UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                   FORM 10-QSB

             [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                For the quarterly period ended September 30, 2007

                                       Or

     [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

 For the transition period from _____________ __, ____ to _____________ __, ____

                        Commission File Number: 000-30191

                       KRONOS ADVANCED TECHNOLOGIES, INC.

             (Exact name of registrant as specified in its charter)

                  Nevada                               87-0440410
       (State or other jurisdiction of              (I.R.S. Employer
       incorporation or organization)              Identification No.)


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

                                 (617) 364-5089
              (Registrant's telephone number, including area code)

              (Former name, former address and former fiscal year,
                          if changed since last report)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act 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

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).

__ Yes X No

As of November 12, 2007, there were 243,813,391 shares outstanding of the
issuer's common stock.

<PAGE>

PART I

FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

The following comprise our (unaudited) consolidated financial statements for the
three months ended September 30, 2007.

                                       2

<PAGE>


                       KRONOS ADVANCED TECHNOLOGIES, INC.
                           CONSOLIDATED BALANCE SHEETS

                                           September 30,
                                               2007                 June 30,
Assets                                      (Unaudited)               2007
                                            -------------       ----------------
Current Assets
 Cash                                       $     81,827        $       363,955
 Accounts Receivable                              27,348                  5,027
 Other Current Assets                             12,138                 12,138
                                            -------------       ----------------
  Total Current Assets                           121,313                381,120
                                            -------------       ----------------
Net Property and Equipment                        12,868                  6,548

Other Assets
 Intangibles                                   1,675,600              1,723,150
                                            -------------       ----------------
  Total Other Assets                           1,675,600              1,723,150
                                            -------------       ----------------
Total Assets                                $  1,809,781        $     2,110,818
                                            =============       ================

Liabilities and Stockholders' Equity (Deficit)

Current Liabilities
 Accounts payable                           $    304,918        $       359,019
 Accrued interest expenses                       159,993                 21,303
 Accrued expenses                                 75,390                125,000
 Accrued expenses and payables
  to directors and officers                        4,051                 22,699
 Notes payable, current portion                  859,000                859,000
 Notes payable to directors and
  officers                                       190,249                202,307
                                            -------------       ----------------
  Total Current Liabilities                    1,593,601              1,589,328
                                            -------------       ----------------
Long Term Liabilities
 Notes payable                                 4,250,465              3,600,000
 Discount for Beneficial Conversion
  Feature                                     (3,080,185)            (3,365,845)
                                             ------------       ----------------
  Total Long Term Liabilities                  1,170,280                234,155
                                            -------------      -----------------

     Total Liabilities                         2,763,881              1,823,483
                                            -------------      -----------------
Stockholders' Equity (Deficit) Common stock,
 authorized 500,000,000 shares of $0.001
 par value Issued and outstanding -
 243,813,391 and 242,342,803, respectively       243,813                242,343
Capital in excess of par value                33,734,170             33,513,598
Accumulated deficit                          (34,932,083)           (33,468,606)
                                            -------------       ----------------
  Total Stockholders' Equity (Deficit)          (954,100)               287,335
                                            -------------       ----------------
  Total Liabilities and
   Stockholders' Equity (Deficit)           $  1,809,781         $    2,110,818
                                            =============       ================


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 September 30,
                                                        -------------------------------------
                                                             2007                  2006
                                                         (Unaudited)            (Unaudited)
                                                        --------------      -----------------
<S>                                                     <C>                 <C>
 Sales                                                  $      25,000       $         19,200
 Cost of sales                                                      -                  9,584
                                                        --------------      -----------------
 Gross Profit                                                  25,000                  9,616
                                                        --------------      -----------------
 Selling, General and Administrative expenses:
  Compensation and benefits (includes equity
     compensation of $132,833 in 2007 and $51,890
     in 2006)                                                 544,489                337,721
  Professional services                                       169,950                102,711
  Depreciation and amortization                               109,395                108,850
  Research and development                                    108,794                 29,607
  Facilities                                                   30,550                 27,044
  Insurance                                                    30,000                 54,144
  Other selling general and
   administrative expenses                                     60,626                 92,878
                                                        --------------      -----------------
 Selling, General and Administrative expenses               1,053,804                752,955
                                                        --------------      -----------------
 Net Operating Loss                                        (1,028,804)              (743,339)

 Interest Expense                                            (434,672)               (99,234)
                                                        --------------      -----------------
  Net Loss                                              $  (1,463,476)      $       (842,573)
                                                        ==============      =================
Basic Loss Per Share                                    $       (0.01)      $          (0.01)
                                                        ==============      =================
Diluted Loss Per Share                                  $       (0.01)      $          (0.01)
                                                        ==============      =================

Weighted average shares outstanding                       242,886,244            149,157,131
                                                        ==============      =================
</TABLE>


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

                                       4

<PAGE>

                       KRONOS ADVANCED TECHNOLOGIES, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS




<TABLE>
<CAPTION>

                                                        For the three months ended September 30,
                                                    ------------------------------------------------
                                                            2007                       2006
                                                        (Unaudited)                 (Unaudited)
                                                    ----------------------    ----------------------
CASH FLOWS FROM OPERATING ACTIVITIES

<S>                                                      <C>                       <C>
 Net loss from continuing operations                     $     (1,463,476)         $       (842,573)

Adjustments to reconcile net loss to net cash
 used in operating activities:
   Depreciation and amortization                                  109,395                   118,850
   Options issued for compensation/services                       198,516                    57,424
   Accretion of note discount                                     285,660                         -
 Change In:
  Accounts receivable                                             (22,321)                   10,000
  Deferred revenue                                                      -                   (19,200)
  Accounts payable                                                (54,101)                   (6,502)
  Accrued Expenses and other liabilities                           70,430                    (4,674)
                                                         -----------------         -----------------
   Net cash used in Operating Activities                         (875,897)                 (686,675)

CASH FLOWS FROM INVESTING ACTIVITIES
 Purchases of property and equipment                               (5,396)                   (2,194)
 Investment in patent protection                                  (62,769)                  (31,315)
                                                         -----------------         -----------------
  Net cash used in Investing Activities                           (68,165)                  (33,509)
                                                         -----------------         -----------------
CASH FLOWS FROM FINANCING ACTIVITIES
 Proceeds from long term borrowings                               650,466                         -
 Issuance of common stock for fees                                 23,527                   550,000
 Repayments of short-term borrowings                              (12,059)                 (304,237)
                                                         -----------------         -----------------
   Net cash provided by Financing Activities                      661,934                   245,763
                                                         -----------------         -----------------
NET DECREASE IN CASH                                             (282,128)                 (474,421)

CASH
  Beginning of period                                             363,955                   598,323
                                                         -----------------         -----------------

  End of period                                          $         81,827          $        123,902
                                                         =================         =================

Supplemental schedule:
     Interest paid in cash                               $        29,571           $       106,649
                                                         ================          ================
     Taxes paid in cash                                  $             -           $             -
                                                         ================          ================
</TABLE>


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. ("Kronos" or 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 months ended September 30, 2007 are not necessarily indicative of the
results that may be experienced for the fiscal year ending June 30, 2008.

