  interference (EMI).
          The Company has completed  product design and development based on the
          customer's specific product application requirements. We are currently
          testing and evaluating the prototype product.

          Kronos is seeking to leverage its business jet application development
          work to  develop  and  produce  air  handlers  and  purifiers  for the
          commercial   aviation  and  automotive  markets.  A  future  potential
          commercial  line of  Kronos-based  air  handlers and  purifiers  would
          attempt to address the specific air quality issues,  including exhaust
          and viruses,  found in enclosed spaces occupied by multiple people for
          extended  periods of time, while providing more efficient air movement
          within unique space constraints.

     o    Microelectronics  Cooling  Products.  In December 2004, Kronos and the
          University  of  Washington  were  awarded  funding for a research  and
          technology  development project entitled "Heat Transfer Technology for
          Microelectronics  and  MEMS"  by  the  Washington   Technology  Center
          ("WTC").   The  objective  of  the  project  is  to  develop  a  novel
          energy-efficient     heat    transfer     technology    for    cooling
          microelectronics.  Thermal  management for  microelectronics  and MEMS
          systems  is a  challenge.  Existing  cooling  devices  aren't  meeting
          increasing needs for energy  consumption and heat dissipation.  Kronos
          air  handling  technology  is an  emerging  technology  that  uses  an
          electric field to exert force on ionized gas.  Kronos is attempting to
          develop an improved  microchip air handling  system that is smaller in
          size, has high speed airflow, allows more targeted delivery of cooling
          to areas of highest heat and is compatible with current processes. WTC
          will  contribute  $40,000 to the  project,  with  Kronos  contributing
          $8,000, plus $32,000 in in-kind services,  including use of the Kronos
          Research and Product  Development  Facility.  During the quarter ended
          March 31, 2005, Kronos and the University of Washington  initiated
          research into development  of  an  energy-efficient   heat transfer
          technology for cooling microelectronics.

Patents and Intellectual Property

     o    Seven  U.S.   Patents  Allowed  for  Issuance.   Kronos  has  received
          notification  that seven of its patents have been allowed for issuance
          by the United States Patent and  Trademark  Office.  These patents are
          considered utility patents which describe  fundamental  innovations in
          the  generation,  management  and  control  of  Electrostatic  Fluids,
          including  air  movement,  filtration  and  purification.  Each of the
          patents  contain  multiple part claims for both general  principles as
          well as specific designs for  incorporating the Kronos technology into
          air  movement,  filtration  and  purification  products.  The  patents
          provide  protection for both specific product  implementations  of the
          Kronos technology,  as well as more general processes for applying the
          unique attributes and performance characteristics of the technology.

<TABLE>
<CAPTION>

               Date                Patent Title                Description                Protection
          ------------       --------------------       ------------------------          -----------
<S>             <C>                                                                          <C>
          April 2005         Electrostatic Fluid        placement, utilization               2022
                             Accelerator Design         and geometries of the
                             Geometries                 electrodes - impacts air
                                                        flow

          December 2004      Spark Management Method    analysis, detection and              2021
                             and Device                 prevention of sparks in
                                                        a high voltage field -
                                                        creates safe, effective
                                                        electrostatic technology
                                                        products

          November 2004      Electrostatic Fluid        electrode design                     2021
                             Accelerator - Electrode    geometries and
                             Design Geometries          attributes - achieves
                                                        unique air movement and
                                                        purification performance

           October 2004      Electrostatic Fluid        management and control               2021
                             Accelerator - Power        to produce air flow
                             Supply Management and      rates, high efficiency
                             Control                    particulate removal and
                                                        biological destruction

                                       15

<PAGE>

            April 2004       Electrostatic Fluid        using an electrostatic               2021
                             Accelerator for and a      fluid accelerator to
                             Method of Controlling      produce commercially
                             Fluid                      useful air flow rates

          December 2003      Method of and Apparatus    enhancements to core                 2020
                             for Electrostatic Fluid    technology for producing
                             Acceleration Control of    ion discharge to create
                             a Fluid Flow               air movement and base
                                                        level filtration

           January 2003      Electrostatic Fluid        core technology for                  2019
                             Accelerator                producing ion discharge
                                                        to create air movement
                                                        and base level filtration
</TABLE>


     o    First  International  Patent  Allowed for Issuance.  In November 2004,
          Kronos  received  formal   notification   from  the   Commonwealth  of
          Australian  Patent Office  indicating  that its  application  entitled
          "Electrostatic  Fluid  Accelerator"  has been examined and allowed for
          issuance  as an  Australian  patent  (#773626).  There are a number of
          other patent applications  corresponding to Kronos' seven U.S. Patents
          that have been filed and are pending outside of the United States.

     o    Additional  Patent   Applications.   A  number  of  additional  patent
          applications have been filed for, among other things,  the control and
          management  of  electrostatic  fluid  acceleration.  These  additional
          patent   applications  are  either  being  examined  or  are  awaiting
          examination by the Patent Office.

CRITICAL ACCOUNTING POLICIES

Use of Estimates.  The  preparation of financial  statements in conformity  with
accounting   principles   generally  accepted  in  the  United  States  requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities  and disclosures 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.

Allowance for Doubtful  Accounts.  We provide a reserve  against our receivables
for estimated losses that may result from our customers' inability to pay. These
reserves  are  based on  potential  uncollectible  accounts,  aged  receivables,
historical  losses and our  customers'  credit-worthiness.  Should a  customer's
account  become  past due,  we  generally  will place a hold on the  account and
discontinue  further  shipments  and/or  services  provided  to  that  customer,
minimizing further risk of loss.