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, 2007, which was filed on September 28, 2007.

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 current year ended June 30, 2007. In addition, the
Company has used more cash than that provided from cash in its operations. The
Company is currently using its resources to commercialize its technology and
develop viable commercial products, 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 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:


Retailer. In October 2007, Kronos executed a Letter of Intent for the
development, manufacture and sale of air purification devices based upon Kronos'
proprietary air movement and purification technology with a leading national
retailer. It is expected that Kronos and the retailer would enter into a
definitive purchase agreement providing for the exclusive sale of private label
residential standalone air purifiers through the retailer's distribution
channels. Actual purchases of the products, which we do not expect prior to
2008, are dependent on the successful development of the product, the
negotiation of a definitive purchase agreement incorporating the terms of the
letter of intent, other usual and customary terms and the retailers' discretion.
Under the terms of the Letter of Intent, the retailer has paid Kronos $250,000
towards the development costs of the new products and will contribute marketing
resources to assist in the product development process. The intent of the
parties is for Kronos to lead and manage all development, production and
manufacturing activities for the Kronos air purifier and for the retailer to
actively market the Kronos air purifier through their distribution channels.


EOL. In December 2005, Kronos executed a non-exclusive License Agreement with
EOL LLC, a Russian Federation corporation ("EOL"), based in Korolev, Moscow
Region. EOL is leveraging the Kronos technology to produce, market, and
distribute Kronos commercial air purification products, bacteriological and
virus destruction devices in select Commonwealth of Independent States. The
agreement comes after successful completion of multiple tests in Eastern Europe,
which found the Kronos technology capable of decontaminating rooms infected with
airborne viruses and bacteria. Under the terms of the five-year agreement, EOL
is providing Kronos a fixed percentage royalty on every product sold, as well as
upfront licensing and quarterly maintenance fees. The initial medical products
are currently being marketed in Russia and marketing plans are being put in
place in Ukraine, Kazakhstan, Moldova and Byelorussia. During the fiscal year
ended June 30, 2007, Kronos earned $104,000 in revenue from the sale of power
supplies, other electrical components and engineering services and from the
royalty from the sale of finished products by EOL. During the three months ended
September 30, 2007, Kronos earned $25,000 in licensing fees.

                                       6

<PAGE>

Global Appliance Manufacturers. In October 2006, a leading global home appliance
manufacturer committed to fund 20% of the cost for Kronos to manufacturer a
silent kitchen range hood product. This next generation range hood device
represented the culmination of more than twelve months of product design and
development effort by Kronos to apply our technology to this unique embedded
residential application. The product was shipped to the customer in October
2006. In January 2007, the prototype design was modified based on customer input
and a revised unit was shipped to the customer. In addition to financial
support, the customer has also provided Kronos with product components for
Kronos testing and evaluation. In February 2007, a second global appliance
manufacturer committed to purchase additional prototypes from Kronos. During the
fiscal year ended June 30, 2007, Kronos earned $37,000 in revenue from the
development of prototype devices for the residential range hood market place. In
October 2007, Kronos shipped the additional prototypes to the customer for
testing and evaluation.

DESA. In June 2006, the Company executed its first license for embedded
applications of Kronos technology with DESA LLC ("DESA"). The agreement provides
DESA the opportunity to embed the Kronos electrostatic air movement technology
within fireplaces, hearth systems, zone heaters and mounted electric fans and
heaters. In October 2006, DESA approved Kronos' designs for the first
Kronos-based product and committed to the funding of the product development by
Kronos. In January 2007, DESA committed additional funds for Kronos' exploration
of a second Kronos-based product application. By May 2007, various prototype
configurations for each of the two product applications were under test and
evaluation by Kronos and DESA. During the three months ended September 30, 2007,
Kronos and DESA developed a plan for product commercialization.

Washington Technology Center. In June 2007, the Washington Technology Center
awarded the Company, in conjunction with the University of Washington and Intel
Corporation, continued funding for a research and development project based on a
novel cooling system for microelectronics and computer chips. This Phase III
award follows the Company's Phase 1 and Phase II awards in December 2005 and
June 2006, respectively.

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

Principles of Consolidation. The consolidated financial statements of the
Company include those of the Company and its subsidiary for the periods in which
the subsidiary was owned by the Company. All significant intercompany accounts
and transactions have been eliminated in the preparation of the consolidated
financial statements. At September 30, 2007, we had only one subsidiary, Kronos
Air Technologies, Inc.

Use of Estimates. The preparation of consolidated financial statements in
conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and 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 account 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 three months or less when purchased,
to be cash equivalents. The Company maintains cash and cash equivalents with
high-credit, quality financial institutions. At September 30, 2007 the cash
balances held at financial institutions were in excess of federally insured
limits.

Accounts Receivable. The Company provides an allowance for potential losses, if
necessary, on trade accounts 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 September 30, 2007 and June 30, 2007. The Company charges off accounts
receivable against the allowance for losses when an account is deemed to be
uncollectable.

                                       7

<PAGE>

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 the Company's 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 its
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 the Company's 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 the
Company's 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 the Company's strategic business
objectives, and utilization of the asset.


Income Taxes. Income taxes are accounted for in accordance with the provisions
of Statement of Financial Accounting Standards ("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.

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

Net Loss Per Share. Basic loss per share is computed using the weighted average
number of shares outstanding. Diluted 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.

                                       8

<PAGE>

Stock Options. In December 2004, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards No. 123R,
Share-Based Payment ("SFAS No. 123R"). This Statement is a revision of SFAS No.
123, Accounting for Stock-Based Compensation, and supersedes Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and
its related implementation guidance. SFAS No. 123R focuses primarily on
accounting for transactions in which an entity obtains employee services in
share-based payment transactions. SFAS No. 123R requires entities to recognize
stock compensation expense for awards of equity instruments to employees based
on the grant-date fair value of those awards (with limited exceptions). Kronos
elected to implement the provisions of SFAS No. 123R in the fiscal year ended
June 30, 2005.

Recent Accounting Pronouncements


In September 2006, the FASB issued FASB Statement No. 157 "Fair Value
Measurements". This Statement defines fair value, establishes a framework for
measuring fair value in accordance with generally accepted accounting principles
("GAAP"), and expands disclosures about fair value measurements. This statement
applies under other accounting pronouncements that require or permit fair value
measurements, the FASB having previously concluded in those accounting
pronouncements that fair value is a relevant measurement attribute. Accordingly,
this statement does not require any new fair value measurements. However, for
some entities, the application of this statement will change current practices.
This statement is effective for financial statements for fiscal years beginning
after November 15, 2007. Earlier application is permitted provided that the
reporting entity has not yet issued financial statements for that fiscal year.
Management believes this statement will have no impact on the financial
statements of the Company once adopted.