Valuation  of  Goodwill,   Intangible  and  Other  Long  Lived  Assets.  We  use
assumptions in establishing  the carrying value,  fair value and estimated lives
of our long-lived  assets and goodwill.  The criteria used for these evaluations
include management's estimate of the asset's ability to generate positive income
from  operations  and  positive  cash flow in  future  periods  compared  to the
carrying  value of the asset,  the strategic  significance  of any  identifiable
intangible   asset  in  our   business   objectives,   as  well  as  the  market
capitalization  of Kronos.  We have used certain key assumptions in building the
cash  flow  projections  required  for  evaluating  the  recoverability  of  our
intangible  assets. We have assumed revenues from the following  applications of
the Kronos  technology:  consumer  stand-alone  devices,  assisted  care/skilled
nursing stand-alone devices, embedded devices in the hospitality industry and in
specialized  military  applications.  Expenses/cash out flows in our projections
include   sales   and   marketing,   production,   distribution,   general   and
administrative   expenses,   research  and  development   expenses  and  capital
expenditures.  These  expenses are based on  management  estimates and have been
compared  with   industry   norms   (relative  to  sales)  to  determine   their
reasonableness.  We use the same key assumptions for our cash flow evaluation as
we do for internal budgeting,  lenders and other third parties;  therefore, they
are  internally  and externally  consistent  with financial  statement and other
public and private  disclosures.  We are not aware of any negative  implications
resulting   from  the   projections   used  for  purposes  of   evaluating   the
appropriateness  of the carrying value of these assets. If assets are considered
to be impaired,  the  impairment  recognized is the amount by which the carrying
value of the assets  exceeds  the fair  value of the  assets.  Useful  lives and
related  amortization or  depreciation  expense are based on our estimate of the
period that the assets will  generate  revenues or  otherwise be used by Kronos.
Factors that would influence the likelihood of a material change in our reported
results include  significant changes in the asset's ability to generate positive
cash flow, loss of legal ownership or title to the asset, a significant  decline
in the  economic  and  competitive  environment  on  which  the  asset  depends,
significant changes in our strategic business objectives, and utilization of the
asset.

Valuation of Deferred Income Taxes.  Valuation allowances are established,  when
necessary,  to reduce deferred tax assets to the amount expected to be realized.
The likelihood of a material change in our expected  realization of these assets
is dependent on our ability to generate  future taxable  income,  our ability to
deduct tax loss  carryforwards  against future taxable income, the effectiveness
of our tax planning and strategies among the various tax  jurisdictions  that we
operate in, and any  significant  changes in the tax  treatment  received on our
business combinations.

                                       16

<PAGE>

Revenue  Recognition.  We recognize  revenue in accordance  with  Securities and
Exchange  Commission  Staff  Bulletin  104  ("SAB  104").  Further,  Kronos  Air
Technologies  recognizes revenue on the sale of  custom-designed  contract sales
under the percentage-of-completion  method of accounting in the ratio that costs
incurred to date bear to estimated total costs. For uncompleted  contracts where
costs and estimated  profits exceed  billings,  the net amount is included as an
asset  in the  consolidated  balance  sheet.  For  uncompleted  contracts  where
billings  exceed costs and  estimated  profits,  the net amount is included as a
liability  in  the  consolidated  balance  sheet.  Sales  are  reported  net  of
applicable cash discounts and allowances for returns.

RESULTS OF OPERATIONS

The Company's  net loss for the nine months ended March 31, 2005 was  $5,945,000
compared with a net loss of $1,735,000 for the corresponding period of the prior
year. The increase in the net loss was primarily the result of the restructuring
of the HoMedics debt (refer to Note 10 - Commitments  and  Contingencies)  which
resulted in a non-cash charge to operations of $3,857,000.

The  Company's  net  operating  loss for the nine  months  ended  March 31, 2005
increased by 26% to $1,677,000  compared with a net operating loss of $1,336,000
for the corresponding period of the prior year. The $341,000 increase in the net
operating  loss was primarily the result of an increase in selling,  general and
administrative expenses ($282,000) and a decrease in gross profit ($59,000).

Revenue. Revenues are generated through sales of Kronos devices, and fees earned
from  licensing the Kronos  technology and providing  technical  services to our
customers  at Kronos Air  Technologies,  Inc.  Revenue for the nine months ended
March 31, 2005 was $430,000.  These  revenues were  primarily from our U.S. Navy
SBIR  Phase II and U. S. Army  SBIR  Phase II  contracts.  Revenue  of  $342,000
recorded  during the  corresponding  period of the prior year was primarily from
our  HoMedics,  U. S. Navy SBIR Phase II and U. S. Army SBIR Phase I and Phase I
Option contracts.

Cost of  sales.  Cost of sales for the nine  months  ended  March  31,  2005 was
$375,000  compared to $228,000 for the  corresponding  period of the prior year,
respectively.  Cost of sales in the current year was primarily development costs
associated  with our U. S. Navy SBIR and U. S. Army SBIR  contracts.  Prior year
cost of sales  related to revenue from our  HoMedics,  U. S. Navy SBIR and U. S.
Army SBIR contracts.

Gross profit.  Gross profit for the nine months ended March 31, 2005 was $55,000
compared to $114,000 for the  corresponding  period of the prior year because of
the increased  cost to build  products under contract for the U.S. Navy and U.S.
Army, partially offset by the increase in revenue from these contracts.

Selling  and  other  general  administrative  expenses.   Selling,  general  and
administrative  expenses for the nine months ended March 31, 2005  increased 19%
to $1,732,000  compared to $1,450,000 for the corresponding  period of the prior
year.  This  $282,000  increase  was  primarily  the  result of an  increase  in
compensation  and benefits  ($263,000)  due to the  expansion  of the  Company's
research  and  product  development  team and an  increase in the cost of health
benefits, an increase in depreciation and amortization  ($84,000) because of the
increase in amortization of expenditures for intellectual  property  development
and for research  and product  development,  an increase in insurance  ($28,000)
because  of the  increase  in  directors  and  officers  and  product  liability
insurance, an increase in research and development ($12,000) because the company
expanded its  development  of new  products,  partially  offset by a decrease in
professional  services  ($108,000) because of a decrease in legal and accounting
expenses  and  the  capitalization  of  patent  counsel   expenditures  for  the
development of the Company's intellectual property.

Loss on Debt Restructuring. Loss on debt restructuring for the nine months ended
March 31, 2005 was $3,857,000 and  represented the non-cash charge to operations
for the cost to restructure  the HoMedics  debt,  including the cost to issue 26
million warrants (refer to Note 10 - Commitments and Contingencies).

Other income.  Other income for the nine months ended March 31, 2004 was $22,000
and  was  consideration  earned  from  the  assignment  of the  Company's  stock
repurchase  rights  to  Fusion  Capital  who made a  partial  repurchase  of the
Company's stock used in May 2003 to acquire the remaining  license rights to the
Kronos  technology  not  included  in the  original  acquisition  of Kronos  Air
Technologies, Inc.

Interest expense. Interest expenses for the nine months ended March 31, 2005 was
$411,000 compared to $421,000 for the corresponding period of the prior year.

CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 2005

Our total  assets at March 31, 2005 and June 30, 2004 were  $2,476,000  for each
period.  Total assets at March 31 2005 were comprised primarily of $2,012,000 of
patents/intellectual  property, $223,000 of prepaid assets and $188,000 of cash.
Total  assets  at June 30,  2004  were  comprised  primarily  of  $2,253,000  of
patents/intellectual  property.  Total current assets at March 31, 2005 and June
30,  2004  were  $460,000  and  $238,000,   respectively,  while  total  current
liabilities for those same periods were $2,864,000 and $1,423,000, respectively,
creating  a  working  capital  deficit  of  $2,404,000  and  $1,186,000  at each
respective  period end.  This 103% increase in the working  capital  deficit was
primarily  the result of  increases  in the  current  portion  of notes  payable
($1,511,000)  offset by an increase in prepaid assets ($152,000) and an increase
in cash ($119,000). The increase in the current portion of notes payable was the
result of the Company  incurring  $2,000,000 in short term debt  financing  from
Cornell Capital  Partners,  partially offset by conversion of HoMedics debt from
short term to long term ($722,000).

Shareholders'  deficit as of March 31, 2005 and June 30, 2004 was $2,937,000 and
$1,383,000,  respectively.  The increase in accumulated deficit ($5,945,000) was
partially  offset by an  increase  in paid in  capital  ($4,391,000)  due to the
issuance of shares of common stock during the nine months ended March 31, 2005.

                                       17

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

Historically, we have relied principally on the sale of common stock and secured
debt and customer contracts for research and product  development to finance our
operations.

In October  2004,  Kronos  entered into  agreements  for up to $20.5  million in
equity and equity  backed debt  financing  from  Cornell  Capital  Partners.  In
October 2004, Kronos sold 5 million  unregistered  shares of Kronos common stock
for gross  proceeds of $500,000 to Cornell  Capital  Partners.  Cornell  Capital
Partners  committed  to  provide  $4  million  pursuant  to  two  Equity  Backed
Promissory Notes, which have or will be funded as follows: $2 million was funded
upon the filing an SB-2  Registration  Statement and $2 million will be upon the
SEC declaring the Registration  Statement  effective.  Kronos executed a Standby
Equity  Distribution  Agreement  for $20 million of funding which Kronos has the
option to drawdown  against in increments as large as $1.5 million over the next
twenty four months.  Kronos  received $0.5 million in funding upon the amendment
of the HoMedics debt  financing  and $2 million upon filing of the  Registration
Statement. Kronos expects to receive an additional $2 million over the next 30 -
60 days under these agreements.

In October  2004,  HoMedics  agreed to extend  repayment  of Kronos  debt and to
provide an  additional  $1 million in  funding.  HoMedics  has agreed to provide
Kronos with an  additional  $1 million in  financing - $925,000 in secured  debt
financing and $75,000 for the purchase of additional warrants. The $925,000 will
be paid to Kronos upon Kronos achieving three milestones:  (i) $175,000 shall be
funded upon  delivery  and  successful  testing of  electronic  boards and power
supplies from Kronos'  contract  manufacturing  partner,  (ii) $250,000 shall be
funded upon obtaining tooling of the current prototype  configuration and device
testing and performing to HoMedics' specifications,  and (iii) $500,000 shall be
funded upon the initial sale of  Kronos-based  air  purifiers  by  HoMedics.  In
addition,  quarterly  debt payments and the maturity date for existing debt have
been extended. Quarterly payments due on the outstanding $2.4 million in secured
debt  financing,  which had been scheduled to begin in August 2004,  will be due
the  earlier  of Kronos  receipt  of  royalty  payments  from  HoMedics  sale of
Kronos-based  air  purification  products or two years. The maturity date of the
$2.4  million in debt has been  extended  from May 2008 to October of 2009;  the
maturity date on the $925,000 will also be October 2009.  The interest rate will
remain  at 6% for the $2.4  million  in debt;  the rate  will  also be 6% on the
additional debt. HoMedics increased their potential equity position in Kronos to
30% of Kronos common stock on a fully  diluted  basis.  In  connection  with the
October 2004  agreements,  Kronos issued  HoMedics a warrant to buy 26.5 million
shares of Kronos common stock.

Net cash flow used in operating  activities was $1.7 million for the nine months
ended March 31, 2005. We were able to satisfy most of our cash  requirements for
this period from the proceeds of the sale of equity to Cornell Capital  Partners
and a group  of  accredited  investors,  the  first  $2  million  Equity  Backed
Promissory  Note with Cornell  Capital  Partners and our U.S. Navy and U.S. Army
Phase II contracts.