In February 2007, the FASB issued FASB Statement No. 159 "The Fair Value Option
for Financial Assets and Financial Liabilities--Including an amendment of FASB
Statement No. 115". This statement permits entities to choose to measure many
financial instruments and certain other items at fair value. The objective is to
improve financial reporting by providing entities with the opportunity to
mitigate volatility in reported earnings caused by measuring related assets and
liabilities differently without having to apply complex hedge accounting
provisions. This statement is expected to expand the use of fair value
measurement, which is consistent with the FASB's long-term measurement
objectives for accounting for financial instruments. This statement applies to
all entities, including not-for-profit organizations. Most of the provisions of
this statement apply only to entities that elect the fair value option. However,
the amendment to FASB Statement No. 115, Accounting for Certain Investments in
Debt and Equity Securities, applies to all entities with available-for-sale and
trading securities. Some requirements apply differently to entities that do not
report net income. Management is currently evaluating the impact, if any, this
statement will have impact on the financial statements of the Company once
adopted.

NOTE 4 -- INCOME TAXES

The composition of deferred tax assets and the related tax effects at September
30, 2007 and June 30, 2007 are as follows:

                                         September 30, 2007
                                            (unaudited)         June 30, 2007
                                         ---------------       ---------------
Benefit from carryforward of capital
and net operating losses                 $   (8,681,000)       $   (7,698,000)

Other temporary differences                    (157,000)             (157,000)

Options issued for services                     (71,000)             (551,000)
Less:
  Valuation allowance                         8,909,000             8,406,000
                                         ---------------       ---------------
  Net deferred tax asset                 $            -        $            -
                                         ===============       ===============
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:

                                       9

<PAGE>

<TABLE>
<CAPTION>

                                           September 30, 2007
                                              (Unaudited)                               June 30,2007
                                    ------------------------------------  ----------------------------------------
                                                                % of                                  % of
                                       Amount               Pre-Tax Loss         Amount            Pre-Tax Loss
                                    -------------           ------------     --------------        ------------
      Benefit for income tax at:
<S>                                <C>                        <C>          <C>                        <C>
      Federal statutory rate       $      (498,000)           (34.0)%      $      (799,000)           (34.0)%
      State statutory rate                 (29,000)            (2.0)%              (47,000)            (2.0)%
      Non-deductible expenses               24,000              1.6 %               24,000              1.0 %
      Increase in valuation allowance      503,000             34.4 %              822,000             35.0 %
                                    ------------------------------------  -----------------------------------------
                                    $           -               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 September 30, 2007, the Company has approximately $19.9 million of unused
Federal net operating losses, $2.3 million of capital losses and $15.7 million
of state net operating losses available for carryforward to future years. The
benefit from carryforward of such losses will expire in various years through
2027 and could be subject to limitations if significant ownership changes occur
in the Company.

NOTE 5 - SEGMENTS OF BUSINESS

The Company has only one reportable segment, which consists of developing,
licensing, manufacturing and distributing air movement and purification devices
utilizing the Kronos technology. For the three months ended September 30, 2007
and the fiscal year ended June 30, 2007 the Company operated only in the U.S.

NOTE 6 - EARNINGS PER SHARE

Weighted average shares outstanding used in the earnings per share calculation
were 242,886,244 and 149,157,131 for the three months ended September 30, 2007
and 2006, respectively.

As of September 30, 2007, there were outstanding options to purchase 90,404,104
shares of the Company's common stock and outstanding warrants to purchase
15,792,342 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 September 30, 2006, there were outstanding options to
purchase 23,636,027 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.

NOTE 7 - CONVERTIBLE NOTES PAYABLE AND NOTES PAYABLE

The Company had the following obligations as of as of September 30, 2007 and
June 30, 2007:

                                              September 30, 2007
                                                  (Unaudited)      June 30, 2007
                                                ---------------   --------------
 Obligations to AirWorks Funding LLLP (1)       $  2,954,457     $    2,480,000
 Obligations to Hilltop Holding Company, LP (1)    1,096,008            920,000
 Discount for beneficial conversion feature (2)   (3,080,185)        (3,365,845)
 Obligations to Sands Brothers (3)                   859,000            859,000
 Obligations to Gumbinner and Sun (1)                200,000            200,000
 Obligation to current employees (4)                 190,249
 202,307
                                                 ------------    ---------------
                                                   2,219,529          1,295,462
 Less:
  Current portion                                  1,049,249          1,061,307
                                               --------------    ---------------
 Total long term obligations, net of
      current portion                          $   1,170,280     $      234,155
                                               ==============    ===============

                                       10

<PAGE>

(1) These notes bear interest at the rate of 12%, are secured by the assets of
the Company and are convertible into shares of Kronos common stock at $0.0028 or
are payable in full on June 19, 2010.

(2) Under GAAP, the Company recorded a discount for the beneficial conversion
feature ("BCF") on the convertible debt issued to AirWorks and Hilltop. The
amount of BCF discount was calculated using the Black-Scholes model. Because the
maximum value of the BCF discount can not exceed the full value of the issued
debt, the Company recorded the discount at the full value of the debt of
$3,400,000. The Company is amortizing the BCF discount over the three year life
of the debt. For the three months ended September 30, 2007, the Company recorded
BCF discount amortization of $285,660.

(3) These notes bear interest at the rate of 12%, are secured by the assets of
the Company and are payable in full on December 31, 2007.

(4) These notes bear interest at the rate of 12%. They represent obligations to
current employees of the Company, which are currently due in full.

NOTE  8 - COMMITMENTS AND CONTINGENCIES

In June 2007, Kronos entered into a Funding Agreement with a group of lenders
providing for a loan, at the discretion of the lenders, in the aggregate amount
of up to $18,159,000. At the initial closing, the Company received an initial
advance of $4,259,000. During the three months ended September 30, 2007, the
Company received an additional $650,466 in funding. After payment in full of the
amounts due under a convertible debenture issued to Cornell Capital Partners and
the settlement agreement obligation to HoMedics and payment of the expenses of
the transaction, the remainder of $1,069,000 was used for working capital
purposes. The initial new lenders were: (i) AirWorks Funding LLLP, a
newly-formed limited partnership; (ii) Critical Capital Growth Fund, L.P. and
various Sands Brothers Venture Funds, all of which are affiliates of Laidlaw and
Co. (UK) Ltd. and (iii) RS Properties I LLC, a New York-based private investment
company. RS Properties assigned to Hilltop Holding Company, LP, a Delaware
limited partnership, ("Hilltop") its promissory note together with certain other
rights and agreements relating thereto, including, without limitation, its
rights and obligations under the Funding Agreement.

The loan is secured by all of the Company's assets and is convertible into
shares of the Company's common stock at a conversion price of $0.0028 per share,
subject to adjustment under certain circumstances. Future installments under the
Funding Agreement, up to $13,249,530, may be advanced at the discretion of the
lenders, even if not requested by the Company. Under the Funding Agreement and
related notes, the Company pays interest on the notes at the rate of 12% per
annum. Of the total amount of the initial advance, monthly interest payments
commence on July 1, 2007 on $859,000, which is due and payable on December 31,
2007. Such amount may be converted into Kronos common stock at the option of the
holder at the $0.0028 conversion price only if not paid in full by December 31,
2007. With respect to all other loan amounts, interest is paid quarterly
starting January 1, 2008 and outstanding principal is due and payable June 19,
2010, unless earlier converted at the option of the lenders. Assuming the
payment when due of the $859,000, the maximum loan amount is advanced under the
Funding Agreement and related notes and the lenders convert the entire amount of
the loan into Kronos common stock at the noted conversion price, the lenders
would own approximately 93.3% of the Company's total equity on a fully diluted,
as converted basis.