We estimate  that  achievement  of our business  plan will  require  substantial
additional  funding.  We anticipate  that the source of funding will be obtained
pursuant to senior debt  funding  from the HoMedics  Secured  Promissory  Notes;
equity funding from the Cornell  Capital  Equity  Investment  Agreement,  Equity
Backed Promissory Notes and the Standby Equity  Distribution  Agreement;  and/or
the  sale  of  additional  equity  in our  Company;  cash  flow  generated  from
government grants and contracts;  and cash flow generated from customer revenue.
There are no  assurances  that these sources of funding will be adequate to meet
our cash flow needs.

GOING CONCERN OPINION

Our  Report  of  Independent  Registered  Public  Accounting  Firm  includes  an
explanatory paragraph to their audit opinions issued in connection with our 2004
and 2003  consolidated  financial  statements  that  states  that we do not have
significant  cash or other  material  assets to cover our operating  costs.  Our
ability to obtain  additional  funding  will  largely  determine  our ability to
continue in business.  Accordingly, there is substantial doubt about our ability
to continue as a going  concern.  Our  financial  statements  do not include any
adjustments that might result from the outcome of this uncertainty.

We can  make  no  assurance  that we  will  be  able  to  successfully  develop,
manufacturer and sell commercial  products on a broad basis. While attempting to
make this transition,  we will be subject to all the risks inherent in a growing
venture,  including,  but not limited  to, the need to develop  and  manufacture
reliable and  effective  products,  develop  marketing  expertise and expand our
sales force.

FACTORS AFFECTING KRONOS' BUSINESS AND PROSPECTS

We are subject to various risks which may have a material  adverse effect on our
business,  financial  condition and results of  operations,  and may result in a
decline in our stock price. Certain risks are discussed below:

We have a limited operating history with significant losses and expect losses to
continue for the foreseeable future.

We have only recently begun  implementing our plan to prioritize and concentrate
our management and financial  resources to fully capitalize on our investment in
Kronos Air  Technologies  and have yet to  establish  any history of  profitable
operations.  We incurred a net loss of $5.9  million  for the nine months  ended
March 31, 2005. We incurred a net loss of $2.5 million for the fiscal year ended
June 30,  2004.  As a result,  at March 31,  2005 and June 30,  2004,  we had an
accumulated  deficit  of $26.0  million  and $20.0  million,  respectively.  Our
revenues and cash flows from  operations have not been sufficient to sustain our
operations.  We have sustained our operations through the issuance of our common
stock and the  incurrence  of debt.  We expect that our  revenues and cash flows
from  operations  may  not be  sufficient  to  sustain  our  operations  for the
foreseeable    future.   Our   profitability   will   require   the   successful
commercialization of our Kronos technologies. No assurances can be given that we
will be able to successfully  commercialize  our Kronos  technologies or that we
will ever be profitable.

                                       18

<PAGE>

We will require significant  additional  financing to sustain our operations and
without it we will not be able to continue operations.

At March 31, 2005 and June 30, 2004,  we had a working  capital  deficit of $2.4
million and $1.2 million,  respectively.  The Report of  Independent  Registered
Public Accounting Firm for the year ended June 30, 2004, includes an explanatory
paragraph  to their  audit  opinion  stating  that  our  recurring  losses  from
operations and working  capital  deficiency  raise  substantial  doubt about our
ability to continue as a going concern. For the nine months ended March 31, 2005
and March 31, 2004,  we had an  operating  cash flow deficit of $1.7 million and
$1.3  million,  respectively.  We  currently  do not have  sufficient  financial
resources to fund our operations or pay certain existing obligations or those of
our subsidiary.  Therefore,  we need  substantial  additional  funds to continue
these operations and pay certain existing obligations.

If obtaining  sufficient financing from the U. S. Navy, U. S. Army, HoMedics and
/or Cornell  Capital  Partners  were to be  unavailable  and if we are unable to
commercialize  and sell our  products  or  technologies,  we will need to secure
another source of funding in order to satisfy our working capital needs. Even if
we are able to access  the funds  available  under the U. S. Navy and U.S.  Army
SBIR  contracts,  HoMedics  senior debt  agreement and / or the Cornell  Capital
Equity Investment  Agreement,  Equity Backed Promissory Notes and Standby Equity
Distribution  Agreement, we may still need additional capital to fully implement
our business,  operating and  development  plans. At March 31, 2005 and June 30,
2004,  we had a cash balance of $188,000 and $69,000,  respectively.  Should the
financing we require to sustain our working  capital  needs be  unavailable,  or
prohibitively  expensive  when we require  it, we would be forced to curtail our
business operations.

Existing  shareholders  will  experience  significant  dilution from our sale of
shares under the Cornell Capital Equity Investment  Agreement and Standby Equity
Distribution Agreement and any other equity financing.

The sale of shares pursuant to our agreement with Cornell Capital Partners,  the
exercise  of  HoMedics  stock  warrants  or any other  future  equity  financing
transaction will have a dilutive impact on our  stockholders.  As a result,  our
net income per share could decrease in future  periods,  and the market price of
our common stock could decline.  In addition,  the lower our stock price is, the
more shares of common  stock we will have to issue  under the Equity  Investment
Agreement and Standby Equity Distribution Agreement with Cornell Capital. If our
stock price is lower, then our existing  stockholders  would experience  greater
dilution.  We cannot  predict the actual  number of shares of common  stock that
will be issued  pursuant  to the  Standby  Equity  Distribution  Agreement  with
Cornell  Capital or any other  future  equity  financing  transaction,  in part,
because the  purchase  price of the shares will  fluctuate  based on  prevailing
market conditions and we do not know the exact amount of funds we will need.

Competition in the market for air movement and  purification  devices may result
in the failure of the Kronos products to achieve market acceptance.

Kronos  presently faces  competition from other companies that are developing or
that  currently  sell  air  movement  and  purification  devices.  Many of these
competitors  have  substantially  greater  financial,  research and development,
manufacturing,  and  sales  and  marketing  resources  than  we do.  Many of the
products  sold  by  Kronos'  competitors  already  have  brand  recognition  and
established  positions in the markets that we have targeted for penetration.  In
the event that the Kronos  products do not  favorably  compete with the products
sold by our competitors, we would be forced to curtail our business operations.

Our failure to enforce  protection  of our  intellectual  property  would have a
material adverse effect on our business.

A significant  part of our success  depends in part on our ability to obtain and
defend our intellectual  property,  including patent protection for our products
and processes, preserve our trade secrets, defend and enforce our rights against
infringement  and operate  without  infringing the  proprietary  rights of third
parties, both in the United States and in other countries. Our limited amount of
capital  impedes  our  current  ability to protect  and defend our  intellectual
property.

The  validity  and  breadth  of our  intellectual  property  claims  in ion wind
generation and electrostatic  fluid  acceleration and control technology involve
complex legal and factual  questions and,  therefore,  may be highly  uncertain.
Despite our efforts to protect our  intellectual  proprietary  rights,  existing
copyright, trademark and trade secret laws afford only limited protection.

Our industry is characterized by frequent intellectual property litigation based
on allegations of infringement of intellectual property rights.  Although we are
not aware of any  intellectual  property claims against us, we may be a party to
litigation in the future.

Possible future  impairment of intangible  assets would have a material  adverse
effect on our financial condition.

Our net  intangible  assets of  approximately  $2.0 million as of March 31, 2005
consist  principally of purchased patent  technology and marketing  intangibles,
which relate to the acquisition of Kronos Air  Technologies,  Inc. in March 2000
and  to  the   acquisition  of  license  rights  to  fuel  cell,   computer  and
microprocessor  applications  of  the  Kronos  technology  not  included  in the
original  acquisition of Kronos Air Technologies,  Inc. in May 2003.  Intangible
assets comprise 81% of our total assets as of March 31, 2005.  Intangible assets
are subject to periodic  review and  consideration  for potential  impairment of
value.  Among  the  factors  that  could  give  rise  to  impairment  include  a
significant  adverse  change in legal  factors or in the  business  climate,  an
adverse action or assessment by a regulator,  unanticipated  competition, a loss
of key  personnel,  and  projections or forecasts  that  demonstrate  continuing
losses  associated  with these  assets.  In the case of our  intangible  assets,
specific  factors  that  could  give rise to  impairment  would be,  but are not
limited to, an inability to obtain patents,  the untimely death or other loss of
Dr. Igor  Krichtafovitch,  the lead inventor of the Kronos technology and Kronos
Air Technologies Chief Technology  Officer,  or the ability to create a customer
base for the sale or licensing of the Kronos  technology.  Should an  impairment
occur,  we would be required to  recognize  it in our  financial  statements.  A
write-down of these  intangible  assets could have a material  adverse impact on
our total assets, net worth and results of operations.


                                       19

<PAGE>

Our common stock is deemed to be "Penny Stock,"  subject to special  requirement
and conditions and may not be a suitable investment.

Our common  stock is deemed to be "penny  stock" as that term is defined in Rule
3a51-1  promulgated under the Securities  Exchange Act of 1934. Penny stocks are
stocks:

-        With a price of less than $5.00 per share;
-        That are not traded on a "recognized" national exchange;
-        Whose prices are not quoted on the Nasdaq automated quotation system
         (Nasdaq listed stock must still have a price of not less than $5.00 per
         share); or
-        In issuers with net tangible assets less than $2.0 million (if the
         issuer has been in continuous operation for at least three years) or
         $5.0 million (if in continuous operation for less than three years), or
         with average revenues of less than $6.0 million for the last three
         years.

Broker/dealers  dealing  in penny  stocks  are  required  to  provide  potential
investors  with a  document  disclosing  the  risks of penny  stocks.  Moreover,
broker/dealers  are required to determine whether an investment in a penny stock
is a suitable  investment for a prospective  investor.  These  requirements  may
reduce  the  potential  market for our common  stock by  reducing  the number of
potential investors. This may make it more difficult for investors in our common
stock to resell  shares to third parties or to otherwise  dispose of them.  This
could cause our stock price to decline.

We rely on management and research  personnel,  the loss of whose services could
have a material adverse effect upon our business.

We rely principally upon the services of our senior  executive  management,  and
certain key  employees,  including the Kronos  research  team, the loss of whose
services  could have a material  adverse effect upon our business and prospects.
Competition for  appropriately  qualified  personnel is intense.  Our ability to
attract and retain highly qualified senior management and technical research and
development  personnel  are  believed to be an  important  element of our future
success.  Our  failure to attract  and retain such  personnel  may,  among other
things,   limit  the  rate  at  which  we  can  expand  operations  and  achieve
profitability.  There can be no  assurance  that we will be able to attract  and
retain  senior   management  and  key  employees  having   competency  in  those
substantive areas deemed important to the successful implementation of our plans
to  fully  capitalize  on our  investment  in the  Kronos  technology,  and  the
inability to do so or any difficulties encountered by management in establishing
effective working relationships among them may adversely affect our business and
prospects.  Currently,  we do not carry key person life insurance for any of our
executive management, or key employees.


ITEM 3. CONTROLS AND PROCEDURES


Evaluation of Disclosure Controls and Procedures.