Daniel R. Dwight, President and Chief Executive Officer, and the Company entered
into an employment agreement effective as of November 15, 2001. The initial term
of Mr. Dwight's employment agreement was for two years and will automatically
renew for successive one year terms unless Kronos or Mr. Dwight provide the
other party with written notice within three months of the end of the initial
term or any subsequent renewal term. Mr. Dwight's employment agreement was
renewed on August 13, 2003 and again on August 15, 2004, August 15, 2005, August
15, 2006 and August 15, 2007. In April 2006, the Board of Directors increased
Mr. Dwight's base cash compensation to $225,000 per year effective April 15,
2006. Mr. Dwight is eligible for annual incentive bonus compensation in an
amount equal to Mr. Dwight's annual salary based on the achievement of certain
bonus objectives. In addition, Kronos granted Mr. Dwight 1,000,000 immediately
vested and exercisable, ten-year stock options at various exercise prices. Mr.
Dwight is entitled to fully participate in any and all 401(k), stock option,
stock bonus, savings, profit-sharing, insurance, and other similar plans and
benefits of employment.

                                       11

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Richard F. Tusing, Chief Operating Officer, and the Company entered into an
employment agreement effective as of January 1, 2003. The initial term of Mr.
Tusing's employment agreement was for two years and will automatically renew for
successive one year terms unless Kronos or Mr. Tusing provide the other party
with written notice within three months of the end of the initial term or any
subsequent renewal term. Mr. Tusing's employment agreement was renewed on
October 1, 2004, October 1, 2005, October 1, 2006, and November 1, 2007. Mr.
Tusing's employment agreement provides for base cash compensation of $160,000
per year. Mr. Tusing will be entitled to fully participate in any and all
401(k), stock option, stock bonus, savings, profit-sharing, insurance, and other
similar plans and benefits of employment.

NOTE 9 - SUBSEQUENT EVENTS

In October 2007, we received additional aggregate advances of $299,534 from
AirWorks and Hilltop under the terms of the Funding Agreement and related notes.

In October 2007, Kronos executed a Letter of Intent for the development,
manufacture and sale of air purification devices based upon Kronos' proprietary
air movement and purification technology with a leading national retailer. It is
expected that Kronos and the retailer would enter into a definitive purchase
agreement providing for the exclusive sale of private label residential
standalone air purifiers through the retailer's distribution channels. Actual
purchases of the products, which we do not expect to occur prior to 2008, are
dependent on the successful development of the product, the negotiation of a
definitive purchase agreement incorporating the terms of the letter of intent,
other usual and customary terms and the retailers' discretion. Under the terms
of the Letter of Intent, the retailer has paid Kronos $250,000 toward the
development costs of the new products and will contribute marketing resources to
assist in the product development process. The intent of the parties is for
Kronos to lead and manage all development, production and manufacturing
activities for the Kronos air purifier and for the retailer to actively market
the Kronos air purifier through their distribution channels.

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

INTRODUCTORY STATEMENTS

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 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 is a product development and production company that continues to develop
and patent technology that, among other things, 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 and funds are available, we intend to enter additional markets in the
future. The Company currently has thirteen U.S. patents and five international
patents. To date, our ability to execute our strategy has been restricted by our
limited amount of capital.

Kronos is focused on developing proprietary technology for air movement and
purification applications to address the indoor air quality market. The Kronos
technology has numerous valuable characteristics for applications in the indoor
air quality market, including moving air and gases at high velocities while
filtering odors, smoke and particulates and sterilizing air from bacteria and
virus contamination. A number of the scientific claims of the Kronos technology
have been tested by the U. S. and foreign governments, multi-national companies
and independent testing facilities (see "Independent Testing - Product Claims
Platform" below).

                                       12

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The Company has begun establishing strategic partners with select companies both
domestically and internationally for standalone and embedded applications of our
proprietary technology. The Company and its partners are in various stages of
developing Kronos-based products.

                               Standalone Platform
o    Residential  Products - In October 2007, Kronos executed a Letter of Intent
     for the development, manufacture and sale of air purification devices based
     upon Kronos'  proprietary air movement and  purification  technology with a
     leading  national  retailer.  It is expected  that Kronos and the  retailer
     would  enter  into  a  definitive  purchase  agreement  providing  for  the
     exclusive  sale of  private  label  residential  standalone  air  purifiers
     through the  retailer's  distribution  channels.  Actual  purchases  of the
     products,  which we do not expect to occur prior to 2008,  are dependent on
     the successful  development of the product, the negotiation of a definitive
     purchase agreement  incorporating the terms of the letter of intent,  other
     usual and customary terms and the retailers' discretion. Under the terms of
     the Letter of Intent,  the  retailer has paid Kronos  $250,000  towards the
     development  costs  of the  new  products  and  will  contribute  marketing
     resources to assist in the product development  process.  The intent of the
     parties is for Kronos to lead and manage all  development,  production  and
     manufacturing  activities  for the Kronos air purifier and for the retailer
     to  actively  market the Kronos air  purifier  through  their  distribution
     channels.

o    Medical  Products - In December 2005, the Company  executed a non-exclusive
     license agreement with EOL LLC, a Russian Federation  company ("EOL"),  for
     manufacturing and distributing  Kronos-based commercial standalone products
     in Russia and other select  Commonwealth of Independent States. The initial
     medical products are currently being marketed in Russia and marketing plans
     are being implanted in Ukraine,  Kazakhstan,  Moldova and  Byelorussia.  In
     November  2006,  the Ministry of Health Care and Social  Development of the
     Russian  Federation issued a Registration  Certificate for the product that
     designates  the product for medical use.  During the fiscal year ended June
     30,  2007,  Kronos  earned  $104,000  in  revenue  from  the  sale of power
     supplies,  other electrical components and engineering  services,  and from
     the  royalty  from the sale of finished  products by EOL.  During the three
     months ended September 30, 2007, Kronos earned $25,000 in licensing fees.

         The Company is in active discussions to enter the U.S. medical market
         with one or more medical products distribution companies.