As of the end of the period covered by this report, our Company carried out an
evaluation of the effectiveness of the design and operation of its disclosure
controls and procedures pursuant to Exchange Act Rules 13a-15(e) and 15d-15(e).
This evaluation was done under the supervision and with the participation of our
Company's Principal Executive Officer/Principal Financial Officer. The Company's
disclosure controls and procedures are designed to provide a reasonable level of
assurance of achieving the Company's disclosure control objectives. The
Company's Principal Executive Officer/Principal Financial Officer has concluded
that the Company's disclosure controls and procedures are, in fact, effective at
this reasonable assurance level as of the end of the period covered.

Changes in Internal Controls.

In connection with the evaluation of the Company's internal controls during the
Company's fiscal quarter ended March 31, 2005, the Company's Principal Executive
Officer/Principal Financial Officer has determined that there are no changes to
the Company's internal controls over financial reporting that has materially
affected, or is reasonably likely to materially effect, the Company's internal
controls over financial reporting.



                                       20

<PAGE>

                                     PART II

ITEM 1. LEGAL PROCEEDINGS

None.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

In January 2005,  Cornell  Capital  Partners  returned  2,941,177  shares to the
Company. These shares were acquired by Cornell in private placement transactions
entered  into in October  2004.  Pursuant to a new Standby  Equity  Distribution
Agreement dated January 28, 2005 Cornell has agreed to accept  1,470,587  shares
in 6 months and 1,470,588 in 12 months.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.


ITEM 5. EXHIBITS

<TABLE>
<CAPTION>

EXHIBIT NO.     DESCRIPTION                                  LOCATION
-------------------------------------------------------------------------------------------------
<S>             <C>                                          <C>
 2.1            Articles of Merger for Technology            Incorporated by reference to
                Selection, Inc. with the Nevada              Exhibit 2.1 to the Registrant's
                Secretary of State                           Registration Statement on Form
                                                             S-1 filed on August 7, 2001 (the
                                                             "Registration Statement")

 3.1            Articles of Incorporation                    Incorporated by reference to
                                                             Exhibit 3.1 to the Registration
                                                             Statement on Form S-1 filed on
                                                             August 7, 2001

 3.2            Bylaws                                       Incorporated by reference to
                                                             Exhibit 3.2 to the Registration
                                                             Statement on Form S-1 filed on
                                                             August 7, 2001

 4.1            2001 Stock Option Plan                       Incorporated by reference to
                                                             Exhibit 4.1 to
                                                             Registrant's Form
                                                             10-Q for the
                                                             quarterly period
                                                             ended March 31,
                                                             2002 filed on May
                                                             15, 2002


10.21           Consulting Agreement, dated January 1,       Incorporated by reference to
                2001, by and between TSET, Inc. and          Exhibit 10.21 to the
                Dwight, Tusing & Associates                  Registration Statement on Form
                                                             S-1 filed on August 7, 2001

10.22           Letter Agreement, dated April 12, 2001,      Incorporated by reference to
                by and between TSET, Inc. and Daniel R.      Exhibit 10.35 to the
                Dwight and Richard F. Tusing                 Registration Statement on Form
                                                             S-1 filed on August 7, 2001

10.23           Indemnification Agreement, dated May 1,      Incorporated by reference to
                2001, by and between TSET, Inc. and          Exhibit 10.37 to the
                Jeffrey D. Wilson                            Registration Statement on Form
                                                             S-1 filed on August 7, 2001

                                       21

<PAGE>

10.24           Indemnification Agreement, dated May 1,      Incorporated by reference to
                2001, by and between TSET, Inc. and          Exhibit 10.38 to the
                Daniel R. Dwight                             Registration Statement on Form
                                                             S-1 filed on August 7, 2001

10.25           Indemnification Agreement, dated May 1,      Incorporated by reference to
                2001, by and between TSET, Inc. and          Exhibit 10.39 to the
                Richard F. Tusing                            Registration Statement on Form
                                                             S-1 filed on August 7, 2001

10.26           Indemnification Agreement, dated May 1,      Incorporated by reference to
                2001, by and between TSET, Inc. and          Exhibit 10.40 to the
                Charles D. Strang                            Registration Statement on Form
                                                             S-1 filed on August 7, 2001

10.27           Indemnification Agreement, dated May 1,      Incorporated by reference to
                2001, by and between TSET, Inc. and          Exhibit 10.41 to the
                Richard A. Papworth                          Registration Statement on Form
                                                             S-1 filed on August 7, 2001

10.28           Indemnification Agreement, dated             Incorporated by reference to
                May 1 2001, by and between TSET,             Exhibit 10.42 to the
                Inc. and Erik W. Black                       Registration Statement on Form
                                                             S-1 filed on August 7, 2001

10.29           Warrant Agreement, dated July 16, 2001,      Incorporated by reference to
                by and between TSET, Inc. and The Eagle      Exhibit 10.49 to the
                Rock Group, LLC                              Registration Statement on Form
                                                             S-1 filed on August 7, 2001

10.30           Agreement and Release, dated October         Incorporated by reference to
                10, 2001, by and between TSET, Inc. and      Exhibit 10.50 to the
                Jeffrey D. Wilson                            Registrant's Form 10-K for the
                                                             year ended June 30, 2001 filed
                                                             on October 15, 2001

10.31           Promissory Note dated October 10, 2001       Incorporated by reference to
                payable to Mr. Jeffrey D. Wilson             Exhibit 10.51 to the Registrant's
                                                             Form 10-K for the year ended
                                                             June 30, 2001 filed on October 15,
                                                             2001

10.32           Employment Agreement, effective              Incorporated by reference to
                February 11, 2001 by and between             Exhibit 10.55 to the Registrant's
                TSET, Inc. and Daniel R. Dwight              Form 10-Q for the quarterly period
                                                             ended March 31, 2002 filed on
                                                             May 15, 2002