                                Embedded Platform
o    Commercial  Products - In June 2006, the Company executed its first license
     for embedded applications of Kronos technology with DESA LLC ("DESA").  The
     agreement  provides DESA the opportunity to embed the Kronos  electrostatic
     air movement technology within fireplaces, hearth systems, zone heaters and
     mounted  electric fans and heaters.  In October 2006, DESA approved Kronos'
     designs for the first Kronos-based  product and committed to the funding of
     the  product  development  by  Kronos.  In  January  2007,  DESA  committed
     additional funds for Kronos  exploration of a second  Kronos-based  product
     application.  By May 2007, various prototype configurations for each of the
     two product applications were under test and evaluation by Kronos and DESA.
     During the three months ended September 30, 2007, Kronos and DESA developed
     a plan for product commercialization.

o    Residential  Products - In October  2006, a leading  global home  appliance
     manufacturer committed to fund 20% of the cost for Kronos to manufacturer a
     silent kitchen range hood product.  This next generation  range hood device
     represented  the  culmination  of more than twelve months of product design
     and  development  effort by Kronos to apply our  technology  to this unique
     embedded residential  application.  The product was shipped to the customer
     in October 2006. In January 2007,  the prototype  design was modified based
     on  customer  input and a revised  unit was  shipped  to the  customer.  In
     addition to financial  support,  the customer has also provided Kronos with
     product  components for Kronos testing and evaluation.  In February 2007, a
     second  global  appliance  manufacturer  committed  to purchase  additional
     prototypes from Kronos.  During the year ended June 30, 2007, Kronos earned
     $37,000  in revenue  from the  development  of  prototype  devices  for the
     residential  range hood market place.  In October 2007,  Kronos shipped the
     additional prototypes to the customer for testing and evaluation.

o    Microelectronics  Products - In June 2007, the Washington Technology Center
     awarded the Company in  conjunction  with the  University of Washington and
     Intel Corporation  continued funding for a research and development project
     based on a novel cooling system for  microelectronics  and computer  chips.
     This Phase III award follows the  Company's  Phase 1 and Phase II awards in
     December 2004 and June 2006, respectively.

                                       13

<PAGE>

Technology Description and Benefits

The proprietary Kronos technology involves the management of corona discharge by
applying high voltage management across paired electrical grids to create an ion
exchange. Applications for efficient high voltage management, efficient corona
discharge and ion exchange include but are not limited to:

o    air movement, including dielectric fluid movement and propulsion;

o    air  purification,   including  particulate  removal,  bacteria  and  viral
     removal, biohazard destruction, and odor removal;

o    temperature  and  environmental  management,  including  space  heating and
     cooling;

o    microchip, MEMS and other electronics devices and components cooling;

o    air management, including sorting and separation of air streams by particle
     content;

o    sound generation, including high fidelity sound recreation and active noise
     cancellation;

o    high  voltage  management,  including  development  of high  voltage  power
     supplies and control of energy surges and electrical discharges;

o    control  of  water  and  moisture   content  in  air   streams,   including
     dehumidification and humidification; and

o    water  treatment,  including  water  purification,   ionization  and  water
     desalination.

Independent Testing - Product Claims Platform

A number of the scientific  claims of the Kronos  technology have been tested by
the U. S. and foreign  governments,  multi-national  companies  and  independent
testing  facilities.  To date,  independent  laboratory testing has verified the
filtration and sterilization capability of the Kronos technology.

                           Filtration Testing Results:

o    Aerosol and Air Quality  Research  Laboratory - up to 99.8%  filtration  of
     0.02 to 0.20 micron (20 to 200 nanometers) size particles;

o    LMS Industries - removal of over 99.97% of 0.10 micron (100 nanometers) and
     above size particles using HVAC industry's ASHRAE 52.2 testing standard for
     filtration;

o    MicroTest  Laboratories  - HEPA Clean Room Class 1000  quality  particulate
     reduction; and

o    Intertek - 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,"  which  demonstrated a Clean Air Delivery Rate ("CADR") for
     the Kronos air purifier of over 300 for the larger size Kronos air purifier
     and 80 for the smaller size using consumer filtration testing standards for
     the Association of Home Appliance Manufacturers ("AHAM").

                         Sterilization Testing Results:

o    Scientific  Institution  of Health Care,  Central  Clinical  Hospital #2 in
     Moscow (clinical trial):

     -    100% decontamination of bacteria  (Staphylococcus aureus) in under one
          hour and 80%  decontamination  of general  bacteria  in under 24 hours
          from a 48m(3) hospital room while people were present.

o    Pulmonary Department of Municipal Hospital #2 in Moscow (clinical trial):

     -    100% decontamination of bacteria (Staphylococcus aureus) in under five
          hours from a 66m(3)  hospital  room while four  patients were present;
          and

     -    100%  decontamination  of  mildew  fungi in  under  two  hours  from a
          113.2m(3) hospital room.
                                       14

<PAGE>

o    Disinfection Research Institute Sterilization Laboratory in Moscow:

     -    disinfected a room completely contaminated with Bacteriophage

     -    a microorganism which lives in the E. Coli bacteria. (Bacteriophage is
          widely used in virus testing  because the  microorganism's  biological
          structure  and size share  many  functional  similarities  with a wide
          range of viruses); and

     -    100%  decontamination  of room infected with bacteria  (Staphylococcus
          aureus  strain  906 (S.  aureus)  and  Bacillus  cereus  strain 96 (B.
          cereus)

     -    S. aureus is a known cause of hospital-acquired infections,  including
          skin  lesions  such  as  boils  and   furunculosis  and  more  serious
          infections such as pneumonia and meningitis.

o    Institute  for  Veterinary  Medicine in the Ukraine - destroy and sterilize
     air which had been inseminated with Anthrax and E.coli spores;

o    New  Hampshire  Materials  Laboratory  - up to 95%  reduction  of hazardous
     gases, including numerous carcinogens found in cigarette smoke;

o    Battelle PNNL - 95% destruction of Bg (anthrax simulant); and

o    Dr. Sergey  Stoylar,  a  bacteriologist  from the American  Bacteriological
     Society - 100% destruction of Bacillus subtilis 168 (bacteria simulant).

Medical Product Approval

In September 2006, the Russian Research Institute of Medical Equipment approved
EOL's Kronos-based Tree(TM) air purification device for use in hospitals and
other healthcare facilities. The device received Category I approval, which
means the product has met the strictest regulations required for a device to be
used in operating rooms and other areas that require a sterile environment. In
November 2006, following the Russian Research Institute approval, the Ministry
of Health Care and Social Development of the Russian Federation issued a
Registration Certificate that designates the Kronos-based Tree(TM) air
purification device for medical use.

Market Segmentation

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

Kronos' current focus is on the first three of these market segments, which are
described in more detail below:

o    Air  Movement  and  Purification  - Indoor air  pollution,  including  sick
     building  syndrome,  second hand cigarette smoke and various  bacterial and
     viral contaminants, 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 facilities.

o    Air   Purification   for  Unique  Spaces  -   Electronics,   semiconductor,
     pharmaceutical, aerospace, medical and many other producers depend on clean
     room 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  automobiles,  aircraft,  cruise  ships  and  other
     transportation   modes,  that  require  people  to  breathe   contaminated,
     re-circulated air for extended periods.

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 future generation microchips.

                                       15

<PAGE>

Kronos is currently developing products for the air movement and purification
and air purification for unique spaces markets through specific customer
contracts. Kronos is currently undertaking research and development in the
embedded micro cooling market using Company funds and third party grants. These
contracts and grants are described in more detail in the Technology Application
and Product Development section of this filing.

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 movement and 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 or heat sink.

                               Standalone Platform

Residential Products. In October 2007, Kronos executed a Letter of Intent for
the development, manufacture and sale of air purification devices based upon
Kronos' proprietary air movement and purification technology with a leading
national retailer. It is expected that Kronos and the retailer would enter into
a definitive purchase agreement providing for the exclusive sale of private
label residential standalone air purifiers through the retailer's distribution
channels. Actual purchases of the products are dependent on the successful
development of the product, the negotiation of a definitive purchase agreement
incorporating the terms of the letter of intent, other usual and customary terms
and the retailers' discretion. Under the terms of the Letter of Intent, the
retailer has paid Kronos $250,000 towards the development costs of the new
products and will contribute marketing resources to assist in the product
development process. The intent of the parties is for Kronos to lead and manage
all development, production and manufacturing activities for the Kronos air
purifier and for the retailer to actively market the Kronos air purifier through
their distribution channels.

Medical Products. In December 2005, the Company executed a non-exclusive license
agreement with EOL LLC, a Russian Federation company ("EOL"), for manufacturing
and distributing Kronos-based commercial standalone products in Russia and other
select Commonwealth of Independent States. The initial medical products are
currently being marketed in Russia and marketing plans are being implanted in
Ukraine, Kazakhstan, Moldova and Byelorussia. In November 2006, the Ministry of
Health Care and Social Development of the Russian Federation issued a
Registration Certificate for the product that designates the product for medical
use. During the fiscal year ended June 30, 2007, Kronos earned $104,000 in
revenue from the sale of power supplies, other electrical components and
engineering services and from the royalty from the sale of finished products by
EOL. During the three months ended September 30, 2007, Kronos earned $25,000 in
revenue from licensing fees.

In August 2006, the Russian Research Institute of Medical Equipment began the
process for product certification of the EOL's Kronos-based Tree(TM) air
purification device for use in medical facilities, including a successful
clinical trial of EOL products in the Pulmonary Department of Municipal Hospital
#2 in Moscow. In October 2006, Scientific Institution of Health Care, Central
Clinical Hospital #2 in Moscow completed a second clinical trial. As a result of
these clinical trials, the Russian Research Institute approved the Kronos-based
Tree(TM) air purification device for use in hospitals and other healthcare
facilities. The device received Category I approval, which means the product has
met the strictest regulations required for a device to be used in operating
rooms and other areas that require a sterile environment. In November 2006,
following the Russian Research Institute approval, the Ministry of Health Care
and Social Development of the Russian Federation issued a Registration
Certificate that designates the Kronos-based Tree(TM) air purification device
for medical use.

The Company is in active discussions to enter the U.S. medical market with one
or more medical products distribution companies.

Commercial and Other Standalone Products. Utilizing our 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, vaporizers, disinfectors, deodorizers and/or fans. Based on the
proprietary Kronos technology, these devices are currently undergoing testing
and evaluation. Kronos has been meeting with potential strategic partners for
manufacturing, marketing, selling and distributing these Kronos-based products.

                                       16

<PAGE>

                                Embedded Platform

Commercial Products. In June 2006, the Company executed its first license for
embedded applications of Kronos technology with DESA LLC ("DESA"). The agreement
provides DESA the opportunity to embed the Kronos electrostatic air movement
technology within fireplaces, hearth systems, zone heaters and mounted electric
fans and heaters. In October 2006, DESA approved Kronos' designs for the first
Kronos-based product and committed to the funding of the product development by
Kronos. In January 2007, DESA committed additional funds for Kronos exploration
of a second Kronos-based product application. By May 2007, various prototype
configurations for each of the two product applications were under test and
evaluation by Kronos and DESA. During the three months ended September 30, 2007,
Kronos and DESA developed a plan for product commercialization.

In addition, Kronos has developed an air filtration and purification mechanism
capable of performing to HEPA quality standards, while eliminating bacteria and
viruses. The Company believes 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
better than HEPA level filtration and purification. Kronos is seeking one or
more strategic partners to commercialize, market and distribute Kronos based
commercial embedded air filtration and purification devices.

Residential Products. In October 2006, a leading global home appliance
manufacturer committed to fund 20% of the cost for Kronos to manufacturer a
silent kitchen range hood product. This next generation range hood device
represented the culmination of more than twelve months of product design and
development effort by Kronos to apply our technology to this unique embedded
residential application. The product was shipped to the customer in October
2006. In January 2007, the prototype design was modified based on customer input
and a revised unit was shipped to the customer. In addition to financial
support, the customer has also provided Kronos with product components for
Kronos testing and evaluation. In February 2007, a second global appliance
manufacturer committed to purchase additional prototypes from Kronos. During the
year ended June 30, 2007, Kronos earned $37,000 in revenue from the development
of prototype devices for the residential range hood market place. In October
2007, Kronos shipped the additional prototypes to the customer for testing and
evaluation.

Transportation Products. In April 2006, Kronos was invited to serve as a member
and an industrial partner in the Federal Aviation Administration's (the "FAA")
Air Transportation Airliner Cabin Environment Research Center of Excellence. In
this capacity, Kronos is providing its real-time decontamination, air
filtration, purification and technology expertise to evaluate and develop
solutions that proactively address and improve cabin air quality. The program,
led by the FAA, includes senior executives from aerospace equipment
manufacturers and leading American universities.

Microelectronics Cooling Products. In December 2004, Kronos and the University
of Washington were awarded a Phase I grant for a research and technology
development project entitled "Heat Transfer Technology for Microelectronics and
MEMS" by the Washington Technology Center (the "WTC"). The objective of the
project is to develop a novel energy-efficient heat transfer technology for
cooling microelectronics. In January 2006, Kronos and the University of
Washington conducted a successful bench scale demonstration of micron cooling of
a MEMS chip. In June 2006, the Company and the University of Washington were
awarded a Phase II grant for continued funding in its novel cooling system for
microelectronics and computer chips. The WTC contributed $100,000 as a Phase II
grant for the project. Kronos provided $35,000 in funding and $38,000 in in-kind
services, including use of the Kronos Research and Product Development Facility.
Dr. Alexander Mamishev of the University of Washington Electrical Engineering
Department is the principal investigator on the project and is leading a team of
scientists and engineers from Kronos and Intel Corporation who are also
collaborating on the project. In September 2006, Kronos hired a former Intel
employee to lead Kronos' development of micro cooling applications. In June
2007, the Company and the University of Washington were awarded a Phase III
grant for continued funding. This additional funding is to support the further
development of prototype products. The WTC is contributing $100,000. Kronos will
provide $20,000 in funding and $20,000 in in-kind services, including use of the
Kronos Research and Product Development Facility.

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.

                                       17

<PAGE>

Patents and Intellectual Property

Kronos currently has thirteen registered patents with the United States Patent
and Trademark Office and five international patents. 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.