10.33           Common Stock Purchase Agreement,             Incorporate by reference to Exhibit
                dated August 12, 2002 by and between         10.57 to the Registrant's Form S-1
                between TSET, Inc. and Fusion                filed on August 13, 2002
                Capital Fund II, LLC

10.34           Registration Rights Agreement, dated         Incorporated by reference to Exhibit
                August 12, 2002 by and between TSET,         10.58 to the Registrant's Form S-1
                Inc. and Fusion Capital Fund II, LLC         filed on August 13, 2002

10.35           Termination Agreement, dated                 Incorporated by reference to Exhibit
                August 12, 2002 by and between TSET,         10.59 to the Registrant's Amendment
                Inc. and Fusion Capital Fund II, LLC         No. 1 to Form S-1 filed on
                                                             September 16, 2002

10.36           Master Loan and Investment                   Incorporated by reference to
                Agreement, dated May 9, 2003,                the Registrant's 8-K filed on
                by and among Kronos Advanced                 May 15, 2003
                Technologies, Inc., Kronos Air
                Technologies, Inc. and FKA
                Distributing Co. d/b/a HoMedics,
                Inc., a Michigan corporation
                ("HoMedics")

                                       22

<PAGE>

10.37           Secured Promissory Note, dated               Incorporated by reference to
                May 9, 2003, in the principal                Exhibit 99.2 to the Registrant's
                amount of $2,400,000 payable to              8-K filed on May 15, 2003
                HoMedics

10.38           Secured Promissory Note, dated               Incorporated by reference to
                May 9, 2003, in the principal                Exhibit 99.4 to the Registrant's
                amount of $1,000,000 payable to              8-K filed on May 15, 2003
                HoMedics

10.39           Security Agreement dated May 9,              Incorporated by reference to
                2003, by and among Kronos Air                Exhibit 99.4 to the Registrant's
                Technologies, Inc. and HoMedics              8-K filed on May 15, 2003

10.40           Registration Rights Agreement,               Incorporated by reference to
                dated May 9, 2003, by and between            Exhibit 99.5 to the Registrant's
                Kronos and HoMedics                          8-K filed on May 15, 2003


10.41           Warrant No. 1 dated May 9, 2003,             Incorporated by reference to
                issued to HoMedics                           Exhibit 99.7 to the Registrant's
                8-K filed on May 15, 2003

10.42           Warrant No. 2 dated May 9, 2003,             Incorporated by reference to
                issued to HoMedics                           Exhibit 99.7 to the Registrant's
                                                             8-K filed on May 15, 2003
                                                             2002

10.43           Consulting Agreement effective               Incorporated by reference to
                October 31, 2003, by and among Kronos        Exhibit 10.67 to the Registrant's
                Advanced Technologies, Inc.,                 Form 10-Q for the quarterly period
                Steven G. Martin and Joshua B. on            ended December 31, 2003 filed on
                Scheinfeld                                   February 17, 2004

10.44           Promissory Note by and among Kronos          Incorporated by reference to
                Advanced Technologies, Inc., and             Exhibit 10.67 to the Registrant's
                Richard A. Papworth                          Form 10-Q for the quarterly period
                                                             ended March 31, 2004 filed on
                                                             May 17, 2004

10.45           Promissory Note by and among Kronos          Incorporated by reference to
                Advanced Technologies, Inc., and             Exhibit 10.67 to the Registrant's
                Daniel R. Dwight                             Form 10-Q for the quarterly period
                                                             ended March 31, 2004 filed on
                                                             May 17, 2004

10.46           Promissory Note by and among Kronos          Incorporated by reference to
                Advanced Technologies, Inc., and             Exhibit 10.67 to the Registrant's
                Richard F. Tusing                            Form 10-Q for the quarterly period
                                                             ended March 31, 2004 filed on
                                                             May 17, 2004

10.47           Promissory Note by and among Kronos          Incorporated by reference to
                Advanced Technologies, Inc., and             Exhibit 10.67 to the Registrant's
                Igor Krichtafovitch                          Form 10-Q for the quarterly period
                                                             ended March 31, 2004 filed on
                                                             May 17, 2004

10.48           Promissory Note by and among Kronos          Incorporated by reference to
                Advanced Technologies, Inc., and             Exhibit 10.67 to the Registrant's
                J. Alexander Chriss                          Form 10-Q for the quarterly period
                                                             ended March 31, 2004 filed on
                                                             May 17, 2004

                                       23

<PAGE>

10.49           Standby Equity Distribution Agreement,       Incorporated by reference to
                dated October 15, 2004, by and between       Exhibit 99.1 to the Registrant's
                Kronos Advanced Technologies, Inc. and       Form 8-K filed on February 12, 2004
                Cornell Capital Partners, LP

10.50           Registration Rights Agreement, dated         Incorporated by reference to
                October 15, 2004, by and between Kronos      Exhibit 99.2 to the Registrant's
                Advanced Technologies, Inc. and Cornell      Form 8-K filed on February 12, 2004
                Capital Partners, LP

10.51           Escrow Agreement, dated October 15, 2004,    Incorporated by reference to
                by and between Kronos Advanced               Exhibit 99.3 to the Registrant's
                Technologies, Inc. and Cornell Capital       Form 8-K filed on February 12, 2004
                Partners, LP

10.52           Placement Agent Agreement, dated October     Incorporated by reference to
                15, 2004, by and between Kronos Advanced     Exhibit 99.4 to the Registrant's
                Technologies, Inc. and Cornell Capital       Form 8-K filed on February 12, 2004
                Partners, LP