                                  U.S. Patents
<TABLE>
<CAPTION>

                Date         U.S. Patent #        Patent Title              Description               Protection
                ----         -------------        ------------              -----------               ----------
<S>                           <C>                                                                          <C>
               August         7,262,564         Alternative           geometry, voltage ratios             2024
               2007                             Geometries and        and power requirements
                                                Voltage Supply        for improved operational
                                                Management            performance

               July           7,248,003         Electric Field        effective electric field             2025
               2007                             Management            management for reduced
                                                                      sparking

               October        7,122,070         Method of and         inertialess power supply for         2025
               2006                             Apparatus for         safe operation and spark
                                                Electrostatic Fluid   prevention
                                                Acceleration

               August         7,157,704         Corona Discharge      method of generating air             2023
               2006                             Electrode and Method  flow and air cleaning with
                                                of Operating          reduced amount of ozone by-
                                                                      product and with extended
                                                                      life-span of the electrodes

               July           7,150,780         Electrostatic Air     method for improving the             2024
               2006                             Cleaning Device       efficiency of electrodes for
                                                                      filtering micron and sub-
                                                                      micron size particles

               May            7,053,565         Electrostatic Fluid   effective powering of the            2024
               2006                             Accelerator - Power   electrodes for high level of
                                                Management            air velocity

               November       6,963,479         Electrostatic Fluid   advanced voltage management          2023
               2005                             Accelerator -         impacts air filtration and
                                                Advanced Geometries   sterilization, air flow and
                                                                      ozone as well as safe operation
                                                                      and spark prevention

               August         6,937,455         Spark Management      analysis, detection and              2022
               2005                             Method and Device     prevention of sparks in a
                                                                      high voltage field -
                                                                      creating safe, effective
                                                                      electrostatic technology
                                                                      products

               July           6,919,698         Voltage Management    materials and geometry               2023
               2005                             for Electrostatic     allowing for spark free
                                                Fluid Accelerator     operation and use of light
                                                                      weight, inexpensive

                                                                      materials as the electrodes
               May            6,888,314         Electrostatic Fluid   electrode design geometries          2022
               2005                             Accelerator -         and attributes including
                                                Electrode Design      micro channeling to achieve
                                                Geometries            unique air movement and
                                                                      purification performance

               April          6,727,657         Electrostatic Fluid   synchronization of multiple          2022
               2004                             Accelerator for and   stages of arrays -
                                                a Method of           increasing air flow and air
                                                Controlling Fluid     flow efficiency

                                       18

<PAGE>

              December       6,664,741          Method of and         ratio of voltage for                 2022
              2003                              Apparatus for         producing ion discharge to
                                                Electrostatic Fluid   create air movement and
                                                Acceleration Control  base level filtration
                                                of a Fluid Flow

              January        6,504,308          Electrostatic Fluid   electrode density core for           2019
              2003                              Accelerator           producing ion discharge to
                                                                      create air movement and
                                                                      base level filtration
</TABLE>

                              International Patents

Kronos has received formal notification from the Canadian Intellectual Property
Office, the Mexican Institute of Industrial Property, Commonwealth of Australia
Patent Office and the Intellectual Property Office of New Zealand indicating
that one or more patents have been examined and allowed for issuance as patents.
There are a number of other patent applications corresponding to Kronos'
thirteen U.S. Patents that have been filed and are pending outside of the United
States.

Kronos intends to continue to aggressively file patent applications in the U.S.
and internationally. 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.

                                       19

<PAGE>

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.

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

Consolidated Statement of Operations For the Quarter Ended September 30, 2007
Compared with the Quarter Ended September 30, 2006.

We recorded a net loss for each of the quarters ended September 30, 2007 and
September 30, 2006 of $1,463,000 and $843,000, respectively. The increase in the
net loss for the quarter ended September 30, 2007, as compared to the prior
year, was principally the result of a $301,000, or 40%, increase in operating
costs to $1,054,000, and a $335,000, or 338%, increase in interest expense to
$435,000.

Revenue. Revenues are generated through sales of services for design and
development of Kronos devices at Kronos Air Technologies, Inc. Revenues for the
quarter ended September 30, 2007 were $25,000 compared with $19,000 for the
comparable period of 2006. Revenues for the three months ended September 30,
2007 consisted of fees from our license agreement with EOL and for the three
months ended September 30, 2006 consisted of fees from our license agreement
with DESA.

Cost of Sales. There were no cost of sales for the quarter ended September 30,
2007. Cost of sales for the quarter ended September 30, 2006 was $10,000. Cost
of sales for the quarter ended September 30, 2006 was primarily product
development costs associated with our DESA license agreement.

Selling, General and Administrative Expenses. Selling, General and
Administrative expenses for the quarter ended September 30, 2007 increased
$301,000 from the corresponding period of the prior year to $1,054,000. The
increase was principally the result of a $207,000 increase in compensation and
benefits as a result of an increase in non cash compensation associated with the
expensing of stock options and the expansion of the Company's product
development resources, a $79,000 increase in research and development expenses
as the Company invested in further improvements in the performance of its
proprietary technology, and a $67,000 increase in professional services,
partially offset by a $24,000 decrease in insurance expenses as a result of a
reduction in directors and officers and general liability insurance costs.

Interest expense. Interest expenses for the quarter ended September 30, 2007 was
$435,000 compared to $99,000 for the corresponding period of the prior year.
Interest expense for the quarter ended September 30, 2007 was comprised of the
amortization of the beneficial conversion feature of the convertible debt
financing obtained in June 2007 ($286,000) and the interest expense from notes
payable ($149,000). The interest expense for the quarter ended September 30,
2006 was comprised of the interest expense from notes payable.

Consolidated Balance Sheet as of September 30, 2007

Our total assets at September 30, 2007 were $1,810,000 compared with $2,111,000
at June 30, 2007. Total assets at September 30, 2007 and June 30, 2007 were
comprised primarily of $1,676,000 and $1,723,000, respectively, of
patents/intellectual property and $82,000 and $364,000, respectively, of cash.
Total current assets at September 30, 2007 and June 30, 2007 were $121,000 and
$381,000, respectively, while total current liabilities for such periods were
$1,594,000 and $1,589,000, respectively. This created a working capital deficit
of $1,473,000 and $1,208,000 at September 30, 2007 and June 30, 2007,
respectively. This working capital deficit is primarily due to short term
borrowings from Sands Brothers.

Stockholders' deficit as of September 30, 2007 was $954,000. The $1,463,000 net
loss for the three months ended September 30, 2007 was partially offset by the
issuance of options ($199,000) and equity ($24,000) for services.

                                       20

<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.

Net cash flow used in operating activities was $888,000 for the three months
ended September 30, 2007. We were able to satisfy our cash requirements for this
period from the proceeds of the convertible secured promissory notes with
AirWorks and Hilltop.

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 equity funding from the Funding Agreement described below. There are
no assurances that these sources of funding will be available to the Company or
adequate to meet our cash flow needs.

In June 2007, Kronos entered into a Funding Agreement with a group of lenders
providing for a loan, at the discretion of the lenders, in the aggregate amount
of up to $18,159,000. At the initial closing, the Company received an initial
advance of $4,259,000. During the three months ended September 30, 2007, the
Company received an additional $650,466 in funding. After payment in full of the
amounts due under an outstanding convertible debenture issued to Cornell Capital
Partners and the settlement agreement obligation to HoMedics and the expenses of
the transaction, the remainder of $1,069,000 was used for working capital
purposes. During the three months ended September 30, 2007, Kronos received
additional aggregate advances of $650,466 from AirWorks and Hilltop under the
terms of the Funding Agreement and related notes.

The initial new lenders under the Funding Agreement were: (i) AirWorks Funding
LLLP, a newly-formed limited partnership; (ii) Critical Capital Growth Fund,
L.P. and various Sands Brothers Venture Funds, all of which are affiliates of
Laidlaw and Co. (UK) Ltd. and (iii) RS Properties I LLC, a New York-based
private investment company. Subsequently, RS Properties assigned to Hilltop its
promissory note in the amount of $6,480,000, together with certain other rights
and agreements relating thereto, including, without limitation, its rights and
obligations under the Funding Agreement.

The loan is secured by all of the Company's assets and is convertible into
shares of the Company's common stock at a conversion price of $0.0028 per share,
subject to adjustment under certain circumstances. Future installments under the
Funding Agreement, up to $13,900,000, may be advanced at the discretion of the
lenders, even if not requested by the Company. Under the Funding Agreement and
related notes, the Company pays interest on the notes at the rate of 12% per
annum. Of the total amount of the initial advance, monthly interest payments
commenced on July 1, 2007 on principal of $859,000, which is due and payable on
December 31, 2007. Such amount may be converted into Kronos common stock at the
option of the holder at the $0.0028 conversion price only if not paid in full by
December 31, 2007. With respect to all other loan amounts, interest is paid
quarterly starting January 1, 2008 and outstanding principal is due and payable
June 19, 2010, unless earlier converted at the option of the lenders. Assuming
payment when due of the $859,000, that the maximum loan amount is advanced under
the Funding Agreement and related notes and that the lenders convert the entire
amount of the loan into Kronos common stock at the noted conversion price, the
lenders would own approximately 93.3% of the Company's total equity on a fully
diluted, as converted basis.

GOING CONCERN OPINION

The Report of Independent Registered Public Accounting Firm for the years ended
June 30, 2007 and 2006 included an explanatory paragraph that stated 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 consolidated 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.

                                       21

<PAGE>

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 do not have sufficient cash to continue operations and require significant
additional financing to sustain our operations.

At September 30, 2007 and June 30, 2007, we had a working capital deficit of
$1,473,000 and $1,208,000, respectively. The Report of Independent Registered
Public Accounting Firm for the year ended June 30, 2007, includes an explanatory
paragraph to their audit opinion stating that our recurring losses from
operations and working capital deficiency raise doubt about our ability to
continue as a going concern. For the three months ended September 30, 2007 and
the fiscal year ended June 30, 2007, we had an operating cash flow deficit of
$888,000 and $3,029,000 and a cash balance of $82,000 and $364,000,
respectively. Funding may be available to Kronos through AirWorks and Hilltop.
However, Kronos has not determined if this funding will be sufficient, because
the lenders, at their sole discretion, control the timing of and whether such
funding will occur.

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 $1,463,000 for the three months ended
September 30, 2007 and a net loss of $2,351,000 for the fiscal year ended June
30, 2007. As a result, at September 30, 2007 and June 30, 2007, we had an
accumulated deficit of $34,932,000 and $33,469,000, 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 will 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. If we do not achieve profitability we could be forced
to curtail or cease our business operations.

Existing stockholders will experience significant dilution from our sale of
shares under any equity financing.

The sale of shares pursuant to the conversion of the AirWorks and Hilltop
Secured Convertible Promissory Note, the exercise of stock options and 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.

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 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 or cease 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. If we are unable to enforce protection
of our intellectual property, we could be forced to curtail or cease our
business operations.

                                       22

<PAGE>

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

Our net intangible assets of approximately $1,676,000 as of September 30, 2007
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 and
capitalized legal costs for securing patents. Intangible assets comprise 93% of
our total assets as of September 30, 2007. 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 Kronos-based products. 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.

Our common stock is deemed to be "Penny Stock," subject to special requirements
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 $2,000,000 (if the issuer
         has been in continuous operation for at least three years) or
         $5,000,000 (if in continuous operation for less than three years), or
         with average revenues of less than $6,000,000 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 and product development
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 product 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 June 30, 2007, the
Company carried out an evaluation, under the supervision and with the
participation of the Company's Principal Officer/Principal Financial Officer, of
the effectiveness of the Company's disclosure controls and procedures (as
defined in Rule 13a-15(e) of the Securities Exchange Act of 1934 (the "Exchange
Act")) pursuant to Rule 13a-15 of the Exchange Act. It should be noted that any
system of controls, however well designed and operated, can provide only
reasonable, and not absolute, assurance that the objectives of the system are
met. Based on that evaluation, the Company's management, including the Company's
Principal Executive Officer/Principal Financial Officer, concluded that the
Company's disclosure controls and procedures were ineffective at this reasonable
assurance level as of June 30, 2007.

                                       23

<PAGE>

Changes in Internal Controls over Financial Reporting. In connection with the
evaluation of the Company's internal controls over financial reporting during
the Company's fiscal year ended June 30, 2007, the Company's Principal Executive
Officer/Principal Financial Officer has determined that there were no changes to
the Company's internal controls over financial reporting during the fourth
quarter that have materially affected or is reasonably likely to affect the
Company's internal control over financial reporting.

 PART II

ITEM 1. LEGAL PROCEEDINGS

From time to time the Company may be subject to law suits in the normal course
of business.

Thompson E. Fehr has filed a complaint in the Second Judical District Court of
Weber County in the state of Utah against Kronos with respect to prior services
rendered to High Voltage Integrated, Inc. totaling $47,130. The Company believes
this complaint is without merit and is rigorously defending itself.

Allstate Insurance Company, as subrogee of David Buell, filed a complaint in the
Cicruit Court for the County of Oakland in the state of Michigan against
HoMedics, Inc. and Kronos with respect to damages related to a fire in the home
of Mr. Buell which resulted in $244,155 in damages. Under the terms of the
Company's General Liability insurance policy, this matter is currently being
addressed by the Company's insurance carrier, Argonaut Group.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

In September 2007, we issued 1,470,588 shares of Kronos common stock to Cornell
Capital Partners under our Standby Equity Distribution Agreement in payment of a
past due commitment fee. We believe the issuance of such securities was exempt
from the registration requirements of the Securities Act of 1933, as amended,
pursuant to Section 4(2) thereof.

ITEM 5. EXHIBITS

<TABLE>
<CAPTION>

            EXHIBIT NO.         DESCRIPTION                                  LOCATION
            -------------------------------------------------------------------------------------------------
<S>              <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

                 31              Certification of Chief Executive            Provided herewith
                                 Officer pursuant to U.S.C. Section
                                 7241, as adopted pursuant to Section
                                 302 of the Sarbanes-Oxley Act of 2002


                 32              Certification by Chief Executive Officer    Provided herewith
                                 and Chief Financial Officer
                                 pursuant to 18 U.S.C. Section 1350, as
                                 adopted pursuant to Section 906 of the
                                 Sarbanes-Oxley Act of 2002
</TABLE>

                                       24

<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:   November 14, 2007             KRONOS ADVANCED TECHNOLOGIES, INC.

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