10.53           Securities Purchase Agreement, dated         Incorporated by reference to
                October 15, 2004, by and between Kronos      Exhibit 99.5 to the Registrant's
                Advanced Technologies, Inc. and Cornell      Form 8-K filed on February 12, 2004
                Capital Partners, LP


10.54           Investor Registration Rights Agreement,      Incorporated by reference to
                dated October 15, 2004, by and between       Exhibit 99.6 to the Registrant's
                Kronos Advanced Technologies, Inc. and       Form 8-K filed on February 12, 2004
                Cornell Capital Partners, LP

10.55           Escrow Agreement, dated October 15, 2004,    Incorporated by reference to
                by and between Kronos Advanced               Exhibit 99.7 to the Registrant's
                Technologies, Inc. and Cornell Capital       Form 8-K filed on February 12, 2004
                Partners, LP

10.56           Form of Equity-Back Promissory Note in       Incorporated by reference to
                the principal amount of $2,000,000           Exhibit 99.8 to the Registrant's
                                                             Form 8-K filed on February 12, 2004

10.57           First Amendment to Master Loan and           Incorporated by reference to
                Investment Agreement, dated October 25,      Exhibit 99.9 to the Registrant's
                2004, by and among Kronos Advanced           Form 8-K filed on February 12, 2004
                Technologies, Inc., f/k/a TSET, Inc.,
                a Nevada corporation, Kronos Air
                Technologies, Inc., a Nevada corporation
                and FKA Distributing Co. d/b/a HoMedics,
                Inc., a Michigan corporation

10.58           Secured Promissory Note, dated October       Incorporated by reference to
                25, 2004, payable to FKA Distributing        Exhibit 99.10 to the Registrant's
                Co., d/b/a HoMedics, Inc., a Michigan        Form 8-K filed on February 12, 2004
                corporation, in the principal amount of
                $925,000

10.59           Amended and Restated Warrant No. 1,          Incorporated by reference to
                dated October 25, 2004, issued to FKA        Exhibit 99.11 to the Registrant's
                Distributing Co. d/b/a HoMedics, Inc.        Form 8-K filed on February 12, 2004

10.60           Amended and Restated Warrant No. 2,          Incorporated by reference to
                dated October 25, 2004, issued to FKA        Exhibit 99.12 to the Registrant's
                Distributing Co. d/b/a HoMedics, Inc.        Form 8-K filed on February 12, 2004

10.61           Warrant No. 3, dated October 25, 2004,       Incorporated by reference to
                issued to FKA Distributing Co. d/b/a         Exhibit 99.13 to the Registrant's
                HoMedics, Inc.                               Form 8-K filed on February 12, 2004

                                       24

<PAGE>

10.62           Amended and Restated Registration Rights     Incorporated by reference to
                Agreement, dated October 25, 2004, by        Exhibit 99.14 to the Registrant's
                And between Kronos Advanced                  Form 8-K filed on February 12, 2004
                Technologies Inc., a Nevada corporation
                and FKA Distributing Co. d/b/a HoMedics,
                a Michigan corporation

10.63           Termination Agreement dated March 28,        Incorporated by reference to Exhibit
                2005, by and between Kronos Advanced         10.63 to the Registrant's Form SB-2
                Technologies, Inc. and Cornell Capital       filed on April 19, 2005
                Partners, LP

10.64           Standby Equity Distribution Agreement,       Incorporated by reference to Exhibit
                dated April 13, 2005, by and between         10.64 to the Registrant's Form SB-2
                Kronos Advanced Technologies, Inc. and       filed on April 19, 2005
                Cornell Capital Partners, LP

10.65           Registration Rights Agreement, dated         Incorporated by reference to Exhibit
                April 13, 2005, by and between Kronos        10.65 to the Registrant's Form SB-2
                Advanced Technologies, Inc. and Cornell      filed on April 19, 2005
                Capital Partners, LP

10.66           Escrow Agreement, dated April 13, 2005,      Incorporated by reference to Exhibit
                by and between Kronos Advanced               10.66 to the Registrant's Form SB-2
                Technologies, Inc. and Cornell Capital       filed on April 19, 2005
                Partners, LP

10.67           Placement Agent Agreement, dated April       Incorporated by reference to Exhibit
                13, 2005, by and between Kronos Advanced     10.67 to the Registrant's Form SB-2
                Technologies, Inc. and Cornell Capital       filed on April 19, 2005
                Partners, LP

10.68           Form of Equity-Back Promissory Note in       Incorporated by reference to Exhibit
                the principal amount of $2,000,000 dated     10.68 to the Registrant's Form SB-2
                March 7, 2005 between Kronos Advanced        filed on April 19, 2005
                Technologies, Inc. and Cornell Capital
                Partners, LP
</TABLE>


EXHIBIT NO.     DESCRIPTION                                  LOCATION
--------------------------------------------------------------------------------
31.1            Certification of Chief Executive              Provided herewith
                Officer pursuant to 15 U.S.C.
                Section 7241, as adopted pursuant
                to Section 302 of the Sarbanes-Oxley
                Act of 2002

31.2            Certification of Principal Financial          Provided herewith
                Officer pursuant to U.S.C. Section
                7241, as adopted pursuant to Section
                302 of the Sarbanes-Oxley Act of 2002

32.1            Certification by Chief Executive Officer      Provided herewith
                and Principal Accounting Officer pursuant
                to 18 U.S.C. Section 1350, as adopted
                pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002

                                       25

<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.






DATED:   June 9, 2005                  KRONOS ADVANCED TECHNOLOGIES, INC.


                                   By: /s/ DANIEL R. DWIGHT
                                           -------------------------------------
                                           Daniel R. Dwight
                                           President and Chief Executive Officer


                                   By: /s/ DANIEL R. DWIGHT
                                           -------------------------------------
                                           Daniel R. Dwight
                                           Acting Chief Financial Officer